January 20, 2018

Colorado Supreme Court: Election Challenge Time-Barred When Filed and Equitable Tolling Did Not Apply

The Colorado Supreme Court issued its opinion in UMB Bank, N.A. v. Landmark Towers Association, Inc. on Monday, December 11, 2017.

Taxpayer Bill of Rights—Election Challenges—C.R.S. § 1-11-213(4)—Non-claim Statutes.

This case principally required the supreme court to determine whether the 10-day time limitation set forth in C.R.S. § 1-11-213(4) barred respondent homeowners association’s challenge to an election authorizing the issuance of bonds and the collection of debt pursuant to the Taxpayer Bill of Rights. Respondent contended that the election was invalid because its members were eligible electors, and these electors did not receive notice of the election and were not given an opportunity to vote in it. It is undisputed that respondent did not file its election challenge until more than three years after the statutory deadline. The question thus was whether respondent’s challenge could proceed, based on the equitable tolling doctrine or the exception for certain types of claims articulated in Cacioppo v. Eagle County School District Re-50J, 92 P.3d 453 (Colo. 2004). With regard to equitable tolling, the court concluded that C.R.S. § 1-11-213(4) is a non-claim statute. Accordingly, the doctrine of equitable tolling does not apply. As to Cacioppo, the court concluded that respondent’s claim is not a challenge to the substance of the ballot issue but rather is a challenge to the means by which the election results were obtained. The court thus concluded that respondent’s claim is subject to C.R.S. § 1-11-213(4)’s 10-day time limit and that its challenge to the bond and tax election at issue was time barred. Accordingly, the court reversed the judgment of the court of appeals and remanded the case for further proceedings.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Property Owner Can Incorporate HOA Without Consent of Other Owners

The Colorado Court of Appeals issued its opinion in DeJean v. Grosz on Thursday, June 4, 2015.

Condominium—Declaration—Homeowners’ Association—Preliminary Injunction.

The DeJeans and Grosz each owned one unit in a two-unit condominium in Aspen. Before either the DeJeans or Grosz had purchased their units, Schiff, the original owner, had filed and recorded a declaration (Declaration) stating that the covenant runs with the land and that the condominium project called for the existence of a unit owners’ association (Association) to manage the common areas. In March 2013, Grosz incorporated the Association. When the DeJeans learned that the Association had been incorporated, they demanded that Grosz terminate it. The DeJeans thereafter brought this lawsuit. In issuing a preliminary injunction against Grosz, the trial court found that because no Association existed when the DeJeans purchased their unit, the DeJeans have a reasonable probability of success in contesting how the Association was created.

On appeal, Grosz argued that the trial court erred in granting the preliminary injunction because the DeJeans failed to demonstrate that they had a reasonable probability of success on the merits. Where the condominium declaration contemplates a homeowners’ association, and especially where the covenant runs with the land, a property owner can incorporate a homeowners’ association without further consent from the other unit owners. Therefore, the DeJeans had notice of the Association and consented to membership in it when they purchased their unit, regardless of when the Association was incorporated. Accordingly, the DeJeans did not have a reasonable probability of success on the merits of their claims, and the preliminary injunction was vacated.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Homeowners’ Association’s Removal of Arbitration Provision Invalid Against Builders

The Colorado Court of Appeals issued its opinion in Vallagio at Inverness Residential Condominium Association, Inc. v. Metropolitan Homes, Inc. on Thursday, May 7, 2015.

Motion to Compel Arbitration—Construction Defect Action.

Plaintiff association (Vallagio) brought this action against defendants, alleging construction defects in the Vallagio residential development project (Project). The Project was organized as a common interest community under the Colorado Common Interest Ownership Act (CCIOA). Defendant Metro Inverness, LLC (Metro) was the Project’s developer and declarant. Defendant Metropolitan Homes, Inc. was Metro’s manager and the Project’s general contractor. Defendants Krause and Kudla were declarant-appointed members of Vallagio’s board before control of the Vallagio was transferred to unit owners.

