Colorado Homeowners Association Law Blog

Greening Your Community Association

"Going green" seems all the rage these days. From the cover of Newsweek, to hybrid vehicles, to Al Gore and the bevy of eco-friendly products at the local retail store, the push for consumer products and practices that minimize the impact on Earth and its resources has found its place in mainstream America.

Community associations, too, play a role in the green movement. New or old, common interest communities impact the Earth at both the association level and the individual homeowner level. Individuals and associations alike can implement many practices aimed at reducing energy consumption and the overall carbon footprint of their daily activities.

For the past three decades Colorado statutes concerning solar energy devices have guided community associations’ architectural policies. More recent legislation establishes mandates regarding community associations’ landscaping policies and seeks to allow homeowners to use more energy saving devices such as wind generators, retractable window awnings, and clotheslines.

]]> While legislative changes have shaped, and will likely continue to shape, community association policies in this area, community associations can take many or all of the following actions now to save resources and money:

· Adopt landscaping policies that promote Xeriscape techniques and encourage compliance with applicable watering restrictions.

· Replace routine paper mailings with e-mail communication.

· Develop a community website for access to association documents and announcements.

· Provide recycling options for community members at designated places in the common areas and through contracted waste removal services for individual units.

· Choose products made from sustainable materials for community projects such as roof, siding, and deck replacement and for individual homeowners’ use.

· Reduce water consumption with rain sensors and flow meters.

· Use compact fluorescent bulbs for common area lighting.

· Upgrade older systems such as those used for irrigation, heating, cooling and laundry to more cost-effective, energy efficient models.

· Outline preferred locations for solar energy devices and other energy saving devices like retractable window awnings and clotheslines.

· Conduct an energy audit of your community with the assistance of a qualified professional, or through your local service provider, to identify additional ways to save energy and money for your association.

For more information about how your community association can "go green," and guidance on complying with applicable Colorado legislation, contact one of the attorneys at our firm.

New Legislation Supports Homeowner Use of Alternative Energy Devices

Governor Ritter signed HB 1270 into law on Thursday, April 24, 2008. This new legislation amends C.R.S. 38-30-168, which has prohibited certain restrictions on solar energy devices since the late 1970s, and adds a new section to the Colorado Common Interest Ownership Act. The new statutory provisions permit homeowners to install alternative energy generation devices, such as solar panels and wind generators, and other select, energy-saving improvements, despite any express prohibition of these items in the recorded covenants, conditions, and restrictions applicable to an owner’s home. The statute will control in the event of a conflict between the terms of the recorded covenants and the legislation. Homeowners associations and condominium associations may regulate these alternative energy devices only to the extent that the statutes allow.

]]> Colorado homeowners can now install the following alternative energy, or energy efficient, devices, subject to applicable rules and regulations adopted by their community associations:

Solar energy devices
Wind-electric generators
Awnings, shutters, and other shade structures marketed for the purpose of reducing energy consumption
Garage and attic fans
Evaporative coolers
Energy-efficient outdoor lighting devices
Retractable clotheslines

The statute further defines solar energy devices and requires that wind-electric generators meet the Public Utilities Commission’s standards for interconnection. The statute does not give homeowners the right to place any alternative energy device on property (i) owned by someone else, (ii) leased, (iii) used as collateral for a commercial loan, or (iv) identified as general or limited common elements.

Colorado community associations may adopt regulations related to the size, placement, and appearance of the permitted alternative energy devices. Associations may also address bona fide safety concerns in their rules for these improvements. The statute does not preclude community associations from applying their established architectural review procedures before an owner may install a proposed device.

The specific requirements of the new legislation make a review of existing policies, and, most likely, the adoption of regulations concerning the installation of alternative energy devices, advisable. If your community association would like assistance understanding this new legislation and implementing policies to address alternative energy devices, please contact one of our attorneys directly.

The Paperless Association - Myth or Reality?

The migration away from paper products is a hot trend these days. The benefits of such a move for a homeowners association are clear - not only does it save trees, it also saves money (less paper, postage, and storage costs). In short, being green saves green. But can an Association truly become paperless? Not yet, but as computer technology and the use of the internet become more and more advanced, the answer is closer to becoming yes. Below are some steps your Association can take to start freeing itself from the paper weight:

]]> 1. Use E-mail for Correspondence – One of the easiest steps you can take toward going paperless is to start using e-mail for most of your Association’s communication. You can use e-mail for distributing a community newsletter or homeowner directory, as well as communicating information on news and events taking place in the community. Depending on what your covenants and bylaws state, you may also use e-mail to distribute the annual budget or notify owners of covenant violations and overdue assessments. Unfortunately, Colorado law still specifically requires that your notice of annual meeting be either hand delivered or sent via U.S. mail.

2. Maintain an Association Website – As almost all of an Association’s documents can be made accessible on-line, this is probably the biggest step you can take toward going paperless. An effective website should contain viewable and downloadable copies of all of the Association’s material records, such as its governing documents, meeting minutes, financial statements, and annual budget. It should also contain forms, such as ACC requests or community room reservations, which an owner can fill-out and submit to the Board electronically. A website may also contain copies of the Association’s newsletter, a homeowner directory, an event calendar, or even a community bulletin board. All of these features significantly reduce the need for paper, as well as increase an owner’s ability to become involved in the community.

