If your association would like assistance with how to comply with new laws affecting common interest community governance, including the preparation of policies that align with the statutory requirements, contact one of our attorneys to discuss your association's specific needs.

It is too early to tell whether, or to what extent, Colorado will adopt either or parts of these acts. Only time will tell. In the mean time, the acts are useful for their scholarly insight into the issues we face everyday in dealing with common interest communities.

Once a judgment has been entered, the association’s attorney must determine the most efficient, timely and economical manner to collect the amount owed. The most common methods of collecting a judgment include requesting a garnishment of a homeowner’s wages (‘continuing writ of garnishment’) or funds being held in their bank/brokerage account(s) (‘bank writ’).

A bank writ is a feasible option if the association can locate identifying bank information from a homeowner, such as a check copy. It is recommended that the association or its management company retain check images or copies from homeowners to ensure that this information is readily available if needed. Once a bank writ is prepared, it is served on the bank (referred to as the garnishee in these proceedings) which then has 10 days to file a response indicating whether there are any funds being held by them on behalf of the homeowner. If so, the funds are immediately “frozen” until such time as the writ is released by the association or ordered by the court. A copy of the writ is then served on the homeowner. If no objection is filed by the homeowner, the bank releases the funds to the court who then disburses the funds to the association.

Another method of collecting on a judgment, if the homeowner’s current employer can be identified, is by serving a Continuing Writ of Garnishment on their employer. Assuming that the homeowner remains employed, up to twenty-five percent of their wages are disbursed to and retained by the association until such time as the association’s judgment is paid in full.

So what happens if a homeowner’s bank information or current place of employment cannot be located? The association can serve Interrogatories on the delinquent homeowners. These are written questions requesting information about the homeowner’s assets, including bank accounts and brokerage/investment accounts, and current place(s) of employment. A homeowner is required to answer the interrogatories completely and under oath within ten days. If the homeowner fails to answer the interrogatories or answers them incompletely, they may subsequently be held in contempt of court which may result in the court assessing fines or even ordering the incarceration of the homeowner.

In some cases, the association may not be able to obtain any information about a homeowner’s assets and/or current place of employment, even after a contempt citation has been issued. As a general rule, it is our recommendation that these accounts not be “written-off”. For a nominal charge, it is recommended that we follow-up on these accounts every four to six months. A follow-up oftentimes results in us discovering the following critical information:

• That the delinquent homeowner is now currently employed enabling us to garnish their wages
• That a previously filed bankruptcy has been discharged or, better yet, dismissed
•  A current, valid address for a homeowner where interrogatories can be served

Although we recommend at least two follow-ups, each collection file should be analyzed on a case by case basis to ensure that a collection matter is being handled as efficiently and economically as possible. The association may also want to consider a receivership or foreclosure as an option to collect the outstanding debt; these remedies will be discussed in future articles. 

While the law is somewhat vague with respect to who is obligated to install the alarm when the circumstances giving rise to the requirement is either remodeling or rental, it does not appear to require associations to be responsible for compliance or assurance of an owner’s compliance. Rather, it appears that the onus is on the unit owner to install the alarm and assure its ongoing maintenance and operation. If the alarm is installed according to the manufacturer’s instructions and the new law, then the owner of the property, his/her authorized agent, person in possession of the property and the installer are immune from liability for damages resulting from operation, maintenance, or effectiveness of the alarm.

If you have other questions about this new law, please feel free to contact us.

In addition to financial protections, the association should diligently protect against board members who have conflicts of interest (i.e., they have a financial or personal interest in the matter in front of the board) from participating in the decision making. The board should obtain multiple bids for all major contracts and check references. Make it a policy to avoid conflicts of interest by not soliciting or accepting bids from board members, their friends or relatives.

