Homeowner association foreclosures have been the target of reform legislation since the 2022 session due to the highly publicized (and criticized) situation in Green Valley Ranch in 2022. House Bill 22-1137 specifically targeted HOA collection and foreclosure procedures with the alleged aim of keeping people in their homes and preserving equity. These legislative changes caused a backlog of collections and, in many cases, resulted in “do-overs” in order to proceed with foreclosure of an Association lien.
In 2024, the industry saw more changes in the collection and foreclosure process. House Bill 24-1337 (“HB24-1337”) added new prerequisites to foreclosure, including the requirement to first obtain a ‘money judgment’ against the owner unless the subject property is (1) owned by an entity (think corporation, LLC, or trust), or (2) the property is not the owner’s primary residence, or (3) if the owner was not able to be served with the collection lawsuit after 180 days.
HB24-1337 further required that owners be sent a notice offering an opportunity for mediation before filing a foreclosure lawsuit. Additionally, a notice of the future foreclosure must be sent to all lienholders of record to allow an opportunity for a lienholder to pay the balance due to the association before a foreclosure is filed with the court.
HB23-1337 also created new categories of lienors with redemption rights and extended the time to file an intent to redeem for these lienors to thirty-five (35) days. These lienors are not required to have a recorded lien on the property as their redemption rights were created by statute. In order of seniority, these lienors are:
- Owners;
- Tenants (under certain conditions);
- Nonprofit entity with a primary purpose to develop or preserve affordable housing;
- Community Land Trust;
- Cooperative housing corporation formed pursuant to C.R.S. 38-33.5-101; and
- State of Colorado or a political subdivision of the State of Colorado
In 2025, the Colorado General Assembly was apparently determined to further restrict the foreclosure process when it proposed House Bill 25-1043 (“HB25-1043”) known as “Owner Equity Protection in Homeowners’ Association Foreclosure Sales.” The Governor signed the bill into law on June 4, 2025. HB25-1043 has an effective date of October 1, 2025.
HB25-1043 requires strict compliance with foreclosure laws and governing documents, although if a court determines that an association failed to strictly comply with a law or governing document, a cure period is allowed for the association to come into compliance. However, the association may not charge interest or late fees on the balance due during any cure period. What does “strict compliance” mean for associations? It may mean a request from the association’s attorney to redo or resend something to an owner because it did not strictly follow a law or requirement of the collection policy or other governing document. Additionally, this law adds factors that the court shall (meaning it “must”) consider in determining reasonable attorney fees in foreclosure of a lien to include whether the HOA incurred inflated or duplicative fees due to a stay in court proceedings to allow the HOA to strictly comply with foreclosure laws and the governing documents.
The new law also requires that an association’s Collection Policy be revised (yes, again!) to include the following information:
- Owner may request copy of ledger and it must be provided within 7 business days;
- Free information regarding collection and foreclosure is available online from the HOA information and resource center;
- “the sale of the unit owner’s unit at auction to pay delinquent assessments, which could result in the unit owner losing some or all of the unit owner’s equity in the unit…”
- Inform the owner regarding the availability of and instructions on how to access certain free online information related to foreclosure.
Before a foreclosure action may be filed with the court, HB25-1043 requires the HOA to send written and electronic notice to the owner advising the owner that he/she has the right to participate in credit counseling at the owner’s expense and directing the owner to the HOA information and resource center’s website to obtain the credit counseling information. Additionally, the notice is required to provide details as to what credit counseling may include. These details should be available on the HOA information and resource website. Further, no later than 5 days after filing a foreclosure action, written and electronic notice must be provided to all lienholders of (a) the right to cure the nonpayment and (b) of the owner’s right to file a motion to stay the sale of the property for 9 months to sell the property. The owner or the owner’s designee can file a motion to stay the sale at any time prior to the sale date.
Beginning October 1, 2025, homeowner associations are required to periodically request telephone number, cell phone number, and email from owners for notification purposes. However, there is no requirement for an owner to provide this information. The prior laws requiring delinquency notices to be provided to owners via email, text and/or telephone failed to provide an alternate form of notice in the event an association did not have this information. HB25-1043 seeks to redress that oversight by adding an option to send the delinquency notice via regular mail if email, text, and/or telephone information is not available.
With all of the restrictions placed on foreclosures through past, present, and future laws, it will be more challenging to foreclose on an association’s lien. However, despite these challenges, associations must still collect assessments and foreclosure remains the most powerful collection tool.
Should you have any additional questions, please contact an Altitude attorney at (303) 432-9999 or at [email protected].