The declaration contained a general provision allowing unit owners to amend the declaration by a 67% vote and a consenting vote of the declarant. The right of declarant consent expired after the last unit was sold to an owner other than declarant. There was a mandatory arbitration provision specifically for construction defect claims, which provided that it could never be amended without the written consent of declarant, without regard to whether declarant owned any portion of the Project at the time of the amendment.

In September 2013, after the declarant had turned over control of Vallagio and no longer owned any units, at least 67% of the unit owners voted to amend the declaration to remove the arbitration provision in its entirety. Metro’s consent was not obtained.

Vallagio then filed suit against defendants. Defendants moved to compel arbitration, relying on the original declaration provision, arguing that the amendment removing it was invalid because declarant had not consented. The district court denied the motion to compel arbitration, finding that the declaration had been effectively amended to remove the arbitration provision. This interlocutory appeal followed.

Defendants first argued that it was error to conclude that the declaration’s amendment provisions were ambiguous and to construe that ambiguity against declarant. The Court of Appeals agreed. Based on the plain language of the declaration, the Court held that amendments to the arbitration provision required Metro’s consent. Because that consent was not obtained, the motion to compel arbitration as to Metro should have been granted. The Court also agreed that it was error to conclude that the declarant consent requirement for amendments of the arbitration agreement violated CCIOA and was void and unenforceable.

The district court had found that CCIOA § 38-33.3-302(2) prohibited the consent requirement. This section prohibits restrictions on an association’s power that are “unique to the declarant.” Under this declaration, the unit owners have the power to amend the declaration, and under this section of CCIOA the declarant consent requirement does not impose any limitation on the “power of the association.”

The district court had also found that the declarant consent requirement violated CCIOA § 38-33.3-217 because it effectively required more than a 67% vote of unit owners to amend the declaration. The Court disagreed, finding nothing in that statutory provision prohibiting declarant consent for an amendment, but merely requirements for unit owners’ voting percentages. The Court also found that the consent requirement did not allow control of unit owners’ votes, because 67% of the unit owners had to vote favorably to amend the declaration and that requirement was not altered by the declarant consent provision. The Court also rejected Vallagio’s argument that the consent requirement violated CCIOA § 38-33.3-303(5) by allowing Metro Inverness to control Vallagio after the declarant control period expired. CCIOA provisions regarding declarant consent to an association’s actions were not relevant to the issue here presented.

Vallagio argued that even if Metro could enforce the arbitration provision, the other defendants lacked standing to do so because they were not parties to the declaration. The district court did not address this argument, so the Court remanded for resolution of these issues, in particular, whether the other defendants were third-party beneficiaries to the declaration’s arbitration provision.

Defendants argued that they could rely on the arbitration provisions in individual unit owners’ purchase agreements. Because this issue might arise on remand if the district court finds that the other defendants lack standing to enforce the declaration’s arbitration provision, the Court addressed it. The Court agreed with the ruling that Vallagio was not bound by those individual purchase agreements.

The Court rejected Vallagio’s claims that its Colorado Consumer Protection Act (CCPA) claims are non-arbitrable. The right to a civil action under CCPA § 6-1-113 was not made non-waivable under the statute.

The order was reversed in part and affirmed in part. The case was remanded for an order compelling arbitration of Vallagio’s claims against Metro, and for further proceedings to determine whether the claims against the other defendants must be arbitrated.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Exculpatory Clause Applicable Even Though Only Owners’ Association Named

The Colorado Court of Appeals issued its opinion in McShane v. Stirling Ranch Property Owners Association, Inc. on Thursday, April 27, 2015.

Real Property—Declaration of Covenants—Property Owners Association—Exculpatory Clause—Breach of Fiduciary Duty.

Plaintiffs purchased a lot in Stirling Ranch on which to construct a residential home. The lot was subject to the Second Amended and Restated Declaration of Covenants, Conditions, Restrictions and Easements for Stirling Ranch, P.U.D. (Declaration). Under the Declaration, each lot owner in the Stirling Ranch community is a member of the Stirling Ranch Property Owners Association, Inc. (POA). The POA is governed by an Executive Board, and the Board appoints and removes members of the POA’s Design Review Board (DRB). Although the DRB approved plaintiffs’ initial designs, it did so mistakenly based on representations by plaintiffs’ architect. After plaintiffs began construction on the initial designs, they were ordered to stop work and submit redesigned plans to conform to the Design Guidelines. Plaintiff later filed this action against the POA, claiming damages for the redesign of their home. The trial court found in favor of the POA.

