HOA Licensure 16:45, September 25, 2015

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HOA Licensure

HOA’s and their managers should be preparing for the upcoming licensure deadline by ensuring that their managers timely obtain a license.  Effective July 1, 2015, with very limited exceptions, all HOA managers in Colorado must be licensed by the Department of Regulatory Agencies (“DORA”). Garfield & Hecht has been monitoring DORA’s releases regarding how licensure will work.

HOA managers who perform more than one of the of the “community association practices” for compensation will need to be licensed.  “[C]ommunity association practices” include the following: (i) handling HOA funds, (ii) preparing budgets or other financial documents, (iii) creating or implementing a reserve program, (iv) conducting meetings, (v) contracting for maintenance work, (vi) conducting inspections, (vi) handling architectural reviews, (vii) keeping records of HOA violations, or (viii) performing other day-to-day operations for the community.  The word compensation has also been identified to include any compensation by fee, commission, salary or the receipt of anything else of value or performing such services with the intention of receiving or collecting compensation.

Although the proposed rules have been released, the formal rulemaking to adopt the licensure requirements will not take place until early 2015.  The current version of the rules requires that applicants pass a two-part exam consisting of a state portion and a general portion.  Fingerprinting and a criminal background check will also be required. Applicants may start the process in January of 2015, however, applications will not be accepted until April of 2015.  All licenses will be effective for one year.  In order to renew the license each year, the applicant must complete 8 hours of continuing education each year or retake and pass the Colorado state portion of the licensing examination.

HOA’s also need to be aware that the proposed rules address a manager’s handling of HOA funds.  All monies collected must be deposited in accounts belonging to the HOA.  Managers should never deposit funds into accounts other than those belonging to the specific HOA such funds are collected for.  Also, HOA’s should have separate accounts for operating and for reserves and the accounts should be identified as trust or escrow accounts. No manager should be able to access these funds unless a written authorization is obtained from the HOA. Managers must also keep (in paper or electronic format) the following records: (i) account journals, (ii) bank reconciliation reports, (iii) bank deposits including electronic transfers, and (iv) cancelled checks. All disbursements must be supported by bids, bills, invoices and the like.

The HOA’s contract may also need to change with the manager.  The proposed rules state that a manager’s contract must be in writing and clearly specify the terms and conditions of the management services to be performed. The agreement must include the following: (i) beginning and ending dates of the contract; (ii) details of all compensation, fees and charges; (iii) cancellation rights of the parties; (iv) record retention and distribution policy; (v) errors and omissions insurance coverage; (vi) fidelity bond coverage; (vii) a general description of the records to be kept and the accounting or bookkeeping system to be used; and (viii) the common interest community manager’s license number.  The rules do not yet specifically address whether or not existing contract must be modified to comply with these new contractual requirements.  Garfield & Hecht has requested further guidance on this point from DORA.

If you have any questions or require assistance for your HOA, please contact any one of the attorneys noted.

In Aspen:  
Ron Garfield Phone: (970) 925-1936 x200Email:


Chris LaCroix Phone: (970) 925-1936 x204Email:


E. Michael Hoffman Phone: (970) 925-1936 x 232Email:
In Avon: 
Kursten L. Canada Phone: (970) 949-0707 x853Email:


Tracy L. Kinsella Phone: (970) 949-0707 x854Email:


In Glenwood Springs: 
David H. McConaughy Phone: (970) 947-1936 x810Email:


Mary Elizabeth Geiger Phone: (970) 947-1936 x813Email: