August 24, 2019

Colorado Court of Appeals: Condominium Declarations Control Over Contrary Provision in CCIOA

The Colorado Court of Appeals issued its opinion in Francis v. Aspen Mountain Condominium Association, Inc. on Thursday, February 23, 2017.

Condominium Declaration—Common Expenses—Amendment—Colorado Common Interest Ownership Act—Motion for Leave to Amend—Indispensable Parties.

The Francis parties are trusts and their fiduciaries and other individuals with ownership interests in the Aspen Mountains Condominiums. The parties’ dispute arose from a contested 2010 vote that amended the original 1972 condominium declaration to reallocate the common interest shares and common expenses. The 1972 declaration had originally allocated common interest shares and common expenses based on unit size, and the amended declaration reallocated common interest shares equally among all units. Common expenses increased for the Francis parties, and they later filed suit, seeking a judgment voiding the reallocation of the common interest shares. The trial court ruled in favor of the Aspen Mountain Condominium Association, Inc. (AMCA), finding that the 2010 amendment had been properly adopted.

On appeal, the Francis parties first contended that the trial court erred by partially granting AMCA’s motion for a determination of law. Here, the declaration required a unanimous vote to alter the percentage of the undivided interests in the general common elements. The trial court erred by holding that the Colorado Common Interest Ownership Act, which went into effect in 1992, nullified the 1972 declaration’s requirement of a unanimous vote to alter ownership interests in the common elements.

The Francis parties also contended that the trial court erred in denying their motion for leave to amend the complaint to assert additional breach of fiduciary duty claims against AMCA. The motion was submitted after the discovery deadline and only a few months before trial. Further, the case had been pending for more than five years, and the Francis parties had already amended the complaint five times and could have added the newly asserted claim at any point. Therefore, the court did not abuse its discretion in denying leave to amend.

Next, the Francis parties argued that the trial court erred by denying their CRCP 59(a) motion to amend the judgment based on failure to join as indispensable parties the beneficiaries of the various trusts included among the Francis parties. The proposed additional parties were alleged to be beneficiaries of trusts that were already parties to the action and were represented by their respective trustees. As a matter of law, the beneficiaries’ interests were sufficiently protected by the trustees’ participation in the action on their behalf.

The judgment was affirmed in part and reversed in part, and the case was remanded with directions.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Specific Proviso in Condominium Declaration Precluded Certain Non-unanimous Amendments

The Colorado Court of Appeals issued its opinion in DA Mountain Rentals, LLC v. The Lodge at Lionshead Phase III Condominium Association, Inc. on Thursday, October 6, 2016.

The Lodge at Lionshead Condominium Association established a Condominium Declaration years before the adoption of the Colorado Common Interest Ownership Act, which it attempted to amend in 2012 to establish a condominium community. The Association’s proposed amendment was adopted by a supermajority of owner-members. DA Mountain Rentals, an owner of one of the condominium units, protested that the amendments could only be adopted by unanimous consent of the members pursuant to a specific proviso in the Declaration. DA sought a declaratory injunction in district court prior to the Association’s recording of the amendments, and the amendments have not yet become effective due to the litigation.

After discovery, the Association moved for determination of law pursuant to C.R.C.P. 56(h). The court granted the motion and determined that the 2012 Amendments had been validly adopted and the 67 percent voting requirement they imposed did not violate the terms of the Declaration or CCIOA. The Association next moved for summary judgment, which the court also granted. DA filed two appeals. The first appeal challenged the district court’s grant of the Rule 56 motion and the summary judgment motion. The second appeal challenged post-judgment attorney fee and cost awards. The Association moved to dismiss the second appeal because the attorney fee issue was not ripe. A division of the court of appeals partially granted the Association’s motion to dismiss as to the attorney fee issue and consolidated the remaining issues.

The court of appeals first addressed whether the 2012 amendments were valid under the Declaration and the CCIOA, since they would eliminate unanimous member and lender consent requirements for shared expenses and determining obsolescence. The court first considered whether the amendments were permitted under the Declaration without unanimous consent. Because the 2012 amendments could affect the members’ common expenses, the court found that those provisions affecting the common expenses were not allowable under the Declaration. As to the 2012 amendments concerning obsolescence, those were not subject to the unanimous consent requirement and were allowable.