On appeal, plaintiffs asserted that the court erred in concluding that the exculpatory clauses barred their claims against the POA for declaratory judgment/equitable estoppel and negligence. The Court of Appeals disagreed. The Declaration and the Design Guidelines include provisions limiting the DRB’s liability, one of which states that the DRB and the Board are components of the POA and have no separate identity. Therefore, the exculpatory clauses are applicable even though plaintiffs only named the POA as a defendant. Additionally, the exculpatory clauses are valid because they do not implicate a public duty, do not involve an essential service, were fairly entered into, and plainly express the intent to release the DRB from liability.

The Court also rejected plaintiffs’ argument that the trial court erred in concluding that the POA did not breach its fiduciary duty. The record contains sufficient evidence as to why the POA and the DRB rejected plaintiffs’ redesign plans. The record also supports the court’s conclusion that these reasons for rejecting the redesign plans were consistent with the Design Guidelines’ goals. The judgment was affirmed.

Summary and full case available here, courtesy of The Colorado Lawyer.

Frederick Skillern: Real Estate Case Law — Common Interest Communities, Covenants, and CCIOA

Editor’s note: This is Part 2 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

frederick-b-skillernBy Frederick Skillern

Triple Crown at Observatory Village Association v. Village Homes of Colorado
Colorado Court of Appeals, November 7, 2013
2013 COA 150
Construction defect claims; interlocutory review; relationship between revised Nonprofit Corporation Act and the Common Interest Ownership Act.

Arising from alleged construction defects in a common interest community, this interlocutory appeal under C.A.R. 4.2 presents four questions of first impression in Colorado, which the court answers as follows:

  1. Where an association is a nonprofit corporation, the Colorado nonprofit act establishes the time limit for amending its declaration based on action taken without a meeting;
  2. The statutory power to engage in “litigation” under C.R.S. § 38-33.3-302(1)(d) includes arbitration;
  3. C.R.S. § 38-33.3-302(2) does not invalidate the mandatory arbitration provision, because the dispute resolution procedures apply to parties other than the declarant; and
  4. Colorado consumer protection act claims may be subject to mandatory arbitration, because the CCPA does not include a nonwaiver provision.

Village Homes, a residential developer, built homes subject to recorded covenants, and thereby created an association, Triple Crown. Triple Crown was set up as a nonprofit corporation under C.R.S. §§ 7-121-101, et seq. In the declaration of covenants, the developer included a dispute resolution procedure for claims arising from the design or construction of homes in the Triple Crown development. The declaration required that construction defect claims be arbitrated under American Arbitration Association rules.

In 2012, residents began a campaign to amend the declaration by repealing the arbitration clause. Unfortunately, it took more than sixty days to gather the votes to amend the covenants. After sixty days, 48% of the members had cast votes in favor of revocation. After another sixty days, the Association had obtained the required 67% of votes to effect the amendment. The Association recorded the amendment, and then brought this action against Village Homes, alleging negligent construction, Colorado Consumer Protection Act (CCPA) violations, and breach of fiduciary duties.

Village Homes moved to dismiss for lack of jurisdiction, based on the arbitration clause in the declaration. It argued that the amendment repealing the arbitration provision was ineffective because the Association failed to amend Article 14 within the time limits in the Nonprofit Corporations Act, specifically C.R.S. § 7-127-107(2), which deals with time limits for actions taken without a meeting. The trial court granted the motion, dismissed the case, and ordered the case to arbitration. This order is affirmed on appeal. The court holds that when an association amends its declaration without a meeting under the CCIOA, the association, if it is a nonprofit corporation, must comply with the 60-day time limit provided in section 7-127-107.

The Court also agreed that the Common Interest Association Act gives power to associations to “institute, defend, or intervene in litigation or administrative proceedings . . . on the matters affecting the common interest community.” However, the court reasons that “litigation” includes both civil actions in court and arbitrations. It holds that the mandatory arbitration clause did not infringe on the association’s statutory power to “institute litigation.”

