This past summer, the Colorado legislature passed HB22-1137, which became effective on August 9, 2022. This new law requires Colorado associations to update their Collection Policy, Covenant Enforcement Policy and Conduct of Meetings Policy. Additionally, it requires several changes to the collections and covenant enforcement processes. This article focuses on the collections changes, but if you have any questions about the covenant changes, please contact our office for more information. Here are the top 10 ways HB22-1137 changed association collections:
- 6-month payment plan offer is now an 18-month payment plan offer:
As of 2014, associations were required to offer homeowners a 6-month payment plan before sending the matter to an attorney or collection agency. HB22-1137 now requires associations to offer an 18-month payment plan instead of a 6-month payment plan. The specifics of the payment plan will differ depending on the situation, so we recommend contacting the association’s attorney for additional information.
- Additional notice delivery requirements:
One notice (we recommend this be the same notice that contains the payment plan offer letter) must be sent by the following methods:
– Sent by certified mail, return receipt requested AND
– Posted at the unit AND
– One of the following:
+ Sent by regular mail OR
+ Sent by email OR
+ Sent by text
- Document everything:
Because HB22-1137 has so many notice delivery requirements, it is important for the association to keep documentation of compliance. Associations should keep certified mail numbers and the proof of delivery provided by the post office. Associations should also keep copies of any email communication with homeowners. We also recommend documenting the posting with a photo of the notice posted to the door and/or an affidavit from the individual that posted the notice. Additionally, associations should keep documentation of all communication with homeowners, including notes from phone calls, as well as all attempts to communicate with homeowners, such as copies of emails sent to homeowners but that received no response back from the homeowner. It is the association’s responsibility to show compliance with the law, so it is important for associations to retain proof of compliance.
- Collection Policies must be updated:
Before an association can take any legal action to collect a balance due or send a balance to a collection agency, the association’s Collection Policy must be updated to comply with the new laws. As the law already went into effect, if your association’s Collection Policy has not yet been updated, you should contact the association’s attorney immediately to get the update completed. Even if your association does not currently have anyone with a delinquent balance due (and congratulations to your association if this is true for you, as this is very uncommon!), it is always better to be prepared, rather than rushing to get an updated policy in place after a delinquency becomes problematic.
- Board must vote to turnover a matter to collections:
In 2014, the law changed so that a Board had to vote to foreclose against a delinquent homeowner. This new law now expands that to include this requirement before sending a delinquent homeowner to collections also. This process will be familiar to any Board that has initiated a foreclosure against a homeowner. However, for those that have not, your attorney can provide guidance and a resolution for your use to comply with this requirement.
- Interest is limited to 8%:
Associations may not charge interest greater than 8% per annum, even if your Declarations or Collection Policy state otherwise. This requirement is effective on August 9, 2022 and is not retroactive. Therefore, interest charged before that date at a higher rate is acceptable, but any interest accrued on or after August 9, 2022 must be at the lower rate.
- Payments must be applied first to unpaid assessments, then everything else:
Previously, associations were required to state in their Collection Policy how payments were applied, and most associations chose to apply payments first to attorney fees and costs of collection, then late fees and interest and other charges, and finally to unpaid assessments. However, HB22-1137 requires payments to be applied first to unpaid assessments, then to all other types of charges. Because of this, any payments received that state a restrictive endorsement such as “October HOA payment” or “Monthly HOA payment” that previously would have been returned to the homeowner, now should be accepted. However, restrictive endorsements such as “payment in full” may still be returned to the homeowner if the check does not in fact pay the balance in full.
- Designated contact:
Under HB22-1137, homeowners have the right to identify a designated contact. If a homeowner indicates a designated contact, any delinquency notice sent to the homeowner must be copied to the homeowner’s designated contact. The association does have the right to determine how an owner can designate a contact.
- Preferred language:
Homeowners also now have the right to identify their preferred language. If the homeowner requests notices be sent to them in their preferred language, the association is required to comply with that request and send delinquency notices to them in their preferred language.
- Monthly invoices must be sent to all delinquent homeowners:
Associations are now required to send monthly invoices to all homeowners with a delinquent balance. There is no exception for matters already sent to an attorney for collections or for homeowners in bankruptcy. We recommend contacting your association’s attorney for language to include on the monthly invoices for any homeowners currently in collections and/or those in bankruptcy.
HB22-1137 requires many changes to associations’ policies and processes. This list is not meant to be exhaustive of all the changes, only to highlight ten of the most impactful changes. We strongly recommend all associations contact their attorney for details of how their specific policies and letters should be revised. There is no one size fits all solution because some Declarations also have additional requirements that would also need to be complied with. If you have any questions or concerns, please feel free to contact any of our Altitude attorneys at 303-432-9999 or [email protected].