New Laws to Protect Homeowners in Metro Districts, Prevent HOA Foreclosures Go Into Effect

DENVER, CO - Two new laws go into effect on August 7. HB24-1267 creates clear policies and procedures for metropolitan districts to abide by, improving accountability and consistency when enforcing their policies on homeowners. HB24-1337 protects homeowners’ association (HOA) residents against having to pay excessive attorney fees that can result from enforcement actions against unit owners and creates new safeguards against foreclosure.

“Metro districts are a tool used to help keep up with the increasing demand for housing in our communities, and we must ensure that homeowners in these districts are protected from preventable foreclosures and hefty legal fees when conflict arises,” said Rep. Iman Jodeh, D-Aurora, sponsor of HB24-1267 and HB24-1337. “Like HOAs, metro districts may conduct design review and covenant enforcement, unfortunately leading to some homeowners being foreclosed on due to fines and fees over decisions like the material used for their roof. Our new laws will encourage metro districts and homeowners to work together to settle disputes to avoid unnecessary foreclosures and ensure that Coloradans won’t be on the hook for paying exorbitant attorneys fees racked up by HOAs.”

“Keeping families housed is a key priority of mine,” said Senate President Pro Tempore James Coleman, D-Denver, sponsor of HB24-1267 and HB24-1337. “A lack of transparency and confusing, hard-to-follow rules in metro districts and HOAs alike can saddle homeowners with large fines and make it hard for folks to stay in their homes. These new laws will give homeowners greater agency and protection from foreclosure to keep more Colorado families housed.”

“Housing affordability is a serious issue for Coloradans. Foreclosures due to unreasonable HOA repayment requirements threaten housing security for thousands of families,” said Rep. Jennifer Bacon, D-Denver, sponsor of HB24-1267 and HB24-1337. "Our law will create a right of redemption, allowing Colorado homeowners the right to purchase the property back rather than watching their home and hard-earned equity go to the highest bidder for pennies on the dollar. Another law also goes into effect that will require greater transparency from metro districts when they enforce their policies on residents, preventing homeowners from having their house foreclosed on due to unpaid fines and fees resulting from covenant enforcement, keeping Coloradans housed.”

“Metro districts can be an important tool in helping create more badly-needed housing for our communities – but too often homeowners in metro districts face entirely preventable foreclosures,” said Senator Chris Hansen, D-Denver, sponsor of HB24-1267. “By creating more avenues for dispute resolution and creating clearer rules and practices, we can help ensure a fair process for foreclosures and keep more of our neighbors in their homes.”

Beginning August 7, 2024, HB24-1267 prohibits a metro district from foreclosing on a lien based on a resident’s delinquent fees or other charges owed to the metro district. It will also require metro districts to create rules and guidelines that they must comply with when conducting covenant enforcement and design review, including establishing a fair process that gives an owner notice and an opportunity for a hearing.

HB24-1267 also protects residents’ property rights by allowing them to display flags and signs, modify their property to accommodate a person with a disability, park an emergency vehicle in a driveway, remove vegetation for fire mitigation purposes, use a rain barrel, operate a family child care home or install renewable energy devices such as solar panels.

Currently, homeowners associations (HOAs) can require a homeowner to reimburse the HOAs for collection costs and attorney fees without starting a legal proceeding. HB24-1337 would limit the reimbursement amount for attorney fees to 50 percent of the underlying payment owed or $5,000, whichever is less. The bill also prohibits foreclosing on a lien if the homeowner is in a bankruptcy civil action or if the homeowner is in compliance with a payment plan to pay off the collection owed. It also requires the HOA to take specific actions before foreclosing on a home, ensuring foreclosure is the last resort.

“Home ownership is supposed to create generational wealth, but right now the housing crisis is creating generational debt,” said Senator Tony Exum, Sr., D-Colorado Springs, sponsor of HB24-1337. “This law helps ensure HOA foreclosure is a last resort while lowering legal costs and providing Coloradans with the opportunity to buy back their property and stay in their communities. It’s a great step to improving financial and housing stability in Colorado.”

The law also creates a right of redemption for properties in an HOA that have been foreclosed on, which would allow unit owners, tenants, nonprofits, community land trusts, and other entities the opportunity to purchase the property before it is transferred, which will help keep wealth in families and communities.