New laws effective Jan. 1 require licensing for community association managers who perform two or more types of tasks defined by law, including receiving or managing funds, preparing budgets, assisting in notice and conduct of meetings, contracting or coordinating maintenance for common interest communities, conducting inspections, keeping records and other services relating to the day-to-day operation of the association.
Self-managed owner associations are exempt from licensing if the tasks performed are not compensated. Managers who are subject to licensing must be licensed by July 1.
This is a major change in Colorado; however, it follows a national trend towards licensed association managers. The District of Columbia and 15 other states now require association manager licensing.
Licensing is managed through the Colorado Department of Regulatory Agencies, and the program is administered similar to real estate agent licensing. Licensing requires an application and application fee, completion of educational requirements, fingerprinting and a background check. License applicants must be 18 years of age and have a high school diploma or equivalent.
Licensees are required to carry malpractice insurance and must take eight credit hours of continuing education each year through licensed providers.
A 24-credit-hour course is required for licensing and has been available through accredited online and classroom-based education providers since October. Some managers holding specific credentials are not required to take the course. Managers who have been licensed in another jurisdiction for over two years may also be exempt. All licensee applicants are required to take a two-part exam. One part is general, the second is based on state laws.
Any person or firm performing tasks related to the operation and management of a common-interest community is required to be licensed, including the chief executive officer of a business entity that employs individuals or contracts with other business entities to perform management tasks. People performing administrative and ministerial functions not requiring specialized knowledge or skills who are directly supervised by a licensed manager are not required to be licensed. Before a license is granted to a business entity, all employees of the entity performing community association management duties must pass the exam.
There are some exemptions to the license requirement, including attorneys performing services in connection with the representation of their clients, public officials and people acting in fiduciary capacities such as trustees, conservators and guardians.
The Colorado Division of Real Estate will enforce the new regulations and investigate complaints regarding violations. This includes people or firms who are subject to the laws but are not licensed. Enforcement is limited to matters where violations of the licensing laws have occurred, and the division has no jurisdiction to address civil claims or disputes with a common interest community.
The proposed initial licensing fee is $330, and the proposed renewal fee is $170 per year. The 24-credit-hour course is currently offered at about $500. One of the educational providers has three courses of eight credit hours that would qualify for continuing education for $210 each. The course credits can apply to the educational requirements for both licenses for real estate brokers who are also association managers.
Applications may be denied based on lack of good moral character, previous community manager license violations or previous conviction of crimes. Ineligible applicants include any individual who, within the immediately preceding 10 years, been convicted of an offense involving unlawful sexual behavior, a burglary offense or any felony involving fraud, theft, larceny, embezzlement, fraudulent conversion or misappropriation of property.
Although most individuals and firms involved in association management are competent and reputable, the new laws will ensure that licensees obtain specialized training specific to association management and adhere to other professional standards. The division has extensive powers to enforce rules and discipline violations.
Although self-managed associations are generally exempt, training and licensing of an HOA representative performing management duties would be beneficial to the association and its members.
In general, the new laws bring credibility and professionalism to association managers and will help to address violations as they may occur and prevent future misbehavior. This is a needed and significant improvement in the real estate industry in Colorado.
Erin Johnson is an attorney living in Rico. She practices law focused on land-use, zoning, business and estate planning throughout Southwest Colorado. Reach her at erin@fone.net.
