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The front of a house.
Darin Bigus, 37, paid $267,500 in 2015 for a house in Aurora, adding fiber optic lights to his concrete patio, building a covered garden, and remodeling the property's interior. His HOA filed for foreclosure to recover about $9,000. The house sold at auction for just $76,000 last year. An investor resold it for $520,000. (Olivia Sun, The Colorado Sun via Report for America)
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Gov. Jared Polis and a group of four Democratic state legislators on Wednesday called for more changes to Colorado’s laws governing homeowners associations following a Colorado Sun investigation published this week revealing how scores of HOA-foreclosed properties have been sold at auction since 2018 for a fraction of their market value. 

The result is homeowners lose much — if not all — of the equity they’ve built, The Sun found.

In a written statement, Polis said an HOA shouldn’t “drain a family or individual of their financial savings.” The governor’s office, in a news release citing The Sun’s reporting, said HOA foreclosures also exacerbate Colorado’s housing crisis.

“These recent accounts are heartbreaking and deeply troubling,” the Democrat’s statement said. “I continue to urge HOAs to be more flexible — clearly, there is more work to do with the legislature and local communities to enhance the rights of property owners and protect people from being ripped off.”

State Rep. Brianna Titone, D-Arvada, said in the release that the legislature will be examining the issues raised in The Sun’s reporting with a newly formed HOA task force created by a bill she sponsored at the Capitol this year. “There are so many issues that can be solved through neighborly conversations and a little empathy,” she said.

State Rep. Lorena Garcia, an Adams County Democrat, said in a statement that homeowners associations “should not be in the business of auctioning or selling off people’s homes — they should be doing everything in their power to build happy, healthy, and safe communities.”

State Rep. Jennifer Lea Parenti, D-Erie, said in the release that “no one should face financial ruin or homelessness due to a miscommunication or disagreement with their HOA.”

Finally, state Rep. Naquetta Ricks, an Aurora Democrat who sponsored a 2022 bill aimed at reducing HOA foreclosures, said in the release that “it’s clear there’s more work to do.” 

“Coloradans are losing their homes, equity and are seeing their credit scores irreparably damaged by foreclosure forced by HOAs,” Ricks said.

The Sun’s investigation found that HOAs have filed roughly 3,000 foreclosure cases since 2018, more than 250 of which — or roughly 8% — have resulted in properties being auctioned off. At least 100 of the properties auctioned off were sold for $60,000 or less, according to court records. 

While Ricks’ bill has cut down on HOA foreclosure filings, people are still losing their homes now in cases filed before the law went into effect in August 2022.

Homeowners associations are typically nonprofits whose boards are made up of property owners in HOA-governed communities. But they’re often operated by private, for-profit property management companies.

The HOA foreclosure process can span several years and begins when a homeowner who lives in an HOA-governed community doesn’t pay their monthly dues or doesn’t pay their assessments to cover the cost of improvements or repairs to common areas, such as pools or parking lots.

An HOA is required to notify a homeowner of their debt three times — by certified mail, by a notice posted at the property and by either first-class mail, email or text. 

PODCAST: Listen to reporter Jesse Paul talk about The Colorado Sun’s investigation into HOA-foreclosed homes that are sold at auction

If the payments still aren’t made, the HOA can proceed with court action to seek a lien. The HOA lien takes priority over most every other debt on a home, including a mortgage. Once a homeowner’s unpaid balance grows to the equivalent of six months of their regular HOA dues, the association board members can vote to initiate a judicial foreclosure. (Not every HOA board takes this step.)

Aaron Goodlock, an attorney representing the Colorado Legislative Action Committee for the Community Associations Institute, told The Sun that HOAs rely on payments from homeowners to pay for everything from insurance dues to upkeep of common elements, like roofs, elevators and plumbing.

“Any lack of predictability in determining revenue makes budgeting problematic,” he said. “When owners fail to pay, the burden of paying HOA expenses, such as maintenance and insurance, is inequitably shifted to other homeowners in the community. Moreover, if a community has a high delinquency rate, it can directly adversely impact the ability of homeowners to qualify for and obtain conventional financing, especially for first-time homebuyers, due to the association’s poor financial health.”

Court proceedings can last six months or more before a judge rules that a home should be sold to cover the unpaid debt owed to the HOA. 

The properties are auctioned off by county sheriff’s offices, but the sales are difficult to track because they are advertised in the legal sections of low-circulation print newspapers and often don’t happen on the days they’re scheduled. 

Bidding starts at the amount a homeowner owes to an HOA, which can be as little as a few thousand dollars before ballooning with attorneys fees, interest and court costs. Attorneys fees frequently make up a quarter or more of what a homeowner eventually owes their HOA. 

A homeowner only receives money from the auctions if their property is sold for more than what the HOA is owed and generally only if the auction price is more than any other liens on the property. If there is an outstanding mortgage, any money bid on a property over the HOA debt balance is supposed to go to the lender. 

Since homes are auctioned off for so much less than their market value, homeowners are lucky to recover even their downpayment in an HOA foreclosure auction.

Investors frequently buy HOA-foreclosed properties at the auctions and then resell them at market value after paying off the mortgage — if there is one — and doing any necessary renovations, according to court and real estate records examined by The Sun. 

Nearly half of Colorado’s population — or roughly 2.7 million people — lived in one of the state’s 1 million homes in an HOA-governed community at the end of last year, according to the Colorado Department of Regulatory Agencies. 

The Colorado General Assembly’s next lawmaking term begins in January.

Jesse Paul is a Denver-based political reporter and editor at The Colorado Sun, covering the state legislature, Congress and local politics. He is the author of The Unaffiliated newsletter and also occasionally fills in on breaking news coverage....