Finally, the Colorado Common Interest Ownership Act (“CCIOA”)(which in this case does not apply to all associations, only those formed after July 1, 1992) requires that if an association with thirty or more units delegates powers of collection, deposit, transfer, or disbursement of association funds to other persons or to a managing agent, the bylaws of the association must require, in addition to the separation of accounts as noted above, that the other persons or managing agent maintain fidelity insurance coverage or a bond in an amount not less than fifty thousand dollars or such higher amount as the executive board may require. Generally, the higher amount should represent the amount of funds that are in the association’s accounts (both operating and reserve) together with two or three months’ worth of budgeted assessments. Even if your association is not subject to CCIOA, requiring fidelity insurance coverage on those persons who handle the association’s funds is a good idea.

Even with these steps, there is no guarantee that the association will be protected. However, following these basic steps will significantly reduce the risk of theft, and minimizes the association’s reliance on luck and the trustworthiness of its directors, officers and managers.

If you have other questions about protecting against theft or embezzlement, please feel free to contact us.

1. When the towing is directed by a law enforcement officer;
2. When the towing is requested by the owner, authorized operator, or authorized agent of the owner of the motor vehicle; or
3. When the towing is requested by the property owner.

Thus, an Association may tow an illegally parked vehicle from a private street or common area that it owns (since it is the property owner). However, if the vehicle is parked on a public street, it may not tow the vehicle on its own. This is true even if the vehicle is parked in violation of the Association’s covenants or rules. In this situation, the Association could seek to have the vehicle towed by a local law enforcement officer. However, law enforcement is likely only to direct a tow if the vehicle is in violation of city or county ordinances. If the vehicle is simply in violation of the Association’s covenants or rules, the Association’s recourse is likely through fines (pursuant to its enforcement policy) or a lawsuit seeking injunctive relief (a court order prohibiting the vehicle from being parked in violation of the covenants or rules).

For Associations with private streets or other private parking areas, there are a few additional issues to consider before it begins towing vehicles. First, the Association should review its covenants and rules to make sure that they specifically allow for towing. If not, the Association’s remedy is probably still limited to either fines or litigation (or other remedies provided for in the covenants or rules). If the Association’s rules do allow for towing, it should be sure to follow any notice requirements imposed by State statute, municipal ordinances, or the Association’s covenants or rules. Typically, the Association needs to post some type of warning on the offending vehicle before towing the vehicle. However, there may be exceptions where immediate towing is authorized in cases of emergencies or where vehicles are illegally parked in fire lanes.

One final point to consider is that towing is an extreme remedy that should be undertaken with caution. In most cases the Association will be asserting control over a piece of property worth thousands, or tens of thousands, of dollars. If the Association is mistaken about either (1) its authority to tow, (2) that a covenant or rule has been violated, or (3) that proper notice was given before the tow, it could become liable for any damages incurred by the vehicles owner.    

In sum, how to treat illegally parked vehicles in your community is an important decision. Feel free to contact our office if you have any questions regarding the towing of vehicles or whether your Association has this authority.      

Once again the holiday season is upon us, and that means that many homeowners associations will be hosting parties and putting up lights and other decorations on the common areas. While there is nothing wrong with fully celebrating the holiday season, associations should take care to ensure that decorations and holiday displays do not give the impression that the community favors one particular religion over another. This could subject the association to discrimination claims under the Fair Housing Act (FHA) and other federal and state fair housing laws.

The legislation applies to public pools and spas, leading many common interest community leaders to believe that it does not apply to their communities. However, the legislation defines “public pool and spa” as a swimming pool or spa that is--

(A) open to the public generally, whether for a fee or free of charge;

(B) open exclusively to--

            (i) members of an organization and their guests;

            (ii) residents of a multi-unit apartment building, apartment complex, residential real estate development, or other multi-family residential area

By December 19, 2008 all public pools and spas must be equipped with anti-entrapment devices or systems that comply with certain mandated criteria, and each public pool and spa with a single main drain other than an unblockable drain shall be equipped, at a minimum, with 1 or more of the following devices or systems designed to prevent entrapment by pool or spa drains: (i) a safety vacuum release system which ceases operation of the pump, reverses the circulation flow, or otherwise provides a vacuum release at a suction outlet when a blockage is detected, that has been tested by an independent third party and found to conform to mandated standards; (ii) a suction-limiting vent system with a tamper-resistant atmospheric opening; (iii) gravity drainage system that utilizes a collector tank; (iv) an automatic pump shut-off system; (v) a device or system that disables the drain; or (vi) any other system determined by the Consumer Product Safety Commission to be equally effective as, or better than, the systems described in subclauses (i) through (v) above at preventing or eliminating the risk of injury or death associated with pool drainage systems.