The association then argues that CCIOA § 38-33.3-302(2) invalidated Article 14. The trial court rejected this argument. The court agreed with the trial court, finding that the CCIOA section forbids only restrictions unique to the declarant. Article 14 controlled disputes between all parties.

The trial court rejected the association’s argument that its CCPA claims should not be subject to mandatory arbitration, because CCPA provisions by statute “shall be available in a civil action.” The court holds that such a right can be waived, and that Article 14 of the Triple Crown declaration was such a waiver.

 

Ryan Ranch Community Assn., Inc. v. Kelley
Colorado Court of Appeals, March 27, 2014
2014 COA 37M
Liability for homeowner association assessments; annexation; developer side agreement.

This is an interesting situation involving a developer, a side agreement with another landowner to exempt that owner’s land from subdivision covenants, and the annexation provisions of the CCIOA. As a prequel, the following general principles stated in the dissent by Judge Terry set the stage.

  • “Provisions of this article may not be varied by agreement. . . . A declarant may not . . . use any . . . device to evade the limitations or prohibitions of this article or the declaration.” C.R.S. § 38-33.3-104. . . .
  • Members are not “entitled to set up agreements reached with the developer as defenses to the obligation to pay assessments . . . . [T]he developer does not have the power to waive the assessment obligations imposed on property within the common-interest community.” Restatement (Third) of Property: Servitudes, 6.5, cmt. e (2000).

Nice notions, but the developer here found the approval process for a second filing of his development sometimes required some last-minute adjustments. He had a side agreement with Kelley, an owner of a minority of land to be included in a second filing of a large development, to keep the “Kelley Lots” from control of any covenants or new HOAs. At the late stages of approval of the new filing, however, the developer included Kelley’s land in the filing – Kelley signed the plat – and sold the lots in bulk to Ryland.

Ryland, going along with the deal, sold the Kelley lots immediately back to developer, and the developer then deeded the land to Kelley. Kelley sold the lots to another builder, who sold homes to consumers. Several years go by, during which the consumers enjoy neighborhood improvements, and then the HOA takes action to collect assessments – including back fees totaling $70,000. The homeowners had constructive notice of the plat and the declaration from exceptions to their deed warranties. In defense, the homeowners and Kelley argued that their lots had not been appropriately “annexed” into the association. The decision goes through the statutes, and two judges reverse the trial court and hold that the requirements for annexation had not been met.

The reasoning of the majority goes like this. To exercise a development right under CCIOA, a developer must comply with the plat and map requirements of C.R.S. § 38-33.3-209 and the recording requirements of C.R.S. § 38-33.3-217(3). The homeowner defendants argue that to exercise a reserved development right, CCIOA requires the recording of an amendment to the declaration that must contain certain information and be properly indexed. The court agrees that the recording of an Official Development Plan and the declaration was not sufficient to meet these requirements. The original declaration cannot logically be considered an amendment to itself such that it could annex the Kelley Lots. Moreover, nothing was denominated as an amendment, nothing assigned identifying numbers to newly created units, there was no reallocation of interests among all units, and no common elements were described. Nothing on the Filing 2 plat map subjected the described property to the Declaration.

On the other hand, the dissent notes, the Declaration provides that the additional lots will be annexed into the HOA when (1) a plat for additional properties to be annexed is recorded, and (2) either an annexation form is recorded, or a deed for real property within the plat is conveyed from Ryland to a third party other than Ryland. “On November 17, 2005, Ryland recorded the Filing 2 plat, which included the Kelley Lots. On December 20, 2005, Ryland conveyed the Kelley Lots back to the developer by deed. These two actions — filing of the plat and conveyance by deed — fulfilled the requirements of the Declaration to annex real property to the HOA.”

CCIOA fans and developers’ counsel will want to dive into this discussion — and avoid those shortcuts.

Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.

Colorado Court of Appeals: Lots Annexed by Development Were Not Annexed in Compliance with CCIOA

The Colorado Court of Appeals issued its opinion in Ryan Ranch Community Association, Inc. v. Kelley on Thursday, March 27, 2014.

