Bill Seeks to Clarify Rules Regarding Colorado Metro District and HOA Foreclosures

Colorado metro districts and homeowners associations could soon be forced to comply with a similar set of rules regarding covenant enforcement and foreclosure procedures under newly introduced House Bill 24-1267

State law gives metro districts the power to levy fines, fees, and taxes to pay for various construction projects within their territory. However, there is no requirement for metro districts to have a process for residents to dispute the fines levied. Moreover, a metro district could foreclose on a resident’s property if they fail to pay the fees.

House Bill 24-1267 seeks to clean up these statutory gaps and create “parity” between metro districts and homeowners associations, according to Rep. Jennifer Bacon, D-Denver, sponsor of the bill.

Rep. Jennifer Bacon (D)

If passed, HB24-1267 would require metro districts to adopt a written policy regarding how they levy fines and fees by January 1, 2025. They would also be required to create a fact-finding process for residents to dispute charges, and prohibit metro districts from assessing attorney fees against homeowners. Metro districts would also be prohibited from filing a lien against a homeowner over unpaid debts or modifying their property in specific ways.

The bill is being co-sponsored by Denver Democrat Senators Chris Hansen and James Colemen, and House Representative Iman Jodeh of Aurora. Nonprofit groups like the Community Economic Defense Project and the Metro District Education Coalition also support the bill. It was unanimously approved by the House Transportation, Housing & Local Government Committee on Feb. 28, 2024.

“We hope this bill can make it clear that we want reasonable rules and guidelines for metro districts to be transparent for those who live in them,” Bacon said.

The bill was introduced at a time when Colorado’s more than 2,400 metro districts and 8,000 homeowners associations have come under increasing scrutiny over their spending and foreclosure policies. Previous attempts to reign in the powers of both entities have also fallen short of their intended goals.

Last year, an investigation by The Colorado Sun found that homeowners associations often initiated judicial foreclosures on properties with unpaid debts and then sold off the homes for pennies on the dollar. In one instance, the Sun found a HOA in Aurora sold a foreclosed home for about one-fifth of its $276,000 purchase price even though the homeowner owed less than $10,000 in fines and attorneys fees.

A similar situation played out in the Master Homeowners Association for Green Valley Ranch in 2022. The Denver Post reported that the association filed roughly 50 foreclosure requests in 2021, which was about half of all requests filed that year. Many requests were over small issues like broken blinds and grease stains in driveways.

Photo by Michael Tuszynski via Unsplash

To Jodeh, these issues speak to the challenges many Colorado homeowners face once they’ve purchased a home. About 61% of homeowners in Colorado live in HOA-controlled neighborhoods and thousands more live under the jurisdiction of metro districts.

“The sustainability of homeownership is harder for Colorado families to achieve than it’s ever been,” she said, adding that many local governments are turning to metro districts as a way to increase the supply of housing.

The issues Colorado homeowners face with metro districts and homeowners associations are well-worn, but solutions to the issues have been harder to come by. State lawmakers created a task force to study the rights of homeowners living in metro districts. The task force began meeting earlier this year but advocates with Coloradans for Metro District Reform have said the meetings largely revolved around protecting developer interests.

Attempts to create more transparency around metro district operations have been opposed by developers. In 2023, lawmakers introduced legislation that sought to prevent metro district developers from purchasing so-called “developer bonds,” which are issued to investors to finance construction projects. The bonds can be both approved and purchased by metro district developers, a situation that lawmakers like Fort Collins Democrat Rep. Andrew Boesenecker argued shifts the financial burden for construction onto residents of metro districts while developers collect tax-free payments on the bonds.

But that bill was killed in favor of a more modest reform that required metro districts to notify residents of the maximum mill levies and debt that can be issued by the district.

Those efforts were happening at a time when multiple metro districts had accumulated more than $1 billion in debt by the end of 2023. For instance, two voters associated with the seven Granby Ranch Metropolitan District approved 24 ballot measures in May 2023 that issued more than $10 billion in debt repayment obligations, some of which carry interest rates up to 14%. Other metro districts in Castle Rock and Highlands Ranch have debt obligations totaling more than $1 billion as well.

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