If your Board is unfamiliar with any of these requirements, you should check with your pool maintenance company to assure that your community is in timely compliance or call us to assist you with the requirements.

When Should Your Covenants Be Amended?

At WLPP we don’t believe there is any hard and fast rule as to when your covenants should be amended. In general, we recommend that they be reviewed at least every ten years to make sure that they are up to date with current laws and practice. However, a sooner review may be warranted whenever there are significant changes to Colorado law addressing homeowners associations (for example, Senate Bill 05-100). There may be terms that are no longer applicable to your community, outdated restrictions, or terms that no longer comply with current law. 

Another example would be a restriction that prohibits the placement of political signs on an Owners property. Recent changes to Colorado law make this type of restriction illegal and unenforceable. To avoid confusion by the Board and Owners (and possibly litigation if an uninformed Board tries to enforce this restriction), it is best to amend these types of conflicts with Colorado law.  

Other terms that homeowners associations typically seek to have amended:

• Outdated terms that reference the Declarant. This could include terms that grant the Declarant special rights that have long expired.
• Mandatory Dispute Resolution. Many associations request that we add this requirement to their covenants.
• Easements. Provisions that allow the Board to grant easements over the common elements are often requested.
• Restrictions on Leasing. We get numerous requests for either the addition or deletion of provisions that regulate an Owners right to lease their Unit. Depending on your community, such restrictions may be desirable.

If your covenants are completely outdated (over 20 years old) or were poorly drafted, a complete overhaul may be a good idea. This is typically a lengthy process that will eventually result in a completely new document for the community. In such cases it is best to appoint a committee that is in charge of reviewing the proposed amendment and presenting it to the owners. It is always a good idea to allow the owners as much input as possible into the process. Once an initial draft is approved by the committee, we suggest holding an owner forum where owners can comment on the proposed Amendment and offer additional changes.

How Are Covenants Amended?

For most communities, Colorado law states that covenants can be amended with the affirmative vote or agreement of at least 67 % of the votes in the association. This type of approval can be achieved through a vote at a special meeting, through written approvals obtained via mailing, or through door to door solicitation. Once the requisite number of approvals has been obtained, the amendment should be recorded in the County where Association is located.

Depending on the covenants, approval of the proposed amendment by first mortgagees may also be necessary. If the covenants do not provide a procedure for the registration or notification of first mortgagees, Colorado law provides the following steps to obtain first mortgagee approval: 

1. Send a dated, written notice together with a copy of any proposed amendment via certified mail to each first mortgagee.
2. Cause the dated notice, together with information on how to obtain a copy of the proposed amendment, to be printed at least twice - at least one week apart - in a newspaper of general circulation in the county in which the community is located.

A first mortgagee that does not send a negative response within sixty (60) days after the date of the notice shall be deemed to have approved the proposed amendment.

If an association cannot obtain the necessary percentage of owner approvals, the covenants may also be amended through a court order. To obtain a court ordered amendment, the association must first do the following:

1. Send at least two notices of the proposed amendment to all owners that are entitles to vote on it.
2. Discuss the proposed amendment during at least one meeting of the association.
3. Obtain the approvals of at least fifty percent of the number of owners required to adopt the proposed amendment (if 67% of the owners are required to adopt the amendment, this number would be 33.5%).

Once the Association completes these steps it can then petition the Court to approve the amendment.

I hope this article takes away some of the mystery surrounding covenant amendments. Feel free to contact one of our attorneys if you have any questions regarding the amendment of your association’s covenants.