3. Request Electronic Invoices from Vendors – You can request that your vendors bill you directly via e-mail. Many are now able and happy to do this, as it cuts down on their paper use as well. Electronic invoices can also be stored in a secure section of your Association’s website, making them available for inspection by the Board.

4. Utilize Internet Voting – Although the technology is still somewhat new, there are services available that allow your Association to conduct its member voting on-line. If your governing documents allow this type of vote, all you need to do is supply the servicing company with ownership information, the ballot issue(s) to be decided, and the start and end dates of the vote. Owners are supplied with a secure log-in and can vote from the comfort of their home. The company will forward the results to the Board when the vote is complete. No more need for costly mailings and mail-in ballots.

5. Store the Association’s Records on Disk – Storage of the Association’s records can be both a space and money drain. Its not easy finding a place to store meeting minutes, bank records, and correspondence that goes back years and years. An easy solution is to store these documents in electronic form. Although we recommend that you retain original copies of some documents, it’s likely that the entire history of your Association can fit onto one simple disk. Just make sure to keep multiple copies, in case of damage or destruction.

6. Use Recycled Paper – OK, technically this is not paperless. However, there are still some situations that require paper documents. As mentioned above, the notice of your Association’s annual meeting must be either personally delivered or sent via U.S. mail. Further, there may be some owners in your community that refuse to obtain an e-mail address. In these instances, the best we can suggest is to utilize recycled paper. It typically costs no more than “fresh” paper, and you can rest easy knowing that you are doing your part to save the planet.

A Condominium Map for Directions? Who Needs One?

The male gender of our species is often accused of failing to stop and ask directions, sometimes creating a fair amount of discord, particularly when being directionally challenged. Likewise, we are accused of failing to consult a map, instead, simply relying on our instincts, which often as not, turn out to be wrong.

]]> At our firm, we often encounter a similar problem with respect to the common interest communities that we represent – neither the Association, nor the manager have a map – literally. Or, in the case of a planned community, they do not have a plat.

The Colorado Common Interest Ownership Act (CCIOA) defines “map”

as that part of a declaration that depicts all or any portion of a common interest community in three dimensions, is executed by a person that is authorized to execute a declaration relating to the common interest community, and is recorded in the real estate records in every county in which any portion of the common interest community is located. A map is required for a common interest community with units having a horizontal boundary. A map and a plat may be combined in one instrument.

CCIOA defines a “plat” as

that part of a declaration that is a land survey plat as set forth in C.R.S. Section 38-51-106, depicts all or any portion of a common interest community in two dimensions, is executed by a person that is authorized to execute a declaration relating to the common interest community, and is recorded in the real estate records in every county in which any portion of the common interest community is located. A plat and a map may be combined in one instrument.

So what does all this mean? In the simplest of terms, a plat is a two dimensional representation of the units and common areas that make up a community. In other words, it is a birds’ eye view of lot lines, common area boundary lines, easements and other things that can be represented by a drawing, and are prepared in connection with a planned community (think single family homes, or townhomes where there is ownership of the real estate underneath the unit). It represents vertical boundaries (i.e., the boundaries go vertically).

A map is a three dimensional representation of the units and common areas making up the community. While it depicts vertical boundaries like a plat, it also depicts horizontal boundaries (i.e., the boundaries go from side to side), and it is prepared in conjunction with condominium declarations. The horizontal boundaries depict, from an elevation perspective, the lower most and upper most boundaries of the units and give the specific elevation above sea level of the lower horizontal boundary, and a dimension in feet above the lower horizontal boundary of the upper most horizontal boundary.

Section 209 of CCIOA states that a plat or map is a part of the declaration and is required for all common interest communities (except cooperatives). (Before CCIOA, the Colorado Condominium Ownership Act also required the filing of a map.)

So why is this important? Plats and maps typically contain information that might be able to be described in words in the declaration, but are more easily depicted visually. They lend themselves to labeling and descriptions, such as “limited common elements” or “general common elements.” With respect to condominium projects particularly, they help determine what, exactly, makes up the unit – does the unit include attic spaces? How about crawl spaces? Are parking areas general common elements, limited common elements, or part of the units? What about those decks, patios and porches? Plats enable the identification of the common areas. Ever wonder if that entry monument is located on the Association’s property, or on the adjacent owner’s property? Is the area between the boundary fence and the road property owned by the Association, or the adjacent land owners?

Without reading the declaration hand in hand with the map or plat, the information on the map or plat is incomplete, and gives only a partial understanding. However, the reverse is true as well – trying to read the declaration without the plat or map gives only partial information, and an incomplete understanding of the restrictions, rights, duties, and rules of the community.

When we are asked to provide an opinion that requires an interpretation of the declaration, don’t be surprised if we ask for a copy of the plat or map as well. We are trying to “drive” less by instinct, and more based on the actual directions that are part of the governing documents of the community.

