The Bottom Line for Developers
The Colorado General Assembly has passed House Bill 26-1099, titled ‘Protect Financial Condition of Homeowners Associations,’ and it now awaits the Governor’s signature. The bill is well-intentioned — ensuring HOAs are financially sound is a legitimate policy goal. But what the bill’s sponsors appear to have overlooked is a fundamental truth about real estate development: developers do not absorb new regulatory costs. They pass them through to buyers. HB26-1099 will make condominium ownership more expensive in Colorado, at a time when the state’s housing affordability crisis demands the opposite. The Governor should think carefully before signing it.
What the Bill Does
HB26-1099 imposes three primary new obligations on condominium and planned community developers. First, before selling a single unit, the developer (called a ‘declarant’) must commission a reserve study estimating the cost of maintaining, repairing, or replacing all common elements — elevators, roofs, pools, parking structures, HVAC systems, and more — over a 30-year horizon. The study must be updated after each construction phase, with a final study reflecting the project as built.
Second, that reserve study must be delivered to every prospective buyer at least 24 hours before closing. Third — and most consequential for developers — the bill requires that at or before the transfer of control of the association to unit owners, the developer must pay into the reserve fund an amount equal to 1.5% of what a fully funded reserve would require. That is the ‘Developer Funding Requirement,’ and it is where this bill’s real cost lives.
The bill also creates significant new obligations around HOA management company transitions, including a $250-per-business-day penalty for any management company that fails to timely transfer association records to a successor — with treble damages and attorney fees available if the violation is found to be willful.
Running the Numbers: What Buyers Will Actually Pay
To understand the real-world impact of the Developer Funding Requirement, consider a representative mid-scale luxury condominium project: 50 units, 5 stories, two elevators, a parking garage, pool, hot tub, and fitness center. Total development cost: $40 million. The developer pre-sells all units and transfers control of the association to the unit owners within six months of completion.
Under HB26-1099, before that transfer, the developer must commission a 30-year reserve study — the horizon the bill expressly requires — and fund 1.5% of the fully funded reserve balance. A 30-year study captures more replacement cycles than a shorter-horizon study: elevators typically require modernization or replacement every 20-25 years, roofs every 20-30 years, and pool mechanical systems every 15-20 years. Multiple replacement cycles compound the total projected cost significantly. Based on industry-standard reserve study methodology for a building with this amenity profile, the major capital components and their estimated 30-year replacement costs look like this:
| Reserve Component (30-Year Horizon) | Estimated Replacement Cost |
| Elevators (2) — replacement + 1 modernization cycle | $525,000 |
| Roof system — 1-2 full replacements | $650,000 |
| Parking structure (sealing, resurfacing, lighting, drainage) | $375,000 |
| Pool, hot tub & mechanical equipment — 2 cycles | $200,000 |
| Common area HVAC & mechanical systems | $250,000 |
| Building exterior / envelope & waterproofing | $450,000 |
| Common area finishes (lobbies, hallways, flooring) | $200,000 |
| Fire suppression & alarm systems | $150,000 |
| Fitness center equipment — 2 cycles | $100,000 |
| Miscellaneous (lighting, landscaping, signage, paving) | $120,000 |
| TOTAL ESTIMATED 30-YEAR RESERVE REQUIREMENT | $3,020,000 |
Source: Industry-standard reserve study component estimates for a 50-unit, 5-story mid-luxury condominium. Actual figures vary by project, location, and inflation assumptions.
Applying the bill’s 1.5% Developer Funding Requirement to the $3,020,000 total produces a required developer reserve contribution of approximately $45,300. That is the payment the developer must make to the association before turning over control — a cost that did not exist before HB26-1099.
The Per-Unit Cost to Buyers
Developers don’t absorb new costs — they price them into the product. In this project, the Developer Funding Requirement and reserve study cost would be allocated across all 50 units at closing:
| Cost Item | Amount |
| Developer Funding Requirement (1.5% × $3,020,000) | $45,300 |
| Reserve study cost (initial + phase updates, estimated) | $8,000 |
| Total new developer cost under HB26-1099 | $53,300 |
| Number of units | 50 |
| ADDITIONAL COST PER UNIT (passed to buyer at closing) | ~$1,066 |
Note: Reserve study cost estimate is consistent with industry pricing for a 50-unit building with elevators and complex amenities. Per-unit figure is rounded.
Over $1,000 per unit. On a $750,000 condominium, that is a pure regulatory add-on that does nothing to improve the quality of the home or the buyer’s experience of it. Multiply that across the hundreds of new condominium projects developed in Colorado every year, and the aggregate cost to Colorado homebuyers runs into the tens of millions annually.
A Misaligned Policy at the Wrong Time
Colorado already struggles with housing affordability. Developers operate on thin margins in a high-cost construction environment, navigating rising labor costs, materials inflation, entitlement delays, and a challenging financing market. Every new regulatory cost imposed on the development side of a transaction gets baked into the sales price. HB26-1099 is not unique in that respect, but it is yet another increment added to an already heavy burden.
There is also a timing mismatch embedded in the law. The Developer Funding Requirement kicks in at the moment of transfer — precisely when the developer has already committed capital, completed construction, and is trying to close out the project. Requiring a mandatory reserve contribution at that stage creates a cash-flow pressure that developers will simply account for upfront in their pricing, meaning buyers pay it before they ever move in.
It is worth noting that well-run associations already build reserve funding into their annual dues. The market has mechanisms — buyer due diligence, lender requirements, and CCIOA’s existing governance framework — that incentivize financially healthy HOAs without mandating developer subsidies at closing. HB26-1099’s reserve study disclosure requirement is reasonable; the Developer Funding Requirement is not.
What the Governor Should Consider
Governor Polis has made housing affordability a central policy priority. If that commitment is to be meaningful, it requires scrutiny of legislation that adds cost to the development process — even when that legislation is framed in sympathetic terms. HB26-1099 should not be signed in its current form. At a minimum, the Developer Funding Requirement warrants reconsideration, or a hardship exemption for smaller projects where the reserve contribution creates a disproportionate burden.
The reserve study requirement and the management company transition provisions can stand on their own merits. Transparency about long-term capital obligations is good for buyers and helps associations start on sound footing. But mandatory developer-funded reserve seeding — at the point of closing — is a cost that will land squarely on Colorado condominium buyers.