HOA Legi-Slate

On July 13, 2006, the Colorado Court of Appeals decided Snowmass Land Company v. Two Creeks Homeowners Association, Inc., (2006 WL 1914076), cert. denied.  In Snowmass, a developer created a common interest community under CCIOA, and reserved certain development rights, (including the right to withdraw property from the community), in the recorded declaration of the association.  The association later asserted that the developer did not properly reserve the right to withdraw the property.  The trial court ruled in favor of the association.  In confirming the trial court's decision, the Court of Appeals held that the community did not have a map (as defined in CCIOA) containing the information required by § 209 of CCIOA for the developer to properly reserve the right to withdraw the property. 

Many practitioners feel that the Snowmass decision creates potential problems for developers, buyers and lenders, in that the decision fails to distinguish between plats and maps under CCIOA, and rejects the reasoning that a plat or a map is a part of the declaration for a community.  The decision further holds that there is not equivalent effect for terms or disclosures made in either the declaration, plat or map. 

The Real Estate Section Council of the Colorado Bar Association has drafted proposed legislation to amend  § 209 of CCIOA, (i) to clarify the distinction between plats and maps, (ii) to create equivalency among the plat, map and declaration, (i.e. if any material required by § 209 is contained in any one of the plat, map or declaration, the requirements of § 209 are satisfied), and (iii) to make the changes retroactive to July 1, 1998, the effective date of the 1998 amendments to CCIOA, (i.e. if material required by § 209 was previously included in a declaration recorded after July 1, 1998, but was not contained in a map, the requirements of § 209 would be satisfied).

The legislation will likely be introduced in the 2007 session.

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Yesterday afternoon, Senator Morse introduced SB 07-063 – “Concerning the Exemptions of Mixed-Use Communities From Provisions Governing Amendments to The Declaration Establishing A Common Interest Community Under The ‘Colorado Common Interest Ownership Act.’” (The House sponsor of this bill is Representative Massey.) The bill has been assigned to the Senate Business, Labor & Technology Committee. (The members of the seven member committee are as follows: Chair Senator Veiga, Vice-Chair Senator Tochtrop, Senator Kester, Senator Schwartz, Senator Takis, Senator Taylor, and Senator Wiens.)

This bill would amend Section 217 of CCIOA, which currently caps the percentage of affirmative votes that may be required to amend an association declaration at 67 percent. Last year, SB 89 established exemptions to this cap for phased and declarant-controlled communities. SB 63 would add mixed-use communities to these existing exemptions. In addition, the bill would statutorily define “mixed-use community” as a “common interest community that contains two or more of the following elements: residential, commercial, business, retail, office, agricultural, recreational, or industrial.”

Last session, the Senate version of SB 89 contained exemptions for mixed-use communities as well as phased and declarant-controlled communities. (The Colorado Association of Homebuilders (“CAHB”) was the primary proponent for these exemptions.) However, the House sponsor, Representative Carroll, was concerned that these exemptions were too broad. Through various negotiations, the version of SB 89 that former Governor Owens signed into law exempted just phased and declarant-controlled communities from the 67% cap. The language of SB 63 is almost identical to the language that SB 89 contained concerning exempting mixed-use communities put forth by CAHB last year.

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We have been hearing from worried homeowners, as well as board members, saying that due to all types of reasons, their associations have not yet adopted the responsible governance policies and procedures required by CCIOA. (Section 38-33.3-209.5 requires associations to adopt policies and procedures addressing: 1) collections; 2) handling board member conflicts of interest; 3) conduct of meetings; 4) enforcement of covenants and rules; 5) owner inspection and copying of records; 6) investment of reserve funds; 7) the adoption and amendment of policies, procedures, and rules; and 8) handling of disputes between association and owners [Note: associations have until January 1, 2007, to adopt this last policy.])

These concerned individuals want to know the consequences of not having these policies and procedures. Their questions fall along the lines of, 'if my association doesn't have a collection policy, does it still have the authority to collect unpaid assessments?' Or, 'if my association doesn't have an enforcement policy, may it still take enforcement actions?'

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An association that maintains adequate reserves will find itself in the enviable position of having the funds necessary to cover the unenviable (and usually eventually unavoidable) costs of undertaking major maintenance and replacements of the community's common elements. Three potentially unappealing options face associations who haven't planned ahead by adequately reserving: 1) do nothing and allow the situation to deteriorate further, decreasing property values; 2) impose a special assessment; or 3) attempt to secure a loan, which will need repayment eventually. Even before a common element needs replacement, a lack of adequate reserve funds can hurt the ability of prospective buyers to obtain financing. In addition, some insurance companies have expressed reservations about renewing the master insurance policies of associations with underfunded reserves.

