First Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 11-0710.01 Duane Gall HOUSE BILL 11-1197 HOUSE SPONSORSHIP Gardner D., SENATE SPONSORSHIP (None), House Committees Senate Committees Economic and Business Development A BILL FOR AN ACT Concerning the priority of liens in foreclosure proceedings, and, in connection therewith, amending provisions governing enforcement of the lien granted to a unit owners' association under the "Colorado Common Interest Ownership Act". Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) Existing law gives a unit owners' association (a/k/a homeowners' association or HOA) a lien for past-due assessments and other charges, of which the most recent 6 months' worth of assessments are granted a superpriority over all other liens, including the mortgage on the unit. The bill amends and clarifies the rights of the HOA in foreclosure proceedings as they pertain to this superpriority portion by: Bifurcating the superpriority portion from the remainder of the lien and prohibiting the HOA from foreclosing on both portions as though they were one lien with a single priority; Requiring a senior lienholder who forecloses its lien to pay the HOA the amount the HOA is due under the superpriority provision; Prohibiting the HOA from adding attorney fees or other fees and costs to the amount it may enforce under the superpriority provision, but allowing it to collect interest on the base amount if a senior lienholder fails to pay the HOA within 6 months after foreclosing; and Requiring the HOA to provide a ledger accounting for the past-due assessments upon request even if it has assigned its interests to another party. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. 38-33.3-316 (2) (b), (2) (c), (8), and (11), Colorado Revised Statutes, are amended to read: 38-33.3-316. Lien for assessments. (2) (b) Subject to paragraph (d) of this subsection (2), a lien under this section is also prior to the security interests described in subparagraph (II) of paragraph (a) of this subsection (2) to the extent of: (I) An amount equal to, but not exceeding, the common expense assessments based on a periodic budget adopted by the association under section 38-33.3-315 (1) which would have become due, in the absence of any acceleration, during the six months immediately preceding institution by either the association or any party holding a lien senior to any part of the association lien created under this section of an action or a nonjudicial foreclosure either to enforce or to extinguish the lien. Except as otherwise provided in subparagraph (IV) of this paragraph (b), the amount recoverable pursuant to this paragraph (b) does not include any additional fees and costs, including attorney fees and costs, of the association. (II) (Deleted by amendment, L. 93, p. 653,  21, effective April 30, 1993.) (III) If a lienholder holding a lien senior to any part of the association lien created under subsection (1) of this section initiates an action or a nonjudicial foreclosure either to enforce or extinguish its lien, the party must, within six months after the date of the recording of the notice of election and demand pursuant to section 38-38-102, or of the notice of lis pendens, as the case may be, pay to the association the amount of the association lien specified in subparagraph (I) of this paragraph (b). (IV) If a party fails to pay the amount due to the association within the period set forth in subparagraph (III) of this paragraph (b), the association is entitled to the greater of the following: (A) Statutory interest on that amount, calculated from the date of the recording of the notice of election and demand pursuant to section 38-38-102 or of the notice of lis pendens; or (B) Interest on that amount, calculated in accordance with applicable provisions of the declaration, bylaws, or rules and regulations of the association. (V) Upon a lienholder's compliance with subparagraph (III) of this paragraph (b), the portion of the association lien described in subparagraph (I) of this paragraph (b) is satisfied in full: (A) With respect to all parties, including the unit owner; and (B) For purposes of any subsequent foreclosure proceeding commenced by the association or senior lienholder. (c) (I) This subsection (2) does not affect the priority of mechanics' or materialmen's liens or the priority of liens for other assessments made by the association. In addition, any other liens for other assessments, fees, charges, late charges, attorney fees, fines, and interest made by the association are separate from the lien described in subparagraph (I) of paragraph (b) of this subsection (2) and are not liens prior to the security interests described in subparagraph (III) of paragraph (b) of this subsection (2). A lien under this section is not subject to the provisions of part 2 of article 41 of this title or to the provisions of section 15-11-201, C.R.S. (II) Notwithstanding any other provision of law, the association shall not foreclose two or more portions of its lien under this section that have different priorities as part of the same lien. (8) The association shall furnish to a unit owner or such the unit owner's designee, or to a holder of a security interest or its designee, upon written request, delivered personally or by certified mail, first-class postage prepaid, with a return receipt directed to the association's registered agent, a written statement setting forth the amount of unpaid assessments currently levied against such the owner's unit and a ledger reflecting the unpaid assessments, regardless of whether the association has assigned its interests to another party. The association shall furnish the statement shall be furnished within fourteen calendar days after receipt of the request. and is binding on The statement binds the association, the executive board, and every unit owner. If no statement is furnished to the unit owner or holder of a security interest or his or her designee, delivered personally or by certified mail, first-class postage prepaid, return receipt requested, to the inquiring party, then the association shall have has no right to assert a lien upon the unit for unpaid assessments which that were due as of the date of the request. (11) The association's lien may be foreclosed by any of the following means; except that a foreclosure by the association does not extinguish any right, title, or interest of a senior lienholder in the property: (a) In a condominium or planned community, the association's lien may be foreclosed in like manner as a mortgage on real estate. (b) In a cooperative whose unit owners' interests in the units are real estate as determined in accordance with the provisions of section 38-33.3-105, the association's lien must be foreclosed in like manner as a mortgage on real estate. (c) In a cooperative whose unit owners' interests in the units are personal property, as determined in accordance with the provisions of section 38-33.3-105, the association's lien must be foreclosed as a security interest under the "Uniform Commercial Code", title 4, C.R.S. SECTION 2. Act subject to petition - effective date - applicability. (1) This act shall take effect at 12:01 a.m. on the day following the expiration of the ninety-day period after final adjournment of the general assembly (August 10, 2011, if adjournment sine die is on May 11, 2011); except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within such period, then the act, item, section, or part shall not take effect unless approved by the people at the general election to be held in November 2012 and shall take effect on the date of the official declaration of the vote thereon by the governor. (2) The provisions of this act shall apply to foreclosure actions in which the notice of election and demand is filed on or after the applicable effective date of this act.