In order to conduct the public sale of the property, the lender must obtain a court order authorizing the sale. This is done by way of a Rule 120 Motion in court. Without going into detail, a Rule 120 Hearing is scheduled to determine if,in fact, there is a default in a payment under the mortgage and whether the proper notice is served under the Service Member Civil Relief Act. The procedure can be stopped by the owner of the property or another person who has personal liability for payment of the mortgage by filing an injunctive proceeding in a separate court action. If a separate injunctive proceeding is filed, the public trustee sale process is stopped.

If the necessary court order is obtained, and the public trustee sale occurs, at the sale the lender or a successful bidder receives a certificate of purchase, but not title to the property. Following the sale, if statutory notices are timely filed, lien holders who were junior to the mortgage (which may include the homeowners association) have the right to redeem from the sale by paying the amount bid at the sale plus any additional amounts that have come due since the sale. The junior lien holder having the most senior recorded lien can redeem the property no earlier than 15 business daysnor more than 19 business days after the sale. Each subsequent lien holder has an additional 5 business daysto redeem.

At the expiration of all redemption periods, if there has been no redemption, title transfers to the lender. If there is a redemption by a junior lien holder, then title transfers to the redeeming party. The original owner is no longer responsible for payment of assessments that come due once title vests in the foreclosing lender or redeeming party. The lender or the redeeming party, whether or not they apply for an actual deed, becomes liable, however, for all assessments that come due commencing with the date they take title.

Unless the association elects to redeem from the foreclosure, the foreclosure eliminates the association’s lien for unpaid assessments with the exception of six months’ worth of budgeted assessments which are entitled to “superlien” status; that is, they have a priority superior to the lender’s mortgage, and therefore, cannot be eliminated as part of the foreclosure. In addition to regular assessments that become due commencing with the transfer of title through foreclosure, upon the future resale of the property the superlien amounts must be paid to convey clear title.

The amount of assessments coming due through the date the lender or redeeming party takes title to the property remains the personal obligation of the foreclosed owner. The association will need to evaluate whether it should pursue that owner for the amounts owed.

If your association would like to update its collection policy to address foreclosure issues, or other matters relating to delinquent accounts, please contact one of our attorneys, or our Client Relations Representative, Kate Ellis, at kellis@wlpplaw.com for assistance.

The question posed to me by the reporter was whether we are witnessing more conflict between community associations and their members. My complete response was along the lines that, yes, we seemed to be witnessing more conflict, although, I’m not sure that it is necessarily reflected in the number of lawsuits being filed. A number of the conflicts are resolved before they reach the level where legal action is taken, maybe because their boards and the members are able to resolve the problem by way of compromise. However, it is also possible that the problems are not resolved at all, leaving only unsettled discord within the community, division of the members into opposing camps, efforts to recall the board or division of the board into opposing camps. The net result of these problems is a dysfunctional board, or a dysfunctional community. So, it begs the question, is there a way to resolve problems before they lead to dysfunction?

While, in the future, we may explore other means of dispute resolution, as well as thoughts on how to avoid disputes, today I want to limit this post to the very narrow topic of one of the first steps in resolving disputes - understanding the source of the dispute from the perspective of both the homeowner and the community association. In any type of negotiation, it is important to understand the other side’s position – put yourself in their shoes, so to speak. With the current economic climate, board members of community associations need to understand the financial challenges that might be facing their members, including the loss of jobs and the prospect of foreclosure or bankruptcy. When faced with these problems, homeowners are going to find it extremely difficult not only paying their assessments, but also spending money to maintain their property, leading to complaints from the Association or even their neighbors.

From the opposite perspective, homeowners need to understand that the Association’s expenses have also increased in the same manner that the individual homeowner’s expenses have increased, making it more difficult for the Association to do its job. Further, if fewer homeowners pay their assessments, the Association is faced with having to carry out its responsibilities (costing more), but with less money. Somewhere, something has to give, and often what gives, is that homeowners receive fewer, or lesser quality, services, leading to their complaints about what they really get from their Association.