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We often hear stories of well-meaning association boards that make the decision to withhold due to "privacy concerns" certain association records from an owner requesting them. The decisions to withhold certain association records are explained along the lines that it would be an invasion of privacy:

• to release the names and addresses of other association members;
• to provide a list of owners delinquent in their assessments;
• to let an owner inspect covenant complaints filed by or against other owners, etc.

However, none of the above reasons are valid ones for refusing an owner request to inspect and copy such association records.

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As discussed in this post, Colorado does not have a state regulatory or enforcement agency to monitor association compliance with CCIOA. Much of CCIOA's enforcement power comes from section 38-33.3-123, which provides for the mandatory award of attorney fees to the prevailing party in actions to enforce its provisions. We have heard concerns that SB 100 and SB 89 broadened the types of actions for which attorney fees are awarded. This understandable concern is actually unfounded.

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Signed into law on May 26th, SB 89 requires associations to adopt a written procedure by January 1, 2007, concerning how disputes between owners and the association are addressed. To assist you in complying with this requirement, we have posted three different ADR policies for your use. Click here to access these policies.

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As discussed in this post, current law requires a seller, on the request of the buyer, to disclose the association's governing and financial documents listed in the most recent available version of the Colorado Real Estate Commission's sales contract. Sellers may do this by providing the required documents themselves (whether they deliver personally or through their real estate agent) or by authorizing their association to provide them to the buyer. (Although the statute speaks only to sellers authorizing their associations to disclose the documents, practically speaking, it is likely that these requests may come from sellers' real estate agents.) Chances are sellers within your community will be - or already have begun - authorizing your association to disclose these documents to the buyer. Does your association have a system in place to honor these requests efficiently and in a manner that protects association interests?

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SB 89 amended the disclosures that sellers of residential property located in a common interest community are required to make. These required disclosures are addressed outside of the Colorado Common Interest Ownership Act ("CCIOA") in section 38-35.7-102 of Colorado's statutes. This post addresses what associations may charge for providing association documents to either the seller or, at the seller's authorization, to the buyer in conjunction with the sale of a unit within a common interest community.

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On June 1, the Governor signed HB 1387, which brings numerous revisions to Colorado's foreclosure law. The law's intent is to simplify the process of foreclosures in Colorado, as well as providing owners with a better opportunity to keep their property. (The law's more significant amendments are discussed in this post.) Most of the law will not take effect until July 1, 2007, with a few provisions taking effect on July 1, 2006. Although the new law may affect associations who have units in foreclosure, associations do not have to take affirmative steps to comply with the amendments - except to ensure that their foreclosure attorney is up on all the changes.

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With Governor Owens's signature, Senate Bill 89, the "SB 100 Clean-up Bill," is now law. SB 89 addresses many parts of SB 100 that needed clarification due to ambiguous or conflicting language. In addition, SB 89 modifies some of the requirements implemented by SB 100 that failed to consider the actual manner in which associations operate or had unintended consequences. With the exception of two provisions (the adoption of a dispute resolution policy and a portion of the seller disclosure section), SB 89 is effective on the Governor's signature, May 26, 2006. (Click here for a copy of the new law.)

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As reported last month in this post, Colorado led the nation in foreclosures for the month of March. This Rocky Mountain News article reports that, unfortunately, Colorado has retained this spot for the month of April. As discussed in this post, a bill is before the Governor that proposes several changes to Colorado's foreclosure laws. It is hoped that several of these changes will help owners to keep their homes. It will be interesting to see how this proposed foreclosure bill may affect Colorado's foreclosure numbers if signed into law.

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House Bill 06-1387, which passed its third reading in the Senate on May 3, 2006, but which has not yet been signed into law, contains numerous proposed revisions to Colorado's foreclosure laws (C.R.S. § 38-38-101, et seq.). The bill is now on its way to the Governor for consideration. The intent of the bill is to modernize and simplify the process of foreclosures within Colorado, while also providing owners with a more realistic opportunity to retain ownership of their property. The most significant change to the bill as it relates to community associations is the expansion of the time in which to cure and the elimination of the owner's right to redeem.

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The formal Act version of SB 89 is available by clicking here. (The content of this version is the same as the rerevised version that the House passed; it's just now in its final format.) Governor Owens has until June 8th to sign the bill, which we are expecting him to do. Most of SB 89 will become effective on the Governor's signature, so we'll let you know immediately once it becomes law. (Need to know what this bill contains? Its contents are discussed in this post and in this one.)