Update on Legislation Affecting Community Associations: Board Actions without Meeting

On March 3, 2008, the Colorado General Assembly sent this legislative session’s first piece of legislation impacting Colorado community associations to Governor Ritter for signing. Upon enactment, House Bill 08-1089 will amend the Colorado Revised Nonprofit Corporation Act to provide new default procedures for board actions taken without meetings. The new legislation aims to facilitate board actions between meetings and addresses the issue of board members who cannot or do not vote on proposed matters within the necessary time period for board action. House Bill 08-1089 will not take effect until August 6, 2008, at the earliest, and remains subject to the possibility of veto or voter referendum.

]]> On its effective date, House Bill 08-1089 will revise Section 7-128-202, Colorado Revised Statutes, to state:

(1) Unless otherwise provided in the bylaws, any action required or permitted by articles 121 to 137 of this title to be taken at a board of directors’ meeting may be taken without a meeting if a notice stating the action to be taken and the time by which a director must respond is transmitted in writing to each member of the board and each member of the board, by the time stated in the notice:
(a) Votes in writing for such action; or
(b) (I) Votes in writing against such action, abstains in writing from voting, or fails to respond or vote; and
(II) Fails to demand that action not be taken without a meeting.

In contrast to the old statutory procedures for board action without meeting, which require a response from every member of the board, the new default procedures will allow for a response deadline. If a board member does not respond by the set deadline, then the board may tally the votes cast without waiting for the non-responsive member to vote. This section of the statute does not expressly address quorum requirements, so quorum requirements will continue to apply to board actions. Additionally, the new procedures do not discuss reasonable time periods for board consideration of a proposed action.

Community associations functioning as nonprofit corporations may utilize the new procedures for actions taken without meeting, unless the associations’ bylaws provide different procedures. In other words, the new statutory language will not change the procedures for associations with bylaws that already specify the requirements for board actions without meetings. Many associations’ bylaws contain procedures that track the old statutory language or state different procedures for board action without meeting; those associations will not directly benefit from this new legislation without first amending their bylaws.

If your association bylaws contain more cumbersome procedures for board action without meeting, and you desire to amend those procedures to benefit from the new statutory language, please contact our office to discuss the steps for amending the bylaws and to obtain a quote for the legal fees to amend the bylaws.

Stay tuned for future updates on legislation impacting community associations’ notice and hearing procedures, dispute resolution, and restrictions on energy efficiency measures.

Options in Covenant Enforcement

The young man living at 101 Crazy Daisy Avenue hasn’t mowed his lawn in over a month. The couple just down the street has two beagles that embark on a nightly duet with the moon. Another couple has been camping in their motor home for over a month…in their front yard. And don’t forget the bank owned ranch sitting vacant on the corner. The rest of the community is up in arms and demands action. What is a conscientious Board to do?

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Covenant enforcement is one of the more unpleasant tasks faced by homeowners associations. It is never easy to tell your neighbor they must mow their lawn or put a muzzle on their pets. Most owners realize that there are certain rules that they must abide by when moving into a covenant controlled community. However, some do not, and some choose simply to ignore them. In those situations it is up to the Board to exercise its authority to ensure compliance with the covenants. This article provides an introduction to some options for a Board to consider when pursuing covenant violations. Please keep in mind that this article is not meant to be an exhaustive discussion of each remedy, and an Association should contact legal counsel to discuss their options before moving forward with an enforcement action.

Some Basics First.

An initial question that we often receive is whether a Board must do anything to enforce the covenants? A simple answer to this question is YES. As a general matter, it is the Board’s fiduciary duty to enforce the covenants in its community. However, this doesn’t mean that they must file a lawsuit against every owner who hasn’t taken down their holiday decorations yet. It does mean they should consider the evidence in each situation and decide whether or not, in its business judgment, it is worth pursuing an alleged violation, and if so, what action they should take. An owner’s complaint of a barking dog may not be worth pursuing if it’s unclear who owns the dog in question. On the other hand, it is likely worthwhile to pursue an Owner who has painted her home hot pink in violation of architectural standards.

When considering the various options available to an Association, the first thing a Board should do is consult their governing documents. Typically the Association’s Declaration will specifically state what options are available to enforce the covenants. If not, Colorado law provides basic rights for most Associations, such as imposing fines or instituting a lawsuit. Importantly, we do not suggest some remedies, such as self-help or filing a covenant violation lien, without specific authority in the Association’s Declaration.

What can the Association do?

· Impose a fine. This is the most typical form of covenant enforcement. Most Associations have the power to impose reasonable fines for violations of the declaration, bylaws, or rules and regulations of the association. However, an owner must be given notice of an alleged violation and an opportunity to be heard regarding the violation before a fine can be imposed.

Pros: Inexpensive to the Association; typically effective is the fines are high enough (but they must be reasonable); quicker results then most other remedies.

Cons: Ineffective if the fines are too low (just a cost of doing business); does not remedy the underlying violation.