Lack of communication seems such an overused, trite explanation for many problems. However, it truly can be a significant cause of disputes, and effective communication can be one of the first steps to dispute resolution. Once homeowners and associations each understand the other’s challenges and problems, there is at least a foundation for further discussion to determine if a common ground can be reached. Without communication, most assuredly common ground will not be reached, both parties become entrenched in their positions, lawyers get involved, and the stakes increase. So, the lesson of this post, if there is one, is that, if there is to be effective dispute resolution short of legal action, the association and the homeowners should make every effort to understand each other’s position before moving in an irreversible direction. Legal action rarely achieves harmony within a community.

The Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy, if a proof of claim has been filed by the association, the debtor is required to repay the amount owed the association at the time of the filing of the bankruptcy petition, usually over a period of three to five years. The debtor will further be required to make his or her monthly assessment payments to the association on a timely basis. While the bankruptcy is pending, the association should be receiving two payments: (1) an installment payment from the bankruptcy trustee for the pre-bankruptcy arrearages and (2) a payment from the debtor for the monthly assessment. It is, therefore, helpful for an association to maintain two ledgers, one containing the amount of the debt owed prior to the filing of the bankruptcy and, another, setting forth all assessments coming due following the bankruptcy.

If a debtor fails to make a payment in any given month, the association’s attorney can request that the trustee move to dismiss the bankruptcy or request relief from the automatic stay, thereby permitting the association to proceed against the owner or commence a judicial foreclosure notwithstanding the bankruptcy. This is a very powerful tool since it often results in the debtor bringing his/her assessment payments current to avoid the dismissal of the bankruptcy and one which ensures that the association is paid in full at the conclusion of the Chapter 13 bankruptcy. 

Although it may be a source of inconvenience for associations or managers, maintaining separate ledgers enables us to quickly and accurately identify the source(s) of non-payment and take prompt legal action to cause the debtor to remedy the default. 

The Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy, if a discharge is granted to a debtor, all amounts owed to the association on the date of filing of the Chapter 7 bankruptcy must be “written-off” as the personal obligation of the homeowner. However, the association still has a statutory lien for pre-petition amounts owed and all amounts coming due after the filing of the Chapter 7 petition. It is recommended that the association maintain a separate ledger containing the amounts owed prior to the filing of the bankruptcy. This will ensure that all collection efforts by the association, its manager or attorney properly account for the personal obligation of an owner and the amount which is solely secured by the association’s lien.

How about that Lien?

Following the discharge of a debtor in a Chapter 7 bankruptcy, we are often requested to provide an opinion on whether the association should maintain its lien for pre-bankruptcy assessments. Our answer, unequivocally, is that the association should maintain its lien until it has been paid in full or extinguished by a public trustee foreclosure or tax sale. The association should, of course, continue accounting for the lien on a separate ledger to assist with collecting the full amount owed.

Some compelling reasons for maintaining the lien are as follows:

• The owner may attempt in the future to sell his/her unit or obtain the refinancing of a mortgage.

• The amount secured by the lien may be utilized as additional leverage by an association when attempting to negotiate a short sale.

• The unit may, in the future, increase in value, providing a sufficient “equity cushion” to permit the association to initiate a foreclosure to collect the amounts secured by the lien.

• The owner may become solvent and commence paying their monthly assessments. If the association’s collection policy so permits, once a bankruptcy has been discharged or dismissed, payments may first be applied towards the prior arrearages secured by the lien and finally towards the personal obligation of the owner.

 If your association would like to update its collection policy to address bankruptcy issues, or other matters relating to delinquent accounts, please contact one of our attorneys, or our Client Relations Representative, Kate Ellis, at kellis@wlpplaw.com for assistance.

Until the parties are divorced and the deed to the property is transferred by sale to a third party or transferred to one of the divorcing parties as part of the property division –either voluntarily or by court order - both husband and wife are responsible for payment of the assessments.

If during the divorce proceedings, the court  grants the wife temporary use of the family home until the final divorce hearing and requires the wife shall make all payments associated with the property, the husband and wife are still jointly responsible for the assessment payments. The wife is obligated by the court to make the payments associated with the property, but the husband as a titled co-owner of the property is still jointly liable with the wife for the assessments.

