HOA Document review
Buying a Home in an HOA
With nearly 10,000 HOAs in Colorado, there's a strong chance your new home may fall under one. HOAs bring both benefits and restrictions, with most associations enforcing covenants that could limit what you can do with your property. Understanding the intricacies of HOA living is a critical part of the home-buying process. With proper due diligence, you can ensure purchasing in an HOA aligns with your goals.
General Hierarchy of an HOA’s Governing Documents
The hierarchy of governing documents typically includes:
Declaration of Covenants, Conditions, and Restrictions (CCRs)
Articles of Incorporation
Bylaws
Governance Policies
Rules & Regulations
Design Guidelines
The Declaration of CCRs holds the highest authority and governs the primary rules and obligations for members.
Who Regulates HOAs in Colorado?
HOAs are governed by the Colorado Common Interest Ownership Act (CCIOA), which defines the rights and responsibilities of unit owners and associations. While CCIOA provides a framework for resolving disputes, it does not establish state oversight or regulation of HOAs.
Disputes between homeowners and HOAs are considered civil matters. Alternative dispute resolution, such as mediation, can often resolve conflicts without litigation.
Where to Find HOA Governing Documents
Colorado lacks a centralized repository for HOA governing documents. Associations are required to maintain records under sections 38-33.3-317 and 38-33.3-209.4 of the Colorado Common Interest Ownership Act (CCIOA) and the Colorado Nonprofit Corporation Act.
If you're a prospective buyer, you’ll need to request these documents from the seller, often facilitated by your real estate broker. However, you are only entitled to these documents once you’ve signed the Contract to Buy and Sell Real Estate (see Section 7).
Understanding Section 7 of the Colorado Contract to Buy and Sell
Once under contract, buyers are entitled to governing and financial documents outlined in Section 7 of the Colorado Contract to Buy and Sell (Residential). Reviewing these documents will provide insight into the HOA’s operations, governance, rules and regulations, and financial health. Y
Due Diligence for Homebuyers in an HOA
Community Association Managers (CAMs)
HOAs often hire Community Association Managers (CAMs) to oversee day-to-day operations. Before closing, determine whether the HOA is professionally managed and research the CAM or management company. Online reviews and direct communication with the management company can provide valuable insights.
Insurance Coverage
Colorado law requires HOAs to maintain:
Property Insurance for common elements.
Commercial General Liability Insurance for claims related to common element use.
Buyers should verify whether the HOA maintains adequate insurance and determine if homeowners must carry specific policies, such as flood or hazard insurance. In attached-unit communities, proper insurance coverage is critical to address damages caused by natural disasters or accidents.
Costs of Membership
Living in an HOA often involves costs beyond standard dues, including special assessments, insurance costs, and other fees. Review meeting minutes and financial documents to identify potential increases or upcoming assessments.
Maintenance and Landscaping
HOA boards control maintenance and landscaping schedules. Review the governing documents to understand what is considered a “common element” and what falls under the homeowner's responsibility. Evaluate how well the community’s landscaping and maintenance align with your expectations.
Financial Health
The financial health of an HOA is crucial. Buyers should review financial documents to assess the association's reserves, budgets, and overall stability. A financially unstable HOA could result in unexpected assessments or higher dues.
Rules and Restrictions
HOA rules can affect everything from pet ownership to renting out your property. Carefully review governing documents to ensure the community’s rules align with your lifestyle and long-term plans.
How GLO Can Help
If you’re purchasing property in an HOA, GLO’s experienced attorneys can:
Review governing documents to ensure you understand your rights and obligations.
Assess financial documents to gauge the HOA’s financial health.
Clarify insurance requirements and coverage.
Provide insights into rules and restrictions that may affect your decision.
Contact GLO today to discuss your real estate needs and learn how our expertise can make your transaction as smooth and successful as possible.
CONTACT US
Fill out an Intake Form to inquire about working with GLO.
Read more