· Small Claims Court. An Association has the power to institute a lawsuit on behalf of its members. In small claims court the Association represents itself (typically a Board member or two) in an informal legal setting without an attorney. A small claims court can issue a money judgment or issue an injunction requiring an Owner to remedy the violation (or allowing the Association to remedy the violation at the Owner’s expense). Small claims courts can address violations that cost less than $7,500 to remedy.

Pros: Inexpensive for the Association; effective at remedying the underlying violation.

Cons: Association must represent itself.

· County Court. Similar to small claims court, but the Association can (but doesn’t have to be) presented by an attorney. County courts can address violations costing less than $15,000 to remedy. Attorney fees may be awarded to the prevailing party, so this option should not be entered into lightly.

Pros: Very effective at remedying the underlying violation; attorney fees available if successful.

Cons: Can be costly to the Association if the lawsuit is not successful.

· Liens. If provided for in the declaration, an Association may file a lien with the County evidencing the violation. This gives everybody, including potential purchasers or mortgage companies, notice of the violation.

Pros: Inexpensive.

Cons: Typically does not remedy the underlying violation until the property is sold or refinanced.

· Self Help. If provided for in the declaration, an Association may enter onto an owner’s property and remedy a violation, charging the costs to the owner. If this option is chosen, the Association should take great care to document, by video or photograph, the actions it took.

Pros: Quick and effective remedy for the underlying violation; inexpensive if the costs can be collected from the owner.

Cons: Can be expensive if the costs cannot be collected; opens the Association up to potential liability for trespass, damage to property, or personal injury.

· Suspension of Services/Privileges. If provided for in the Declaration, an Association, after notice and hearing, may suspend the membership privileges of an Owner. Generally, this should not include the suspension of basic services necessary for the health and safety of an owner, such as water or heat.

Pros: Inexpensive.

Cons: Ineffective if there are no substantive privileges (like use of a pool) or if an Owner does not utilize the privileges.

· Mediation/ Arbitration. Some Association’s governing documents require mediation/ arbitration instead of pursuing a lawsuit. Generally this is in front of a third party mediator who makes a decision after both sides have had a chance to state their case. This can be non-binding or binding, depending on the documents and what the parties agree too. Non-binding mediation is typically informal, while a binding arbitration can resemble a complex lawsuit.

Pros: Mediation is more neighborly and less confrontational than a lawsuit; effective if you have a good mediator.

Cons: Can be expensive (for both attorney and mediator time); not effective in situations where there is no middle ground (the pink house must be repainted).

· CALL THE POLICE or Code Enforcement. Most counties, cities or towns have ordnances that address things such as on-street parking, storage of unsightly objects, or the construction of unauthorized improvements. Loud noises or threatening behavior may also be a criminal violation.

Pros: Inexpensive; can be effective in the right circumstances.

Cons: City code may not address the underlying violation; law enforcement may be unresponsive.

Hazards to Watch For:

· STATUTE OF LIMITATIONS. Colorado law provides a 1 year statute of limitations for improvements built in violation of the Association’s governing documents. This generally means that an Association cannot require the removal of an unauthorized improvement after 1 year has passed, starting from when the Association knew or should have known of the violation. In addition, other statures of limitations may apply, depending on the violation.

· Arbitrary or capricious enforcement. Covenants and rules cannot be enforced in an arbitrary or capricious manner. That is, an Association cannot choose to fine one owner for parking his RV in front of his house, but ignore a similar violation by another owner (unless the Association has a valid business reason for doing so).

· Estoppel. An Association may not be able to enforce a covenant if it has given an owner the OK to pursue the unlawful activity. This could occur when a member of an Association’s architectural review committee formally gives an owner permission to paint his house electric blue. If the Owner then paints his house electric blue, the Association cannot make him repaint his house to a more acceptable color, as he relied on the past ACC approval.

Recap:

· Be Neighborly

· Check the Governing Documents

· Document Everything

· Beware the Statute of Limitations

· Treat Everyone Alike

· The Police are your Friend.

In sum, covenant enforcement is an often overlooked, but important, function of a healthy Association. It helps retain property values and creates a safe and pleasant community. Feel free to contact our firm if you have any questions regarding the enforcement of covenants in your community.

Board Disputes: If You Won't Say It in Person, Don't Say It by E-mail

Technology expedites the work of community association board members, managers, and attorneys. Technology allows us to fully consider detailed documents before convening for in-person meetings and, in some circumstances, to request board decisions in lieu of meetings. With a few clicks, we can send project bids, opinion letters, and summaries of accounts by e-mail, and post important announcements on association websites. For these and other purposes, technology can positively serve your community associations. But community association leaders must tread carefully when using technology, particularly e-mail, for association business. Board members must keep in mind their fiduciary duties to their community associations before hitting “send” to avoid getting themselves and their associations into heated disputes and potential legal binds.

