HB26-1099, Concerning Protecting the Financial Condition of Common Interest Communities, was introduced on February 3rd and, if passed, would affect reserves, records, and an association’s contract with a management company. Here are some of the changes we would see:
- Reserves. The bill would require a declarant to obtain a reserve study for an association, to be updated after completion of each phase of building, that would include an estimate of the project cost of maintaining, repairing, or replacing the Common Elements or property of the association as planned. Such reserve study (as updated) must be provided by the declarant to prospective buyers in advance of the closing date for the sale. Further, the declaration would be required to pay to the association an amount equal to 1.5% of the amount required to fully fund the reserves, as set forth in the most recent reserve study for the community, that would be credited to the association’s reserve account.
- Records from Declarant and Records to Owners. Following declarant turnover and within 90 days of each fiscal year thereafter, the association would be required to include the most recent reserve study (as referenced above) with its annual disclosures. Further, the declarant’s reserve study (as revised or updated) must be turned over to the association during declarant turnover as well.
- Management Company Penalties. And finally, this bill provides that a management company will face penalties for failing to transfer all association property (including but not limited to money, financial accounts, books, records, insurance policies, account information and passwords, etc.) to the association’s new management company or to the association directly within 45 days of its management agreement being terminated or not having been renewed by an association. Failure to provide the property could result in liability to the association for all interest and late fees on late payments made by the association, as well as other damages incurred by the association and the management company would be required to pay to the association $250.00 for each business day that it fails to comply with these requirements, plus triple the actual damages incurred by the association plus the association’s attorney fees and costs.
We will continue to update our Legislative Tracker, as this and other bills progress through our legislature. If you have any questions about this bill, please contact an Altitude attorney at [email protected] or 303-432-9999.
I am assuming this applies at the time of the turnover of a property to an HOA.
Is the” Declarant” the business organization building and/or converting a building to Condominiums?
Thanks
Amy Ostrander
The Declarant is the person or entity who creates the common interest community. This bill would apply prior to and up to the turnover of the community to the association.
Would these requirements be applicable to existing HOA that are still under Construction ?
The bill is currently written to require the declarant to obtain a reserve study prior to the sale or conveyance of the first unit in the community, and then update that reserve study after each phase of building, with a final reserve study conducted after the community has been built. The 1.5% would be due to the Association at the time of transfer of control. However, this bill does not currently contain a provision that would require it to be applied retroactively.
The Meadows Townhouse Homeowners Association is a pre-CCIOA complex and is self-managed so how would this bill affect such an entity? Thank you for your reply!
The association would be required to comply with the annual disclosures and records provisions in this bill if the bill were to be passed as written.
Re: Management penalties– Our association changed management companies Nov 30 2024. It took two attorney-written demand letters to get our records forwarded and the process was still incomplete and the accounting was full of errors 5 months later. This also encumbered a pending litigation which involved management’s inactivity and thus served with notice of “third party claim” by the Association’s attorney. If HB26-1099 passes in June and the litigation drags on, is the Association able to claim (penalties) against management for liability 2024-2025?
If passed, the bill would take effect on approximately August 12, 2026. However, there does not appear to be a provision in the bill to allow it to be applied retroactively.