Summary Judgment—Homeowners Association Assessments.

In early 2003, Charles Ochsner verbally agreed to sell John Kelley seven lots (Kelley Lots) of the Ryan Ranch property. In summer 2003, Kelley learned that Ochsner was going to sell the majority of the Ryan Ranch property to the Ryland Group, Inc. (Ryland), the entity that would eventually create Ryan Ranch Community Association, Inc. (HOA) and record the Declaration of Covenants, Conditions, and Restrictions (Declaration). Kelley confirmed with Ochsner and Ryland the verbal agreement to purchase and received assurances that Ryland was not purchasing the Kelley Lots. The parties agreed that the Kelley Lots would not be included in the HOA.

In September 2003, Ryland and Ochsner signed a contract for the sale of parcels in Ryan Ranch to Ryland in two phases, which specifically excluded the Kelley Lots. In October 2003, Ochsner and Kelley and his wife signed a contract for the Kelley Lots. They also signed an agreement providing that (1) the Kelley Lots would not be subject to the maintenance obligations of the HOA to be formed by Ryland, and (2) Ryland would record covenants excluding them from the HOA. No such exclusion covenants were ever recorded.

The 2003 contract excluding the Kelley Lots was reaffirmed by Ochsner and the Kelleys in May 2005. However, when the Ryan Ranch Filing 2 plat map was recorded on November 17, 2005, it included the Kelley Lots. The December 20, 2005 reconveyance deed conveying the Kelley Lots from Ryland back to Ochsner was recorded, as was the Ochsner deed conveying the Kelley Lots to the Kelleys. Ryland never intended to annex the Kelley Lots into the Ryan Ranch community.

In June 2006, the Kelleys sold one of the Kelley Lots to a contractor who constructed a home and sold the lot to the Zimmermans. In September 2010, the HOA asserted that the Kelley Lots had been “automatically annexed” to the HOA and sought to recover past assessments, penalties, and fees from the Kelleys and the Zimmermans. Defendants counterclaimed for a declaratory judgment that Ryland had not annexed the Kelley Lots in compliance with the Colorado Common Interest Ownership Act (CCIOA) or the Declaration, and asserted principles of equitable conversion operated to preclude the transfer of the Kelley Lots from Ochsner to Ryland.

The HOA moved for summary judgment and defendants requested the court to determine as a matter of law that the Declaration did not apply to their properties. The trial court granted the HOA’s motion and denied defendants’ motion.

On appeal, defendants’ argued it was error to grant summary judgment to the HOA because: (1) the Kelley Lots were not annexed in compliance with CCIOA; (2) Ryland did not annex the Kelley Lots in compliance with the Declaration; and (3) Ryland did not “own” the Kelley Lots at the time of the alleged annexation. The Court of Appeals agreed with the first argument and did not address the others.

CCIOA was the controlling statute in this case and prevails over the Declaration. To exercise a development right under CCIOA, a developer must comply with the plat and map requirements of CRS §38-33.3-209 and the recording requirements of CRS §38-33.3-217(3).

Defendants argued that to exercise a reserved development right, CCIOA requires the recording of an amendment to the declaration that must contain certain information and be properly indexed. The Court agreed that the recording of the Official Development Plan and the Declaration was not sufficient to meet these requirements. The original Declaration cannot logically be considered an amendment to itself such that it could annex the Kelley Lots. Moreover, nothing was denominated as an amendment, nothing assigned indentifying numbers to newly created units, there was no reallocation of interests among all units, and no common elements were described. Nothing on the Filing 2 plat map subjected the described property to the Declaration.

The Court’s determination resolved the HOA’s claims for breach of contract, recovery of unpaid assessments, and foreclosure of liens. However, it did not resolve the unjust enrichment claim. On remand, the trial court was ordered to revisit that claim. Attorney fees were awarded to defendants as prevailing parties under the Declaration and CRS §38-33.3-123(1)(c).

Summary and full case available here.

Colorado Court of Appeals: Homeowners’ Association Must Follow Nonprofit Corporation Rules When Amending Declaration Without a Meeting

The Colorado Court of Appeals issued its opinion in Triple Crown at Observatory Village Association, Inc. v. Village Homes of Colorado, Inc. on Thursday, November 7, 2013.