]]> Occasionally, community association board members contact us for help with acrimonious e-mail exchanges between board members. Sometimes we learn about the acrimony because a board member decides to include one of our attorneys on the recipient list for a string of e-mail exchanges gone awry. These types of exchanges inevitably include some or all of the following traits:

Personal attacks on other board members
Exclusion of certain board members from the recipient list to allow “secret” conversations about those not included
Capitalized words, phrases, or sentences symbolizing anger and emphasis
Rehashing of past, presumably resolved, issues
Board members who express their desire to resign from the board
Harsh words, hurt feelings, and attempts at consolation
Non-board members included on the recipient list to back-up accusations, verify comments, or simply as a means of disseminating the board discord throughout the community

Board conflict requires quick attention. In general, we recommend some combination of the following steps for curtailing e-mail exchanges that have spiraled out of control:

Stop the e-mail exchanges immediately. The association president should instruct all board members to cease e-mail communication. If any board member continues to communicate by e-mail, that member should know that no one will respond.

Schedule a meeting of the board. The board should meet to discuss the issues giving rise to the acrimonious e-mail exchange. E-mail allows individuals to communicate quickly without having to speak directly with the recipients. Because e-mail exchanges do not happen face-to-face, people may feel more comfortable making accusations or using harsh words. Tone and other conversational nuances do not translate well over e-mail, sometimes leading to misinterpretation of the writer’s intent. Meeting in person may constrain some of the volatility and allow the board to focus on the real business of the association.

Invite the association’s attorney to the next board meeting. The association’s attorney can stress board members’ fiduciary duties and highlight potential liabilities for conducting business inappropriately. The attorney’s presence may also allow the board to meet in a closed, executive session, which can permit the board to resolve the conflict without other community members present.

Identify the underlying issues and address them as necessary. Community association board members need not resolve all personal differences. Board members should bring their unique perspectives and opinions to the board room, but those perspectives and opinions should not devolve into personal attacks on other board members. If personalities, past issues, or other situations prevent the board from conducting business, then the board members should individually consider whether they can uphold their duties to the association; if not, they may need to resign from the board. In other cases, an outside facilitator may help the board to work through resolvable issues. Or, the community association members may vote for new directors at the annual meeting or remove an errant board, or select board members, in accordance with the bylaws (and, hopefully, with attorney assistance).

Develop a policy concerning the use of e-mail for association business. Boards can best prevent the nasty e-mail situation from ever occurring by proactively adopting an e-mail policy for their associations. Community associations stand to benefit from all board members knowing the appropriate uses for e-mail.

If you serve on a community association board in Colorado and desire an e-mail policy for your association, contact us for a quote to prepare a policy that fits your association’s needs.

Community Association Legal Audit (Part 2 of 2)

Community association board members fill tough roles that require a great deal of attention to association business. We understand that, as board member volunteers, you need guidance from professionals to facilitate informed decision-making, allowing you to uphold your fiduciary duties to the association that you serve. To assist you in evaluating the legal priorities for your community, we have created this Legal Audit checklist. Place a check mark in the box beside each statement that applies to your community association--and don't forget to complete Part 1 of the Community Association Legal Audit.

My community association has . . .

? checked that the assessments charged to individual units match the allocated interests stated for those units in the association’s governing documents.

Associations must assess individual units for budgeted expenses in accordance with the allocated interests stated in the governing documents. When we advise clients of discrepancies that we note in unit assessments and allocated interests, we sometimes hear, “We’ve always done it that way; that’s what people are used to.” If the governing documents do not align with the association’s manner of assessing owners, then past mistakes do not support future disregard for the documents.

]]> ? received legal advice concerning contracts entered into on behalf of the association.

We prefer to take a proactive approach to legal representation by helping our community association clients avoid conflict with vendors, employees, and any other person with whom the associations enter into contractual relationships. By reviewing association contracts before they are signed, we can help to ensure that the contracts capture your understanding and intent and that the terms protect the association in the event that things do not go according to plan.

? turned over all homeowner assessment accounts that show a 90-day delinquency.

Our experience shows that delinquent accounts with amounts more than 90 days past due prove more difficult to collect from the homeowners than newer delinquent balances. We recommend turning over the accounts to our office as close to the 90-day past due point as possible.

? conducted an audit or review of its accounts.

In most cases, community association executive boards can determine whether to conduct an audit or review of the corporate books. Associations with annual revenues or expenditures of two hundred fifty thousand dollars, and owners of at least two-thirds of the units requesting an audit, must have a certified public accountant conduct an audit of the associations’ accounts.

? updated its reserve analysis.

Updated reserve analyses ensure proper budgeting for reserves. Your association’s reserve specialist can recommend a frequency for reserve analysis updates. If your association has not conducted a reserve analysis of its common elements to determine the useful life and replacement costs of various components, then the executive board should consult with a professional now to minimize the need for special assessments later.

? reviewed rules and regulations to ensure compliance with state and federal laws.

One of two scenarios often occurs with community association rules: (1) your association’s rules and regulations stay the same while the laws change, or (2) recent revisions to the rules and regulations do not match the existing law. Rules and regulations that violate state and federal housing laws, as an example, can cost your association tens of thousands of dollars if challenged. An attorney’s review of those rules and regulations can bring your association’s rules into compliance before a violation occurs.