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Governor Owens signed HB 06-1175, the 'Colorado Clean Indoor Act', into law on March 27th. HB 1175, sponsored by Representative May and Senator Grossman, institutes a state-wide ban on smoking in almost all public establishments. (The new law exempts cigar bars, casinos, and DIA's smoking lounge.) Effective on July 1, it is not only restaurants and bars that must go smoke-free - condominium, loft, and townhome residents will also need to think twice before lighting up a cigarette.

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The Denver Post reports that the Colorado lawmakers finished the four month session late Monday night. SB 89 took almost the entire four months to travel through the legislature, but is now on the way to Governor Owens. (Click here for the version, although not yet in the final format, that Governor Owens will consider.) Unlike the Florida legislature, SB 89 was the lone bill dedicated solely to HOAs and, if passed, will bring welcome clean-up amendments to SB 100. (The status of the other bills introduced that will have impact on HOAs will be summarized in upcoming post.)

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As discussed in this post, a conference committee had been requested to address some outstanding issues remaining in SB 89. However, it appears that these issues have been resolved without the need to amend the bill further. It is expected that the conference committee will be dissolved and the Senate to concur with the House amendments at some time today. At this point, the bill will be sent to Governor Owens for consideration.

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This morning, Senator Hagedorn requested that SB 89 be sent to conference committee. (A conference committee is made up of members from both houses, who try to work out outstanding issues left in the bill that were not resolved in committee or by a floor amendment.) He cited the reason for his request as issues brought up by Colorado Ski Country USA, the trade association for Colorado's ski resorts, and the National Association of Industrial and Office Properties ("NAIOP").

We understand these issues concern the amendments made in the House to section 38-33.3-217 as it was amended in the Senate. The Senate version of this provision would have exempted declarant-controlled, phased communities, and mixed-use communities from the 67% cap on the percentage of affirmative votes that may be required to amend an association declaration. Representative Carroll was concerned that these proposed exemptions were too broad and put a lot of effort into compromising with the interested parties. Currently, Section 217 proposes to exempt both declarant and phased-communities. (A phased community is defined as a community in which the developer retains development rights.) It is our understanding that she remains opposed to reverting back to the Senate version of the section.

We'll update you on the conference committee events as they transpire.

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Late yesterday afternoon, SB 89 passed its final reading in the House with a 64-1 vote. (The no vote came from Representative McCluskey). SB 89 will now return to the Senate where the Senate will either accept the House amendments or call for a conference committee to reconcile the two versions. We expect this to happen in the next few days. Click here for the most current version of SB 89. (This is the "rerevised" version, which contains all the amendments adopted by the House.)

Both this post and this post discuss the contents of the rerevised SB 89.

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SB 89 passed its second reading in the Colorado House of Representatives this afternoon. In addition to the Local Government Committee report (discussed here), Representative Carroll introduced two floor amendments, both of which were adopted.

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HB 1090, discussed in this Denver Post article and this post, passed its third reading in the Senate today. HB 1090 would allow victims of childhood sex abuse more time to file lawsuits against private institutions that knew or were on notice of the "propensity of an employee, volunteer, representative, agent, or subordinate of the employer" for engaging in unlawful sexual conduct and who failed to take reasonable steps or institute reasonable safeguards to prevent any such conduct.

The Governor has not given any indication as to whether he will sign or veto the bill. If the bill passes, we will be providing guidance on how to safeguard your association from these types of claims.

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SB 06-02, entitled 'Concerning Mandatory Disclosure In Connection With The Purchase Of Residential Real Property Of Whether The Property Has Been Used As A Methamphetamine Laboratory,' is sponsored by Senator Shaffer and Representative Pommer. The bill, which is on its way to the Governor, addresses the health harms caused by the lingering chemicals left after other discernable signs of methamphetamine production have been cleaned up.

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Click here to view the unofficial preamended version of SB 89, which has been posted on the General Assembly website. This version includes all the Local Government committee amendments that were approved at the hearing on April 11, but have not yet been adopted by the whole House of Representatives on Second Reading. We expect that Second Reading will take place by the end of this week. Click here for the blog post that summarizes these amendments.

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SB 89 will have its second reading next week. While the bill as a whole will benefit owners and associations by cleaning up and clarifying portions of SB 05-100, a hostile amendment was secured during the Local Government Committee hearing. This amendment would allow planned communities, regardless of their size or date of creation, to amend their declarations to exempt out of CCIOA. (Click here for more details.)

Please contact your representative by Monday, April 17 to request his or her support for SB 89 and to oppose the hostile 'carve out' amendment adopted in committee. You can find your representative by visiting Project Vote-Smart and entering your nine-digit zip code.

