When Your Community Doesn't Own Anything, Is It Subject to CCIOA?
Readers of this blog know that CCIOA came into effect on July 1, 1992, but by its definitions, only applied to certain common interest communities, and further, only in limited respects to those communities formed before July 1, 1992. Many legal practitioners held the opinion for many years that CCIOA did not apply to homeowners associations that did not actually own any real property that they were responsible for maintaining, improving, insuring, or paying taxes for.
However, that opinion changed in 2009, when the Colorado Court of appeals issued a ruling that essentially said that CCIOA does not require ownership of real property by the homeowners association. Rather, by the terms of CCIOA, if the owners in the homeowners association were bound to pay assessments, and the assessments were used in part to pay for enforcement of the restrictive covenants or provide services to the members, that was sufficient to make the community subject to CCIOA.
In that case, Hiwan Homeowners Association v. Knotts, the homeowners association did not own any real property. However, the court found that the recording of subdivision plats and restrictive covenants constituted a “declaration” under the provisions of CCIOA. Further, the court, reciting one of the definitions of CCIOA, said that a “common interest community” is one in which an owner of real property, by virtue of his or her ownership, is (1) obligated by a declaration (2) to pay for real estate taxes, maintenance or improvement, or insurance (3) of other real estate. The Hiwan restrictive covenants contained provisions that allowed for enforcement of the restrictive covenants, and that permitted the association to perform certain services for the benefit of properties in the community; specifically, the association hired the Colorado State Forest Service to conduct annual surveys to identify trees that should be removed from owners’ properties. The recommendations from the surveys were sent to residents and included topics such as ways to improve forest health and reduce the risk of wildfire. In addition, the Association paid for community-wide clean-ups. The court determined that these were all maintenance expenditures, designed to keep up and enhance the appearance of the Hiwan community. Therefore, CCIOA applied to the community to the extent that its provisions applied to communities formed before July 1, 1992.
So, if your community does not own its own real property, but nevertheless the declaration creates an obligation for owners to pay mandatory assessments, and the association provides other services that are designed and intended to maintain and improve other real estate (even if that real estate is yours or your neighbor’s property), or the assessment revenue is used to enforce the restrictive covenants, such as by paying attorneys’ fees for assistance in enforcing, you have a community that is subject, at least in part, to the provisions of CCIOA. The specific provisions of CCIOA are beyond the scope of this posting, but this blog contains discussions about many of CCIOA’s requirements.
If you have questions about whether CCIOA applies to your community, please give us a call.