The court next considered whether the construction of the Declaration conflicted with the CCIOA, and determined that it did not. The court evaluated the unanimity requirement as related to the CCIOA and found that there was no conflict between the Declaration and the CCIOA. The court similarly concluded that the obsolescence amendments did not conflict with the CCIOA. The court next evaluated the mandatory buyout provision in the 2012 amendments and found that it was valid. The court rejected DA’s arguments about attorney fees and costs.

The court then considered the Association’s cross-appeal on whether the district court abused its discretion by ordering the production of documents the Association contended were privileged. The court engaged in a lengthy analysis of the sequence of events in district court, and whether subsequent Colorado Supreme Court precedent required the court to retroactively engage in a proportionality review. The court of appeals found that the district court had actively managed discovery after the Association asserted privilege, and the district court retained discretion to do so as it saw fit. The court found no abuse of discretion by the district court.

The court affirmed in part, reversed in part, and remanded with directions.

Colorado Supreme Court: Purported Annexation Failed to Comply with Colorado Common Interest Ownership Act

The Colorado Supreme Court issued its opinion in Ryan Ranch Community Association, Inc. v. Kelley on Monday, September 26, 2016.

Colorado Common Interest Ownership Act—Creation, Alteration, and Termination of Common Interest Communities.

The Colorado Supreme Court considered whether a developer annexed several lots into a common interest community such that the lot owners would owe assessments to the community’s homeowners association. The court concluded that the lots were not annexed because the purported annexation failed to comply with the Colorado Common Interest Ownership Act, C.R.S. §§ 38-33.3-101 to -402. The lot owners therefore were not liable for the association’s assessments.

Summary provided courtesy of The Colorado Lawyer.

Colorado Supreme Court: Developer’s Recordation of Covenants and Plat Did Not Create Common Interest Community

The Colorado Supreme Court issued its opinion in Pulte Home Corp. v. Countryside Community Association, Inc. on Monday, September 28, 2016.

Colorado Common Interest Ownership Act—Creation, Alteration, and Termination of Common Interest Communities—Management of the Common Interest Community.

The Supreme Court addressed when and how common interest communities are 16 formed under the Colorado Common Interest Ownership Act, CRS §§ 38-33.3-101 to -402. In particular, the Court analyzed whether the declarant developer was liable for past-due assessments for maintenance of the developer’s unsold properties and related common elements. The Court concluded that, on the facts presented, the developer’s recordation of the covenants and plat did not create a common interest community. Rather, the community was created when the developer first subjected property to the covenants, and the remaining property could not become part of the community until the developer added it in accordance with certain prescribed steps. The developer’s property was therefore not part of the community and was not subject to assessments. The Court also concluded that the homeowners association had no remedy for unjust enrichment because its covenants fully allocated responsibility for assessment costs.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Common Open Space Part of Subdivision’s Community Property

The Colorado Court of Appeals issued its opinion in Hauer v. McMullin on Thursday, July 2, 2015.

Real Property—Common Open Space—Unincorporated Homeowners Association—Colorado Common Interest Ownership Act—Attorney Fees.

The McMullins owned Two Rivers Estates, which included seven lots and seventeen acres of Common Open Space (COS). The McMullins sold the seven lots to three owners: the Hauers bought lots one and three; the Conrados bought lot two; and Lincoln Trust FBO John Hauer (Lincoln Trust) bought lots four through seven. Thereafter, the Hauers and Lincoln Trust filed a complaint individually and on behalf of the unincorporated Two Rivers Homeowners Association (HOA) to quiet title to their respective lots. They also sought to quiet title to the COS in the HOA. The McMullins counterclaimed, asserting that they hold title to the COS because a common interest community was never formally created and because they never conveyed the COS property. The trial court found in favor of the Hauers and Lincoln Trust.

On appeal, the McMullins contended that the trial court erred when it quieted title to the COS in the unincorporated HOA. The Evergreen Highlands’s declarations expressly established the HOA, conveyed to it the development’s common property, charged it with maintaining the common property, and granted it authority to determine annual membership or use fees. The final recorded plat, the recorded subdivision agreement, the recorded deeds, and the land sale contract with Lincoln Trust constituted declarations necessary to form a common interest community under the Colorado Common Interest Ownership Act. Therefore, the COS was part of the subdivision’s common property and was appurtenant to each lot, and with each conveyance of a lot, an appurtenant one-seventh common interest in the COS was conveyed, as well. The trial court’s findings and order were affirmed.

