What should first-time buyers check about a Colorado HOA?

The numbers behind Colorado HOAs

From the HOA Information and Resource Center's 2024 annual report:

The center notes its data is self-reported and that many associations likely do not register. It also has no power to enforce.

How dues change what you can borrow

Lenders add HOA dues to principal, interest, taxes and insurance when they figure your housing payment. Dues count dollar for dollar against your debt limit.

Illustration at a 6.5% rate on a 30-year loan: each $1,000 borrowed costs about $6.32 a month. So:

A condo with $450 dues and a townhome with $150 dues at the same price are very different purchases. CHFA caps debt-to-income at 50% with a 620 to 659 score and 55% at 660 or more, so dues come straight out of that room.

What Colorado law makes the seller tell you

Under C.R.S. 38-35.7-102, any contract to sell a home in a common interest community must say, in bold, that the property is subject to the community's declaration. It must say you will have to join the association, follow its rules and pay assessments. It warns that the association "could place a lien on the property and possibly sell it to pay the debt." It tells buyers to read the declaration and look into the association's finances. The seller must also provide, or let the association provide, the governing and financial documents if you ask.

The state HOA Center's pre-contract checklist

The Division of Real Estate's HOA Center advises these steps before you sign:

1. Get the declaration from the county clerk and recorder. It sets how dues are decided, what is common property and what owners may not do.
2. Walk the property. Chipping siding, worn balconies or missing shingles can point to deferred maintenance and a future special assessment.
3. Use a broker who knows the Colorado Common Interest Ownership Act. Ask whether the HOA faces any lawsuits.
4. Ask your lender about the HOA questionnaire. Trouble getting one can signal problems inside the association.
5. Check registration. Search the Division of Real Estate licensee lookup by business name. An unregistered HOA cannot pursue enforcement or file a lien against a late owner.
6. Talk to residents about the board and how much dues have risen.

Red flags worth pausing on

• Dues that rose sharply in each of the last few years
• A budget with little set aside for repairs
• A recent or planned special assessment
• Pending lawsuits, including construction defect claims
• Insurance trouble. The state's HOA Center has said the Colorado FAIR Plan, the insurer of last resort, may not fit larger or high-value associations.

Reading the budget and the status letter

The declaration tells you how dues are set. The budget tells you whether they will hold. Ask for the current budget, the last year's actual spending and the board minutes from the past 12 months. Then check three things.

• Repair savings: look for a line set aside for roofs, paving, siding and other big items. A thin reserve often means a special assessment later.
• Dues trend: compare this year's dues with the last two. Steady small raises are normal. Big jumps deserve a question.
• Insurance cost: in fire and hail country, the master policy can be one of the largest lines in the budget.

Before closing, the title company usually orders a status letter from the association. It shows what the seller owes, any approved special assessment and any fees charged at transfer. Ask for it early so a surprise does not show up on your final closing figures. If the seller owes back dues, the contract should require them paid at closing.

If you fall behind on dues

Colorado limits what an association can collect. A 2024 law, HB24-1337, caps the attorney fees an HOA can collect from a late owner at the lesser of $5,000 or 50% of the amount owed, and it restricts foreclosure on HOA liens, per the HOA Center's report. That protects you, but the lien warning in your contract is still real. Budget for dues the way you budget for the mortgage.

HOAs plus metro districts

New subdivisions often have both. The HOA collects dues for shared spaces and rules. A metro district collects property taxes to repay infrastructure debt. Each one adds to your monthly payment. See the metro district guide before you buy new construction.

Condos and down payment help

Most CHFA programs accept condos and townhomes as long as you live there and it is one unit. Your lender still has to approve the building, and that often depends on the HOA questionnaire. Ask early. If the lender cannot get one, the deal can stall late in the process.

Your HOA worksheet

Fill it in for your top two homes. Add the dues to your payment, and add any metro district tax too. Then check your eligibility.

Questions

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