? reviewed governing documents to ensure that basic business practices conform to their requirements and to understand the rights and obligations that they state.

Association bylaws serve as the operating manual for community association business, while the recorded covenants contain explicit guidance on common expense assessments, maintenance and insurance obligations, and restrictions on the use of property subject to the covenants. Community association board members and managing agents should familiarize themselves with the details of both of these important governing documents, which means reading the documents themselves and not relying on other board members’ or homeowners’ paraphrasing of the documents. When questions arise about what the governing documents mean, we can provide the assistance that you need.

? reviewed the architectural design guidelines.

Many associations have written guidelines regarding architectural design within the community. We suggest that associations review these guidelines annually to make sure they state up-to-date building standards and align with the association’s current practices.

? reviewed its insurance policies.

All associations should have liability insurance protecting them from injury claims and property insurance covering the common elements. Associations may also obtain directors’ and officers’ liability insurance, fidelity insurance, and workers compensation insurance. We recommend that every association review its insurance policies to make sure they offer adequate protection and provide the coverage mandated by statute and the governing documents.

? provided an annual education opportunity for members.

Colorado law requires community associations to provide free education to members on an annual basis. While the executive board can set the criteria for the education classes, the classes must educate members on general operations of community members and the rights and responsibilities of owners, the association and board members. The attorneys in our office are happy to provide educational classes for your members.

? provided education for Board members.

Colorado law permits community associations to include board member education class costs as a part of the common assessments. The Rocky Mountain Chapter of the Community Associations Institute hosts numerous education programs for board members throughout the year. You can check for upcoming events at http://www.hoa-colorado.org/.

? recorded a Notice of Association Address to protect the association’s rights as a lien holder.

Colorado’s foreclosure statutes contain a new provision that could inadvertently wipe out community association priority liens against foreclosed units. To protect your association’s rights, the association should record a Notice of Address in the real property records of the county where the community is located. The Notice of Address, which provides a mailing address for the association, together with a recorded Notice of Assessment Lien for those units with delinquent accounts, will result in the association receiving notices of pending foreclosures within the community.

How does your community association’s Legal Audit look? Did you identify some legal needs that your association may need to address? We can help you prioritize your association’s legal matters. Please do not hesitate to contact us about this Legal Audit or other community association legal matters. We look forward to hearing from you soon.

The Law Firm of Winzenburg, Leff, Purvis & Payne, LLP

FCC Bans on Exclusivity Contracts

Exclusivity contracts are often used by providers of video programming distributors (think cable providers) to obtain the exclusive right of access or the exclusive right to provide video service in a community. On November 13, 2007, the FCC entered its order banning exclusivity contracts between cable operators (and other multi-channel video programming distributors) and multiple dwelling unit developments. The definition of multiple dwelling units developments includes condominiums, cooperatives, and communities of single family homes. The final order from the FCC has still not been published. However, in the mean time, you can view a summary of the FCC order here, and comments, prepared by the Community Associations Institute. This action by the FCC is consistent with its belief that communication providers (internet, wireless and cable) should be subject to the greatest possible competition in providing their services, and that consumers generally benefit from that competition.

]]> If you have an exclusivity clause in your video programming distribution contract, this ban will not necessarily terminate the contract. It may only make certain provisions of that contract unenforceable. The impact of this ban on community associations is not certain at this point. The benefit of an exclusivity provision in the contract is that it sometimes enabled the association to obtain a better rate for the video programming services. Without an exclusivity clause, however, it is likely that any discounts will expire with contract renewals.

We will keep you posted as we learn more about this new order. In the mean time, if you have a contract with a video programming distributor, you may want to review its provisions to determine if there is an exclusivity clause, and if so, what the effect on the contract will be once the FCC order goes into effect.

Fair Housing Revisited

We’ve written before about how the Fair Housing Act applies to common interest communities. Unfortunately, there are some (maybe many) homeowners associations and condominium associations that still don’t understand the importance of this federal law and its state counterpart, the Colorado Fair Housing Act, or if they understand, they don’t believe it applies to them. Here is a recent story of a condominium association in Hawaii that found out otherwise.

]]> The consequences of failing to understand the act and its applicability not only required the association to pay a hefty settlement ($200,000), but also required the association to install a permanent wheelchair ramp, provide fair housing training for board members and the association’s agents, and maintain policies and procedures on dealing with reasonable requests for accommodation for disabled individuals.

If your association has concerns about what it should do to comply with either the federal Fair Housing Act, or the Colorado Fair Housing Act, please contact us.

Community Association Legal Audit (Part 1 of 2)

Place a check mark in the box beside each statement that applies to your community association.

My community association has . . .

? adopted the seven mandatory Senate Bill 05-100 policies.

Senate Bill 05-100 requires all associations to adopt seven different responsible governance policies concerning (1) the adoption and amendment of policies, (2) board member conflicting interest transactions, (3) covenant enforcement and fines, (4) collection of delinquent assessments, (5) conduct of meetings, (6) inspection and copying of records and (7) reserve fund investments.