Construction Defect—Interlocutory Review—Revised Nonprofit Corporation Act Relation to Colorado Common Interest Ownership Act—Consumer Protection Act.

Triple Crown at Observatory Village (Triple Crown) is a common interest community organized under the Colorado Common Interest Ownership Act (CCIOA). The developer of Triple Crown, Village Homes of Colorado, Inc. (Village Homes), was Triple Crown’s declarant under CCIOA § 38-33.3-103(12). Village Homes drafted and recorded Triple Crown’s Declaration of Covenants, Conditions, and Restrictions (Declaration). The Declaration created the Triple Crown at Observatory Village Association, Inc. (Association). It was organized as a nonprofit corporation under the Colorado Revised Nonprofit Corporation Act (CRNCA).

Article 14 of the Declaration established a dispute resolution procedure for claims arising from the design or construction of Triple Crown. It required arbitration of claims under American Arbitration Association rules if good faith negotiation and mediation efforts were unsuccessful.

On January 14, 2012, the Association began collecting votes from its members to revoke Article 14. After sixty days, 48% of the members had cast votes in favor of revocation. After another sixty days, the Association had obtained the required 67% of votes to revoke Article 14. The Association recorded the amendment revoking Article 14. The Association then brought this action against Village Homes and several of its principals and employees (collectively, respondents), alleging negligent construction, Colorado Consumer Protection Act (CCPA) violations, and breach of fiduciary duties.

Respondents moved to dismiss for lack of jurisdiction, citing the mandatory arbitration provision in Article 14. They argued that because the Association had not amended Article 14 within the time limits in the CRNCA, they were still bound by the Article 14 dispute resolution procedures. The trial court granted the motion, dismissed the case, and ordered the parties to follow Article 14.

The trial court ruled that when an association amends its declaration without a meeting under CCIOA, the association must comply with the sixty-day time limit provided in CRNCA § 7-127-107. The Court of Appeals agreed. Because the Association did not comply, the amendment was ineffective.

The Court also agreed that CCIOA established the power of unit owners’ associations to “[i]nstitute, defend, or intervene in litigation or administrative proceedings . . . on the matters affecting the common interest community” and that “litigation” includes both judicial proceedings and arbitrations. Therefore, the mandatory arbitration provision did not infringe on the Association’s statutory power to institute litigation.

The Association argued that CCIOA § 38-33.3-302(2) invalidated Article 14. The trial court rejected this argument. The Court agreed with the trial court, finding that the CCIOA section forbids only restrictions unique to the declarant. Article 14 controlled disputes between all parties.

The trial court rejected the Association’s argument that its CCPA claims were not subject to mandatory arbitration, because CCPA provisions “shall be available in a civil action. The Court agreed that such a right can be waived, and Article 14 was such a waiver. The trial court’s order was affirmed and the case was remanded.

Summary and full case available here.

HB 13-1276: Imposing Notice Requirements on Owners’ Associations Under CCIOA Prior to Referring Delinquent Owners to Collections Agencies

On March 25, 2013, Rep. Angela Williams and Sen. Morgan Carroll introduced HB 13-1276 – Concerning Limitations on the Actions a Unit Owners’ Association under the “Colorado Common Interest Ownership Act” May Take Against a Unit Owner with Respect to the Collection of Debt Owed to the Unit Owners’ AssociationThis summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill requires the unit owners’ association of a common interest community (HOA) to adopt, and comply with, a policy regarding the collection of delinquent assessments and other past-due amounts from unit owners. The HOA may not refer a unit owner’s account to a collection agency or attorney without first giving the unit owner notice of the total amount due and how it was determined, offering the unit owner a one-time opportunity to enter into a 6-month payment plan, and listing the legal remedies, including foreclosure, that are available to the HOA.

The bill prohibits an HOA from foreclosing its lien for past-due assessments unless the total amount is at least equal to six months of regular assessments and unless the HOA’s executive board has formally approved the foreclosure action on an individual basis.

