When reviewing the proposed Sunrise regulations requiring licensing of community association managers in Colorado, DORA looked at several factors.   For the full review, click here.  However, prior to issuing its recommendation, DORA noted there are several levels of regulation that may be imposed against a profession.  Licensure is the most restrictive form of regulation and provides the greatest level of public protection.  However, it is also possible to regulate a profession through the use of certification, registration, title protection, and regulation of businesses.

Certification is similar to licensing and does afford consumers a certain level of protection.  However, the criterion for certification is typically lower than that of licensure.  Registration programs, on the other hand, have minimal barriers to entry and afford little protection to the public.

Title protection programs are one of the lower levels of regulation according to DORA.  No registration, or other State notification, is required.  Only those individuals who satisfy the prescribed requirements may use the enumerated titles and such requirements only serve to ensure a minimal level of competency.   Finally, regulation of businesses helps to ensure financial solvency and reliability of companies.  Such regulation can include requirements of filing quarterly financial statements with a regulator, onsite examination of financial records or service records.

In reviewing all these various forms of regulations, DORA noted that regulation of a profession does erect barriers to entry into the profession as well as the cost of operating a business in that industry.  As a result, the consumers’ choices become more limited and the incurred costs are likely to be passed through to the consumer by the service providers.  In other words, with regulation of management companies, as recommended by DORA, associations and owners will likely see an increase in management fees to pass along the cost of licensure.  What will this do to the already struggling associations in these economic times?  Is the tradeoff worth the cost?

Elina B. Gilbert
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