? adopted the Senate Bill 06-89 dispute resolution policy.

Senate Bill 06-89 requires all associations to adopt a policy concerning disputes between owners and the association.

? updated Senate Bill 05-100 policies to conform to Senate Bill 06-89 requirements.

Senate Bill 06-89 modified some of the terms of Senate Bill 05-100, creating recommended changes to the responsible governance policies.

]]> ? adopted a policy concerning insurance deductibles.

Colorado law allows associations to adopt policies concerning the allocation of responsibility for insurance deductibles and processing of insurance claims. We recommend that associations adopt a standard policy and adhere to it for all claims.

? adopted a pet policy.

Associations generally hold the power to regulate the use of the common areas. We recommend that associations adopt a policy concerning pets and the common areas.

? adopted other policies, such as those addressing emergency vehicle parking, landscaping, political signs and flags.

Colorado law allows associations to adopt policies that further define location, timing, size, type and procedures for emergency vehicles, xeriscaping, political signs and flags.

? completed all annual disclosures to association members.

On an annual basis, every community association in Colorado must provide detailed information to the homeowner-members, including but not limited to the association’s budget, the assessments levied against each type of unit, and various insurance policies covering the association.

? submitted the annual corporate report to the Colorado Secretary of State’s office.

You can answer this question by accessing the Secretary of State’s online database at http://www.sos.state.co.us/. If the information for your association shows a noncompliant status, then the annual report was not timely filed. Associations appearing as “administratively dissolved” in the Secretary of State’s database may require member votes to reinstate the corporations.

? filed annual tax returns for the association.

Community associations in Colorado must file annual tax returns on their profits (if any).

? conducted a budget ratification meeting, if required by statute.

Any community association formed after July 1, 1992, and subject to the Colorado Common Interest Ownership Act (“CCIOA”), C.R.S. 38-33.3-101, et seq., must submit a Board approved budget to its owners at least 60 days prior to the end of the fiscal year and must schedule a budget ratification meeting at least 30 days prior to the end of the fiscal year. At the budget ratification meeting, the board’s proposed budget is deemed approved unless a majority of the owners, or a greater number of owners stated in the declaration, rejects it.

The Law Firm of Winzenburg, Leff, Purvis & Payne, LLP

What Would John Wayne Do

In reviewing the law regarding construction of restrictive covenants, I ran across a case I read a couple of years ago. As I was leisurely re-reading this case I was struck by the appellate court’s interpretation of the covenants dealing with the heart of the lawsuit. No, not the validity of the developer unilaterally modifying the restrictive covenants after the sale of lots or tracts. It was how the court concluded that sheep could be maintained on the property when under the original 1984 covenants they were specifically prohibited.

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The appellate court, in reviewing the matter, iterated all the right language for construction of the covenants: “the plain language of a restrictive covenant must be interpreted considering its underlying purpose”; “any doubt relative to the meaning and application of the covenant must be resolved in favor of the unrestricted use of property”; “and all restrictions relative to the use or occupancy of real property must be strictly construed.”.

The appellate court was faced with the issue as to whether sheep could be maintained on property when the 1989 amendment only stated that horses and bovine animals were acceptable. The 1984 covenants specifically prohibited the keeping of sheep. The invalid 1989 amendment stated – which I think is invalid because the 1984 covenants were invalidly supplanted by the 1989 amendments - that in addition to household pets, not relevant to this discussion, two horses and bovine animals may be kept. Nothing about sheep. The court of appeals swept aside the notion that because the sheep were not mentioned they are not prohibited by saying the language is not restrictive. The court went on to opine, it does not restrict specific animals on the lot, it just describes the types of animals that are permitted.

I would have thought by limiting the type of farm animals, you would be excluding all others, such as pigs, chickens, and, yes, sheep. Last time I looked at the dictionary, bovines were oxen and cows, and of the genus Bos; and sheep are not. Sheep are defined as members of the genus Ovis. If we are to strictly interpret the covenants do we just say that a sheep is not a cow but so what?

The appellate court then said if the intent of the covenants was to limit sheep, it would say so. The court said the developer wanted to maintain a residential subdivision with rural characteristics. Are not horses and cows rural enough? The court could not find any rational reason why bovine animals would be permitted and sheep would not. But since the developer said bovine and not farm animals, don’t you think it was the intent to limit the animals to horses and cows? It seems pretty clear to me that the intent was to keep the sheep off the range.

It is my guess that the judges in their younger years did not spend their time like I did on Saturday morning watching movies of John Wayne, Hopalong Cassidy, Gene Autry, Roy Rogers and all the rest of the heroes of the West bring peace to the range wars between cattle ranchers and sheepherders. There was no place for the sheep on the open plains where they chewed the grass so low to the ground the cattle could not feed. Oh yes, there was a very good reason to keep the cattle men and sheepherders apart as well as their animals as John Wayne well knew.

