As originally introduced, HB 1197 would have had a serious, negative affect on associations’ superliens. Luckily, Representative Gardner, the bill sponsor, has worked closely with stakeholders to rewrite the bill. The rewrite resulted in a complete redaction of the original wording of the bill and new language being added. The CAI Colorado Legislative Action Committee supports the bill in its current version.
Altitude Community Law also believes that the certain provisions of the proposed amended bill are beneficial to associations even though they do require some additional steps and costs for associations seeking to foreclose their liens. As with any new significant legislation, however, there will likely be an increase in litigation surrounding certain provisions of the proposed amended bill (e.g. lien priority disputes).
The basics of the bill, IF IT BECOMES LAW, are as follows:
- The superlien will be 9 months instead of 6 months
- The bill attempts to clarify that the super lien is equal to but cannot exceed assessments which would have become due for the nine (9) months immediately preceding institution of a foreclosure.
- If federal regulations adopted by the FNMA for FHLMAC require a shorter period for superliens, the number of months of the superliens will be determined in accordance with those federal regulations. However, under no circumstances will the super lien be less than six (6) months.
- The superlien will be due regardless of whether assessments are delinquent
- Superliens must be paid within six months after a foreclosure is started
- If not paid in six months the lien amount accrues interest at the statutory rate or the rate in the governing documents whichever is greater.
- If not paid in six months the association is entitled to recover its attorney fees and costs incurred to enforce the lien.
- The superlien will not be due more than once every 9 months
- This period could be shortened to every 6 months if required by federal regulations.
- If foreclosing the superlien, associations must send a notice to the owner and the first mortgage holder prior to initiating foreclosure
- If the superlien is not paid within thirty (30) days of this notice, the association may proceed with foreclosing on its lien.
- If an association forecloses, judgments must split out the amounts due on the super lien portion and the “regular” portion
- The association is required to hold separate sheriff sales for each portion of the judgment.
- First mortgage holder or assignees have 90 days to redeem after a sheriff sale of the superlien.
- Statements of unpaid assessments requested under CCIOA will be binding on the association or an assignee of the association’s lien.
Next Steps: The Superlien Bill is set to be heard tomorrow afternoon, February 24, before the House Economic and Business Development Committee. We expect that the Committee will approve the bill, and we will keep you posted as it progresses through the legislature.