The bill specifies the terms and conditions of the repayment plan that must be offered. The plan must permit the unit owner to pay off the deficiency in equal installments over a period of at least 6 months; however, the plan requires the unit owner to remain current on regular assessments as they come due during the period and allows the HOA to pursue collection if the unit owner fails to comply with the plan, has previously been subject to a payment plan, or is a bank that has acquired the unit as a result of default by a borrower. For purposes of section 3, “assessments” include fees, charges, late charges, attorney fees, fines, and interest on common expense assessments.

The bill applies its provisions to common interest communities created before July 1, 1992, the effective date of the “Colorado Common Interest Ownership Act,”, as well as to those created after that date.

On April 12, the House amended the bill and passed in on 2nd Reading; 3rd Reading is scheduled for Monday, April 15.

Since this summary, the bill passed Third Reading in the House; it is assigned to the Local Government Committee in the Senate.

Colorado Court of Appeals: “Portion” Language in CCIOA Determined To Be Unambiguous; 18% Interest on Attorney Fee Award Upheld

The Colorado Court of Appeals issued its opinion in Vista Ridge Master Homeowners Association, Inc. v. Arcadia Holdings at Vista Ridge, LLC on Thursday, February 28, 2013.

Summary Judgment—CRS § 38-33.3-210(4)(b)—Withdrawal and De-annexation of Lots From a Master Association—Interest on Attorney Fees.

Defendant Arcadia Holdings at Vista Ridge, LLC (Arcadia) appealed the summary judgment in favor of plaintiff Vista Ridge Master Homeowners Association, Inc. (Vista Ridge).The judgment was affirmed and the case was remanded with directions.

Vista Ridge was established by the recording of the Master Declaration of Covenants, Conditions, and Restrictions for Vista Ridge (Declaration). Article V of the Declaration reserved the right to withdraw or de-annex any portion of the community in accordance with the Colorado Common Interest Ownership Act (CCIOA). The Declaration limited this right to the extent that “no portion of the Property may be withdrawn or deannexed after a Lot or Unit in that portion of the Property has been conveyed to an Owner other than a Declarant or a Builder.”

Arcadia’s predecessor in interest recorded Vista Ridge Filing No. 9, which platted ninety-four single family residential lots. They were annexed to Vista Ridge by the recording of a Declaration of Annexation and Amendment to the Declaration (Declaration of Annexation). At the time of this action, Arcadia still owned seventy of these lots. Arcadia recorded an Amendment to the Declaration of Covenants, Conditions, and Restrictions for Vista Ridge in which it purported to withdraw and de-annex its remaining seventy lots. Vista Ridge challenged the de-annexation in a complaint for declaratory judgment and damages. The district court granted summary judgment in favor of Vista Ridge and entered a monetary judgment for past-due monthly assessments on the seventy lots plus attorney fees, all accruing interest at an annual rate of 19%.

Arcadia argued it was error to find the de-annexation invalid, and the Court of Appeals disagreed. The Court found CCIOA determinative on this issue. The applicable subsection is 210(4)(b), which states, “[i]f any portion of the real estate is subject to withdrawal, it may not be withdrawn after a unit in that portion has been conveyed to a purchaser.” The parties disagreed as to the meaning of “portion.” Vista Ridge contended it meant the ninety-four lots in Filing No. 9, and Arcadia contended the meaning was arbitrary and the statute ambiguous. The Court found it clear and unambiguous. Filing No. 9 was clearly a separate portion of Vista Ridge. Therefore, following the sale of one of the ninety-four lots constituting Filing No. 9, that portion may not be withdrawn. The relevant portion was the ninety-four lots.

Arcadia also argued it was error to order a monetary judgment that accrued interest on the attorney fees award at a rate of 18% percent. The Court disagreed. Section 7.6 of the Declaration stated that “[a]ny assessment not paid [is] subject to fees authorized by Section 7.2, including . . . interest from the due date at the rate of eighteen percent (18%) per annum.” Attorney fees are referred to in the Declaration as “assessments” three times; therefore, they are considered a type of assessment.

The judgment was affirmed. In addition, pursuant to § 38-33.3-123(1)(c) and the Declaration, Vista Ridge was entitled to recover its appellate attorney fees and costs.

Summary and full case available here.