Dunne v. Shenandoah Homeowners Ass’n, Inc., 12 P.3^rd 340 (Colo.App. 2000)

Notice of Special Meeting - What Goes Inside?

Sometimes unexpected things happen that require the special attention and input of the members of your Association. If a matter pops up that can’t wait until the next annual meeting, a special meeting is in order. When this happens, the question we often are asked by Boards and managers is: What type of notice must we give the members before a special meeting?

]]> Both the Colorado Common Interest Ownership Act (“CCIOA”) as well as the Colorado Revised Nonprofit Corporation Act (“Nonprofit Act”) contain provisions with regard to notices of special meetings of members. CCIOA applies only to Associations created within the state after July 1, 1992. In addition to providing the procedure for calling a special meeting and the time frame for notice of such a meeting (no sooner than 50 days and no later than 10 days), CCIOA requires that notice of a special meeting contain:

the time and place of the meeting
the items on the agenda, including the general nature of any proposed amendment to the declaration or bylaws,
any budget changes, and
any proposal to remove an officer or member of the executive board.

The provision in the Nonprofit Act applies to all incorporated Associations. It provides the procedure for calling a special meeting and the time frame for notice of such a meeting. Additionally, it provides that only business within the purpose or purposes described in the notice of the meeting may be conducted at a special meeting of the members. Therefore, the notice must state with particularity those items that will be voted on or otherwise discussed at the meeting. If not so stated, a member may prevail on a challenge to any action taken at the meeting.

The Board should refer to its governing documents as well as the above referenced statutes with regard to the percentage of members that are required to request a special meeting of the members as well as for the time frame and method with which the notices must be sent to the members. The Bylaws may also contain other requirements for giving notices of special meetings.

Maintaining the Enforceability of Fines in Your Community

The levying of fines against rule-breakers in the community is an effective tactic used by homeowner associations to curb misbehavior and to maintain a harmonious appearance within the community. In order to enforce and collect these fines, however, it is imperative that associations follow proper fining procedures as set out in the Colorado Common Interest Ownership Act (CCIOA), as well as any additional requirements that may be set forth in the Association's governing documents or policies.

]]> CCIOA empowers associations to levy reasonable fines for violations of the declaration, bylaws, and rules and regulations, but only after the homeowner has been given notice and an opportunity to be heard. This means that before the fine can be applied to the homeowner's account, the homeowner must receive notice of the violation and a period of time in which he or she may request a hearing to determine the validity of the fine. A letter indicating merely that a fine has been assessed and that the homeowner may appeal the fine is not compliant with CCIOA. Consequently, fines assessed in that manner cannot be enforced or collected against the homeowner should the matter proceed to trial. Therefore, the preparation of a proper and enforceable fine structure and mechanism is important.

When a violation is made known to the Board, we recommend that the Board deliver a letter to the responsible owner that notifies them of the violation, the potential fine, and their opportunity to a hearing before the Board. The letter should state that the fine will be automatically assessed if the homeowner does not request a hearing within a set time period.

Colorado Foreclosure Law and Your Association's Superlien

As part of the changes to Colorado’s foreclosure law that become effective January 1, 2008, C.R.S. §38-38-103(1)(c) will read:

If a recorded instrument does not specify the address of the party purporting to have an interest in the property under such recorded instrument, the party shall not be entitled to notice and any interest in the property under such instrument shall be extinguished upon the execution and delivery of a deed pursuant to section 38-38-501.

Meaning, if your association’s current contact information is not listed in your Declaration, a lender foreclosure could extinguish your association’s super priority lien.

]]> Arguably, C.R.S. §38-33.3-319, which establishes that the provisions of the Colorado Common Interest Ownership Act (“CCIOA”) shall control in the event of a conflict with other statutes, would allow the statutory lien rights and priorities in section 316 of CCIOA to override this new statute. However, rather than spending the time and money to make that argument in court, your association can take two simple steps now to comply with the new statute and protect the association’s rights.

1. Add the association’s contact address to every Notice of Lien that the association records. Placing the association’s name, along with the address of its management company, on the recorded lien should satisfy the new law. If we are currently filing your association’s Notices of Assessment Liens, we will now include the association’s mailing address on the notices. As foreclosures in Colorado remain prevalent, we recommend that association’s file their lien notices as soon as possible after a homeowner becomes delinquent. This approach may require revising your association’s current collection policy because it may state that the association will wait at least ninety days from the date of delinquency before recording a Notice of Assessment Lien. We can help you evaluate the cost effectiveness of revising your collection policy to protect your association’s interest.

2. Record a Notice of Address that refers to the association’s Declaration and its recording information. Rather than undertaking a costly amendment of your current Declaration, this simple process should protect your rights under the new law. Under C.R.S. § 38-35-108, a Notice of Address, with reference to the Declaration, which is already recorded, puts the lenders on notice of the association’s address, as required by statute, and allows the lender to locate the source of the association’s interest in the property at issue. Associations must record a new Notice of Address every time a change in management companies and/or address occurs. Winzenburg, Leff, Purvis, & Payne can prepare and file the Notice of Address for a flat fee.