G.A.P. is an innovative program which has met with such great success in Florida that its creators decided it was time to debut it in the Mile High (and surrounding) cities. What is G.A.P., you ask?  It stands for “Guaranteed Assessment Program.”…. and that’s exactly what it is!  This insurance program is specifically designed to provide protection for associations against the debt incurred when homeowners fail to pay their assessments and fall delinquent. Sounds too good to be true, doesn’t it?

Here’s how it works.  An association pays a premium to purchase the insurance.  The premium is calculated based upon the association’s annual budget and can vary depending on the risk analysis. The premium will typically be between 1.2% and 1.8% of the budget.  This yearly premium can be paid in full or it can be deferred and paid from payments from the insurance company on a claim.

Once the insurance is purchased, the association can start making claims on any owner who is delinquent.  The decision to make a claim rests solely in the hands of the association.  Once a claim is made, the insurer will pay 6 months of assessments to the association and then the insurance carrier takes over efforts to collect against the homeowner. This means that the association is relieved of having to expend any effort on collections – this weight falls squarely on the shoulders of the insurer.  They use a company called Association Financial Services to handle the non-legal collection efforts.  If they are unsuccessful in their initial efforts to collect, the account will immediately be moved to a law firm to foreclose. Altitude Community Law is currently the only approved law firm in Colorado to handle these files, so we will proceed with a judicial foreclosure of the association’s lien.  The insurance company is responsible for 100% of the cost of the foreclosure so there is no risk to the association.

This automatic advance of six months worth of assessments could be very beneficial for associations facing challenges with FHA approval due to delinquencies and a good way to put money back into the hands of associations with cash flow issues.

If the insurance company is successful in collecting from the homeowner, the association will receive all assessment amounts collected.  If the insurance company is not 100% successful in collecting from the homeowner, the association will receive up to 18 months worth of assessments and is not responsible for any legal fees or costs incurred.

This is an exciting option for Colorado communities that could potentially revolutionize the way communities handle delinquent accounts. While Altitude Community Law does not sell the insurance, we would be happy to offer further information or to put you in touch with local insurance agents who do.  If you have questions about the process and whether it may be a good fit for your community, please contact Brianna Schaefer at [email protected] or 303-991-2012 or Loura Sanchez at [email protected] or 303-991-2004.

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Brianna L. Schaefer
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