Real Property Owner Unit Association Collections

In common interest communities for real property, Colorado 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 act limits the reimbursement amount for attorney fees to $5,000 or 50% of the original money owed.

Colorado law allows the association to require, also 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 act limits the reimbursement amount for attorney fees to $5,000 or 50% of the actual costs the association incurred for the failure to obey.

Colorado 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 act limits the award for attorney fees to $5,000 or 50% of the balance owed to the association; except that the court may award attorney fees in excess of these limits if the court finds that the unit owner was able to comply but willfully failed to comply.

Each of the mentioned limitation is adjusted for inflation. The court, when determining reasonable attorney fees, is required 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.

Colorado law grants an association a lien on a unit for amounts owed to the association by the unit owner. The act 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.

These foreclosure requirements:

• Apply to a unit owned by an individual who occupies the unit as a principal residence;
• Do not apply to a unit owned by an entity other than an individual or a unit that is not occupied as the unit owner's principal residence; and
• Apply to a unit used for workforce housing.

At least 30 days before initiating legal action to foreclose a lien under the act, an association must provide notice to the unit owner that the unit owner has the right to engage in mediation prior to litigation. The association must also provide notice to all lienholders identified on the unit owner property records of the pending legal action for foreclosure. The notice must include the amount of any outstanding assessment and other money owed.

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

Colorado law prohibits certain persons from purchasing the property foreclosed upon under an association lien as a conflict of interest. The act adds the following persons to the prohibition:

• A community association management company representing the association; and
• An individual or a community association management company that was, at any time during the 5-year period immediately preceding the sale of the foreclosed unit, a person that was subject to, or that was owned by or affiliated with a person that was subject to, the prohibition.

A person that purchases a unit through the foreclosure of a lien held by an association acquires the unit subject to any covenants or limitations on the use or sale of the unit to which the previous unit owner was subject.

The act creates a right of redemption for 180 days following a foreclosure sale. In general, the procedures for the act's right of redemption are based on the procedures in current law. A person wanting to redeem the unit under the act 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. If the highest priority lienor has not redeemed the property, each subsequent lienor is entitled to redeem, in succession, within five business days.

To redeem a unit, the redeemer must reimburse the foreclosure purchaser or association in accordance with the standards set by the act.

APPROVED by Governor June 5, 2024

EFFECTIVE August 7, 2024
(Note: This summary applies to this bill as enacted.)