HOA Legi-Slate

On January 13, Senator Lamborn introduced Senate Bill 06-185, entitled "Concerning the Protection of Homeowners in Small Common Interest Communities." Interestingly, SB 185 was assigned to the Senate Judiciary Committee, the same committee that heard SB 89. (Click here for a post listing the members of this Committee.) SB 185 proposes to extend the CCIOA exemption for small and limited expense communities created after July 1, 1998 to all small and limited expense communities, regardless of their date of creation.

Currently, CCIOA exempts pre-CCIOA communities that existed prior to July 1, 1992 (CCIOA's effective date) that have 10 units or less and are not subject to any development rights (38-33.3-119). CCIOA also exempts post-CCIOA communities created after July 1, 1992 and before July 1, 1998 if 1) the community has no more than 10 units and is not subject to any development rights; OR 2) the community's declaration limits each unit's annual assessment to $300.00 (38-33.3-116). Post-CCIOA communities created after July 1, 1998 are exempted if 1) the community has no more than 20 units and is not subject to any development rights; OR 2) the community's declaration limits each unit's annual assessment to $400, as adjusted to the Denver-Boulder consumer price index (38-33.3-116). However, the declarations of exempted common interest communities may provide that the community elects to be included within CCIOA's purview.

Unless an exemption applies, pre-CCIOA communities are subject to the long list of provisions listed in 38-33.3-117. For example, all the amendments made to CCIOA by SB 100 are included in 117, making them applicable to both pre and post-CCIOA communities. This long list reflects the legislature's determination that certain operational and governing provisions were imperative to the well-being of Colorado's common interest communities and should therefore apply to all, regardless of the date of creation.

This bill would have the effect of abolishing the above distinctions by creating a uniform exemption that would apply retroactively to common interest communities created prior to July 1, 1998. If this bill passes, this retroactive exemption would have unfortunate and undesirable consequences, such as:

• Creating difficulty in determining which associations remain CCIOA communities, which are now exempt, and which decided to opt into CCIOA. This difficulty will create confusion for boards, owners, managers, and lenders, among others.


• Creating a situation in which pre-CCIOA communities are not treated in a uniform and fair manner, which was one of the goals of CCIOA.


• Abruptly removing communities from CCIOA that have been governed by the law since its effective date thirteen years ago.


• Conflicting with the purpose of CCIOA, which was to assist associations by establishing "a clear, comprehensive, and uniform framework for the creation and operation of common interest communities." (Click here to read CCIOA's legislative declaration.) By exempting these pre-CCIOA communities from the provisions listed in 117, these communities will not reap the benefits that CCIOA intends to impart.


• Negatively affecting exempted associations financially by removing their right to the superlien when a unit within the community is foreclosed. For most communities, the superlien is imperative for the association's financial health. (Click here for an article that discusses the superlien in Colorado.)

As mentioned above, the declarations of exempted communities can always state that all of CCIOA applies to the community, in effect "canceling out" the exemption. SB 185 proposes that either an exempted association's declaration or bylaws may provide that CCIOA applies to the community. The decision to opt into CCIOA and comply with its governing and operational requirements is a fairly serious one. Due to the serious nature of this decision, CCIOA provides a detailed procedure to follow to opt into CCIOA (38-33.3-118) as well as instructions for small pre-existing communities on how to amend their declarations to elect treatment under CCIOA (38-33.3-120).

Bylaws, on the other hand, are more easily changed and, unlike declarations, are not required to be recorded. Allowing an association to opt in and out of CCIOA through its bylaws is a matter of concern. CCIOA provides an entire framework for governing and operating an association, and the decision to adopt this framework should be done in a thoughtful and fairly permanent manner. In addition, buyers are entitled to record notice whether or not the community in which the unit they are purchasing is contained within CCIOA or not.

Here are my brief responses to your incorrect attacks on SB 185:
1. CCIOA does not create a uniform standard for small associations under Section 116; instead it creates different standards for pre-1992, l992-98 and post 1998. The current Section 116 is unfair and discriminatory to pre-1992 associations. SB 185 creates a fair and uniform standard for all small associations.
2. SB 185 allows small associations to choose to opt in or opt out of CCIOA. It does not repeal Section 118 nor 120. If small associations see benefits in CCIOA, they can opt into the Act.
3. Small associations face considerable burdens due to the inclusion of SB 100 into Section 117. The testimony at the Senate Judiciary Committee showed the need for SB 185 to allow small associations to remove those burdens to their volunteers, budgets, insurance costs and homeowners.
5. As stated above, small associations could choose to remain in CCIOA for the superlien or other benefits. However, most small association would see little or no benefit under the superlien because 6 months assessments would be under $200 and for most under $50. Also, many pre-1992 small associations have covenants which do not subordinate assessments to liens and so they could collect all of their assessments under their covenants and be disadvantaged under the superlien provisions.
6. You appear to argue that the bylaws are not recorded and so there would be no written notice if an association opted into CCIOA is incorrect. Section 118(4)requires a recorded notice of election and the election to be under CCIOA would be a matter of public record.
I find it very surprising that your firm would seek to attack a bill seeking to give small associations equal rights to choose under Section 116.

Lenard Rioth