The McMullins and their attorney contended that the trial court abused its discretion when it awarded the Hauers their attorney fees incurred as a result of the McMullins’ failure to disclose information relevant to the subdivision development, without making a finding of prejudice. The trial court did not abuse its discretion in awarding attorney fees as sanctions under CRCP 37, because this rule and the assessment of attorney fees do not require a finding of prejudice.

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

Small Common Interest Community Exemption and Electronic Public Trustee Foreclosure Bills Signed

On Tuesday, April 21, 2015, Governor Hickenlooper signed two bills into law. He has signed 138 bills to date this legislative session. The two bills signed Tuesday are:

  • HB 15-1095 – Concerning the Extension of an Exemption Under the “Colorado Common Interest Ownership Act” for Certain Small Common-Interest Communities to Include Communities Created Before July 1, 1992, Whose Declarations Limit Their Annual Common Expense Liability to No More than Three Hundred Dollars, by Rep. Terri Carver and Sen. Kevin Lundberg. The bill provides an exemption from certain provisions of the CCIOA for HOAs whose annual expenditures are less than $300 as established by bylaws or declarations.
  • HB 15-1142 – Concerning the Conduct of Foreclosure Sales by a Public Trustee, and, in Connection Therewith, Authorizing the Conduct of Foreclosure Sales Through the Internet and Other Electronic Media and Authorizing the Collection of Fees Through Electronic Transfer, by Rep. Beth McCann and Sen. Lucia Guzman. The bill allows public trustees or sheriffs to conduct foreclosure sales electronically and establishes procedures for electronic sales.

For a complete list of Governor Hickenlooper’s 2015 legislative decisions, click here.

SB 14-140: Requiring HOAs to be Subject to Entire Colorado Common Interest Community Act in Order to Foreclose Lien for Assessments

On Monday, January 27, 2014, Sen. Owen Hill introduced SB 14-140 – Concerning a Prohibition on the Exercise of Lien Rights Under the “Colorado Common Interest Ownership Act” by Unit Owners’ Associations that Do Not Elect to be Covered by the Entire Act. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill requires that, in order to establish or foreclose a lien for assessments, a homeowners’ association must be subject to the entire “Colorado Common Interest Ownership Act.”

On Feb. 17, the State, Veterans, & Military Affairs Committee heard testimony and considered the bill for committee discussion only; the bill will be put back on the calendar for action in the near future.

Since this summary, the State, Veterans, & Military Affairs Committee postponed the bill indefinitely.

HB 13-1277: Creating a Licensing Program for Persons Paid to Manage Common Interest Communities

On March 25, 2013, Rep. Angela Williams and Sen. Morgan Carroll introduced HB 13-1277 – Concerning the Regulation of Persons who Manage the Affairs of Common Interest Communities under the “Colorado Common Interest Ownership Act.” This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

Under current law, common interest communities and their unit owners’ associations (HOAs) are not subject to regulation by any state agency. As introduced, the bill requires any person who manages the affairs of a common interest community on behalf of an HOA for compensation, on or after July 1, 2014, to meet minimum qualifications and obtain a license from the director of the division of real estate in the department of regulatory agencies. Licensees are identified as “community association managers.”

The licensing requirement does not apply to persons who perform clerical, ministerial, accounting, or maintenance functions, not requiring substantially specialized knowledge, judgment, or managerial skill, under the supervision of a licensed community manager or directly for an HOA’s governing board. Licensing examinations will be developed and administered by the director of the division of real estate or by a person or entity under contract with the director.

The bill grants the director powers and duties similar to, but less detailed than, the powers and duties of the real estate commission under existing statutes governing the licensing and supervision of real estate brokers. The director is to monitor the operation of the licensing program during its first year and make recommendations for improvements to the general assembly on or before Jan. 1, 2016. The regulatory scheme is also subject to review after five years under the existing sunset law.

On April 11, the Business, Labor, Economic, & Workforce Development Committee amended the bill and sent it to the Appropriations Committee for consideration of the fiscal impact to the state.

On April 17, the Appropriations Committee amended the bill and referred it to the House Committee of the Whole for Second Reading. The Second Reading was laid over.

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.