Real Property Owner Unit Association Collections

In common interest communities for real property, current law allows a unit owners' association (association) to require, without starting a legal proceeding, a unit owner to reimburse the association for collection costs, attorney fees, or other costs resulting from the owner failing to timely pay assessments or other money owed. The bill limits the reimbursement amount for attorney fees to $5,000 or 50% of the original money owed.

Current law allows the association to require, without starting a legal proceeding, a unit owner to reimburse the association for collection costs and attorney fees resulting from the owner failing to obey the bylaws or rules of the association. The bill limits the reimbursement amount for attorney fees to $5,000 or 50% of the actual cost the association incurred for the failure to obey.

Current law requires a court to award an association reasonable attorney fees, costs, and collection costs in an action in which the association seeks to collect unpaid assessments or enforce or defend the association's bylaws or rules and the association prevails in the matter. The bill limits the award for attorney fees to $5,000 or 50% of the balance owed to the association. The bill requires the court, when determining reasonable attorney fees, to consider relevant factors, including the amount of the unpaid assessments, whether foreclosure action was contested, and whether the attorney fees incurred are disproportionate to the needs of the case.

Current law grants an association a lien on the unit for amounts owed to the association by the unit owner. The bill prohibits foreclosing on the lien until:

• The association has:
• Obtained a personal judgment against the unit owner in a civil action;
• Attempted to bring a civil action against the unit owner but was prevented by the death of or incapacity of the unit owner; or
• Attempted to bring a civil action against the unit owner but the association was unable to serve the unit owner within 180 days; or
• The unit owner is in a bankruptcy civil action.

At least 30 days before initiating legal action to foreclose a lien under the bill, an association must provide notice to the unit owner that the unit owner has the right to engage in mediation prior to litigation.

Current law requires the association to attempt to enter into a payment plan to collect amounts due from a unit owner. The bill prohibits foreclosure on the lien if the unit owner is in compliance with the payment plan.

Current law has a right of redemption for junior lien holders and procedures for invoking the right. The bill creates a right of redemption following certain involuntary transfers of a unit to the association or a foreclosure purchaser for 180 days following the transfer. During the 180 days, the foreclosure purchaser or association is prohibited from selling the unit a foreclosure sale. In general, the procedures for the bill's right of redemption are based on the procedures in current law. A person wanting to redeem the unit under the bill must file a notice of intent to redeem within 30 days after the foreclosure sale. The following people have the right of redemption in order of priority:

• The unit owner;
• A tenant of the unit;
• A nonprofit entity whose primary purpose is the development or preservation of affordable housing;
• A community land trust;
• A cooperative housing corporation; and
• The state of Colorado or a political subdivision of the state of Colorado.

If 2 or more people with the right of redemption attempt to redeem the property, the person with the highest priority is awarded the property and the lower priority rights of redemption are extinguished.

The redeemer may send a notice of intent to exercise the right of redemption. Upon receiving the notice of intent, the foreclosure purchaser or association is prohibited for a specified time from transferring the property to an authorized redeemer that has lower priority than the authorized redeemer that sent the notice.

To redeem a unit, the redeemer must reimburse the foreclosure purchaser or association in accordance with the standards set by the bill. Failure to execute a deed after redemption subjects the owner to liability plus attorney fees. Procedures are set for exercising the right of redemption. and for recording deeds, affidavits, or certificates of compliance concerning the right of redemption with the county clerk and recorder. Filing an affidavit or certificate of compliance with the county clerk and recorder without a reasonable basis subjects the person to liability and attorney fees. If a redeemer makes partial payment, but fails to pay all amounts necessary to redeem the unit before the redemption period expires, the association or foreclosure purchaser shall refund the partial payment on or before 30 days after the expiration of the redemption period.

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)

(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)