The Association under its governing documents has the right to pursue both parties, notwithstanding the divorce court’s temporary orders requiring the wife to pay the assessments. The Court only has jurisdiction over the parties, the husband and wife. It does not have jurisdiction or the authority to tell the Association it can not seek its legal rights against both the husband for non-payment of the assessments. 

The husband’s recourse, for the failure of the wife to make the assessment payments, is in the divorce court. The divorce court can hold the wife in contempt if she willfully violates its orders by not making the assessment payments. But, the court can not relieve the husband’s obligation to the Association to make the payments if the wife does not.    

The parties get divorced. The court awards the property to the wife as part of the property settlement. The husband is ordered to quitclaim all his right, title and interest in the house to the wife. The wife is ordered hold the husband free and harmless against any claims made arising out of her failure to make the payments relative to the property.  

The husband signs a quitclaim deed granting all his interest in the property to the wife as ordered by the Court and records the quitclaim deed with the clerk and recorder of the county where the property is located.  From the moment of recording, the property is transferred from the husband to the wife. The husband is now no longer obligated to the Association for assessments.  From this point forward the wife is solely responsible to the Association for the assessment payments. 

If there is an obligation for payments outstanding prior to the transfer, both husband and wife are jointly responsible even though the wife was previously ordered to pay the assessments and the property has been transferred. The recording of the deed does not absolve the husband from the responsibility for the prior debt. The Association can seek unpaid assessments from both husband and wife for unpaid assessments prior to the recording of the deed, and from the wife for post-recording obligations.

In the scenario where the husband fails to sign and record the quitclaim deed, he is still jointly responsible for all assessments that go unpaid by the wife. Yes the divorce court awarded the property to the wife, and said she had to make all the payments, but remember, pursuant to the governing documents, the husband is still an owner until the property is transferred to the wife. It is the husband’s responsibility to make sure the proper documents are recorded. And if he does not the Association can still seek recovery now from both the ex-husband and ex-wife. “I didn’t know” or “no one told me” is not a proper defense to an action by the Association against the ex-husband  to collect unpaid assessments where the ex-husband fails to record a deed transferring ownership to the ex-wife as ordered by the court.

Once the ex-husband records the deed to the ex-wife per the court order, from that point he is freed from the obligation. But if he waits a month, a year, two years, or more, he will be jointly obligated to the Association along with the ex-wife; and if he is more accessible for collection, more assets, the Association may ignore the ex-wife and go after the ex-husband to satisfy the amounts due, including late fees, interest and attorney fees.

To simply summarize, both parties jointly owning property in a divorce situation are jointly responsible for the assessments until the property changes hands by the proper recording of a deed transferring ownership from one to the other per the final property division, or selling the property to third parties.   The Association is not barred by the court’s orders. It can pursue both parties for the unpaid assessments, dues, fines, late fees, interest, and attorney fees even though the court ordered only one of the parties to be responsible for the payments.

The next column will discuss responsibilities and liabilities involved in a foreclosure proceeding. 

THIS ARTICLE IS PRESENTED AS INFORMATIONAL ONLY. IT IS NOT INTENDED TO SUBSTITUTE FOR LEGAL ADVICE. 

The Colorado Clean Indoor Air Act took effect nearly two years ago, on July 1, 2006. The Clean Indoor Air Act applies to community associations and prohibits smoking in restrooms, hallways, lobbies and other common areas in any public or private buildings, including condominium buildings, and within a fifteen foot radius of building entryways.  The law does not prevent owners from smoking in their residences, and does not clearly restrict smoking on private patios or balconies, although some associations impose more stringent smoking restrictions through their recorded covenants or rules.  Colorado community associations, and individuals, in violation of the Clean Indoor Air Act may face fines.  The law establishes a fine schedule of $200 for the first violation, $300 for the second, and $500 for the third and subsequent violations.

If your community association needs assistance with Clean Indoor Air Act compliance, contact one of our attorneys to discuss available options.