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At the House Local Government hearing on Tuesday, April 11, Representative Liston, the House sponsor of SB 185, requested that the bill be postponed indefinitely. (SB 185 proposed to extend the CCIOA exemption for small and limited expense planned communities created after July 1, 1998 to all small and limited expense communities. Our objections to this proposal are discussed in this post.) The Committee then voted to postpone the bill indefinitely, which has the same effect as killing a bill. Unfortunately, the demise of SB 185 is not the end of the story due to an amendment added at the last minute to SB 89 by SB 185's proponents. (Click here to view amendment.)

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SB 143 - which would have allowed victims of childhood sex abuse to sue private institutions on vicarious liability claims - has generated much controversy as reported in this Denver Post article. (SB 143 is discussed in this post.) In response, Senator Fitz-Gerald has decided to add the key provisions contained in SB 143 into HB 1090, which also addresses sex offenses, including those committed against children. (HB 1090 has not escaped controversy either as related in this Denver Post article.) The unofficial preamended version of HB 1090 is available here. (This version includes the Senate committee amendments that have not yet been adopted by the entire Senate on Second Reading.)

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Yesterday afternoon, the House Local Government heard SB 89. At the committee hearing, Representative Carroll introduced a strike below amendment for the Committee's consideration. (Instead of introducing amendments one by one, a strike below amendment strikes everything below the enacting clause, replacing it with the language of the strike below amendment.)

The strike below incorporates much of the reengrossed version of SB 89. Here is a break down on the pertinent provisions contained in the strike below (I have italicized the portions of the amendment that differ from the reengrossed version):

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SB 143, 'Concerning The Statute of Limitations for Civil Actions Alleging Unlawful Sexual Conduct,' is sponsored by Senator Fitz-Gerald and Representative Madden. This bill seeks to provide further protections to child victims of sexual abuse, including holding institutions accountable for preventing sexual abuse.

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The House Local Government Committee hearing on SB 89 has been moved to Tuesday, April 11. The Local Government Committee meetings begin at 1:30 p.m. We'll keep you posted as developments arise. (SB 89 is discussed in detail in this post.)

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SB 89 and SB 185 are scheduled to be heard by the House Local Government Committee on Tuesday, April 4. (The provisions of SB 89 are discussed here, and SB 185 is covered in this post.) The Committee meeting begins at 1:30 p.m. in House Hearing Room 0112. (A list of Committee members is available in this post.) SB 89 and SB 185 are fourth and fifth on the agenda, but bills may always be heard out of order. The House calendar provides that any bills not heard or completed on April 4th will be scheduled to be heard and completed on Friday, April 7th, time to be determined if such a meeting becomes necessary. We'll keep you posted on any developments.

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We have received a lot of questions concerning what documents associations may charge for in the post-SB 100 world. The answer to this question lies in why the documents are being furnished or copied. The following bullet points list the most common situations in which associations furnish or copy records for their owners.

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Originally set to be heard March 21 by the House Local Government Committee, SB 89 was taken off the calendar to be heard another day. As of today, the bill has not yet been re-scheduled. However, the committee will not be meeting next Tuesday, March 28th, so the earliest SB 89 will be heard will be Tuesday, April 4. We'll keep you posted as to when SB 89 finds its way back on the calendar.

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On March 2, Representative Stengel, facing an ethics investigation over his off-session pay, stepped down from his position as house minority leader. Following Representative Stengel's resignation from the position, Republicans elected Representative May as their new house minority leader. House Minority Leader May has taken himself off the House Local Government Committee and has appointed Representative Stengel to take his place. Click here for an updated list of the members of the House Local Government Committee.

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SB 185 (discussed in this post) will be heard by the House Local Government Committee on March 21, which meets at 1:30 p.m. (Click here for a copy of the bill.) SB 185 was introduced in the House on March 1 by its House sponsor, Representative Larry G. Liston. (Click here for a list of the members of the Local Governement Committee.)

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The House Local Government Committee hearing on SB 89 is scheduled for Tuesday, March 21 at 1:30 p.m. Click here for a list of the members of the Local Government Committee.

Interested citizens may testify to their views on the current version of SB 89 at this hearing. (Click here for tips on testifying in front of committee.) Like the Senate Judiciary Committee, during this hearing, the Committee will examine the details of SB 89 and determine what action to take on the bill.

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SB 89 has now been introduced in the House and has been assigned to the Local Government Committee. As of today, it has not yet been calendared for a hearing, but we'll let you know when it is scheduled.

The 11 members of the Local Government committee are as follows:

Representative Mary Hodge (Chairman) (D)
Phone:
mary.hodge.house@state.co.us

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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.

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