Update on the HB22-1137 Related Bills

HOA Foreclosure Sale Bill Reviewed in Committee

The HOA foreclosure sale bill, HB24-1158, was heard by the Transportation, Housing & Local Government Committee on February 27, 2024.  The recorded hearing is available on its website.

Representative Ricks kicked off the hearing with a brief introduction of how the bill would build on HB22-1137 by:

• Limiting attorney fees in foreclosure actions to $2,500;
• Limiting recovery of appraisal fees to $750.00;
• Including credit counseling information for owners;
• Providing for an initial minimum sale bid;
• Expanding the list of persons prohibited from purchasing foreclosed properties to include management companies;
• Preventing owners from losing equity; and
• Preventing predatory practices

For additional information on the proposed bill, please see our article.

A panel of six individuals provided testimony in opposition to the bill. The panel included, among others, the board president of an HOA, a community association attorney, a community manager, and the vice president of a national management company. The panelists opined various reasons for opposing the bill, including:

• The proposed bill is punitive in nature;
• Delinquent owners have options for payment (that they are not exercising) forcing foreclosure;
• Community members in good standing are penalized;
• If passed, the bill would make housing less affordable for those who do pay their assessments;
• The bill would effectively remove foreclosure from an association’s collection options;
• The bill forces HOAs into rewarding owners who do not pay assessments;
• Lender foreclosures outnumber HOA foreclosures but lender foreclosures are not being addressed;
• The bill would create more problems and raise costs for all homeowners as well as associations; and
• The cap on attorney fees is unrealistic and would shift the additional fees to paying association homeowners.

The committee’s only question for the opposing panelists involved the prohibition on purchase of a foreclosed property by a management company. The vice president of the management company responded by stating that in 46 years of being in business, the management company had never purchased a foreclosed property and that there was no interest in doing so. Another panelist, whose comments indicated he was in favor of the bill rather than opposed to it, responded to the committee’s question in relation to HB22-1137 and not to the proposed bill.

A panel of individuals in favor of the proposed bill also testified. The proponents testified to their various experiences with foreclosures. The testimony included comments such as:

• Attorneys exploit CCIOA and push foreclosures;
• It is “time to reel in HOA attorneys” although the fee cap may be too restrictive;
• The number of HOA foreclosures is misrepresented;
• The proposed bill will not increase community expenses;
• There are current problems with HOA foreclosures including predatory abuse, stealing homes and targeting people; and
• Foreclosures have a negative psychological effect on owners, as well as an effect on the sale price and valuation of the surrounding areas.

The Committee postponed making a decision (including amending and/or voting) on HB24-1158 due to a similar bill, HB24-1233, (the Homeowners’ Association Delinquency Payment Enforcement Procedures), scheduled to be heard by the Committee on February 28, 2024, in order to factor in the interaction between the two bills.

HB22-1137 “Clean Up” Bill Reviewed in Committee

HOUSE BILL 24-1233, the so-called “HB22-1137 clean-up bill,” was heard by the Transportation, Housing & Local Government Committee on February 28, 2024.  The recorded hearing is available on its website. (Note, 2 bills, HB24-1172 and HB24-1267, were heard by the committee prior to HB 24-1233).

Representatives Wilson and Snyder took the lead on explaining the proposed bill to the Committee and summarized their proposed revisions to HB22-1137 as follows:

• Removed the requirement to post notices as the representatives believed there are safer alternatives to posting notices on properties;
• Exempt time shares not occupied on a full-time basis from some of the procedural collection requirements of HB22-1137;
• Limit the amount recoverable for certified mail to the actual costs of the certified mailing; and
• Require equal monthly payments over the term of the required payment plan (originally, the bill sought to reduce the 18 month payment plan requirement to a 12 month payment plan requirement, as well as require equal monthly payments over the term of the payment plan rather than containing the option for an owner to pay a minimum payment of $25 per month for 17 months with a balloon payment in month 18; the sponsors advised at the outset that they intend to keep the 18 month payment plan, but still require equal monthly payments over the term of the plan).

The panel of opponents’ main concern with the bill was that the intent of the bill was much more nefarious than the bill appeared to be on its face, with one individual referring to the bill as a “wolf in sheep’s clothing.”  That same individual was also in favor of the minimum $25 per month payment, as well as an amendment to allow owners to readjust payment arrangements throughout the 18 months according to their financial ability.

The proponents of the bill, which included community association attorneys, board members, and others involved in community management, agreed that there were safety concerns with the posting requirement. The proponents also concurred – with each other, but not the bill sponsors – that allowing 18 months to repay created cash flow problems for associations, especially in light of the astronomical increases in insurance premiums.

Following the statements of proponents and opponents, Representative Wilson presented the proposed amendment to the Committee, in which the amendment sought to retain the 18-month payment option, but to require equal payments over the term of the plan. The amendment passed. At the close of the hearing, the Committee voted 6-5 in favor of referring the bill, as amended, to the Committee of the Whole (“COW”) for a second reading.

We will keep you up to date on the progress of these bills through our 2024 Legislative Tracker.

If you have any questions about HB24-1158 or HB24-1233, please contact one of our Altitude attorneys at 303-432-9999 or email us at [email protected].