Colorado Homeowners Association Law Blog http://www.cohoalaw.com/ en-us Copyright 2010 Tue, 19 Jan 2010 15:38:33 -0700 Tue, 19 Jan 2010 15:45:32 -0700 http://www.movabletype.org/?v=3.34 http://blogs.law.harvard.edu/tech/rss New Lending Rules Continued - HUD Requirements You will remember from a recent posting that we discussed the new Fannie Mae guidelines, and the anticipated HUD regulations. As noted,  HUD did in fact adopt new temporary regulations that went into effect on December 7, 2009, and remain effective until December 31, 2010, at which time the new permanent HUD regulations will become effective. The new HUD temporary regulations are found in HUD Mortgagee Letter 2009-46 A, and can be found at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09_46aml.pdf. The new HUD permanent regulations are found in HUD Mortgagee Letter 2009-46 B, and can be found at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09_46bml.pdf. It is important to note that condominium projects under developer control and under construction or being converted have different standards. This posting does not address those standards.

]]> First, we will address the permanent regulations that become effective after December 31, 2010, as the temporary regulations embody those regulations with certain requirements being relaxed. The following requirements apply to all condominiums (consisting of 2 or more units) to be eligible for HUD financing:

•          At least 50% of the units of a project must be owner-occupied or sold to owners who intend to occupy the units.

•          No more than 10% of the units may be owned by one investor.

•          Projects must be covered by hazard and liability insurance and, when applicable, flood and fidelity insurance.

•          No more than 15% of the total units can be in arrears by more than 30 days in payment of their assessments.

•          No more than 25% of the property’s total floor area in a project can be used for commercial purposes. The commercial portion of the project must be of a nature that is homogeneous with residential use, which is free of adverse conditions to the occupants of the individual condominium units.

•          Budget Review — Lenders must review the Association’s annual budget and determine that the budget is adequate, and includes allocations to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project; provides for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10% of the budget; and provides adequate funding for insurance coverage and deductibles.

•          In cases where the budget documents do not meet these standards, the Lender may request a reserve study to assess the financial stability of the project. The reserve study cannot be more than 12 months old.

•          Projects of 3 units or less will have no more than one unit with mortgage insured by FHA.

•          Projects of 4 units or more will have no more than 30 percent of total units with mortgages insured by FHA.

In addition, project approval must be obtained every 2 years; in addition to other requirements, consideration will be given to: (1) pending special assessments; (2) pending legal action against the association or directors or officers; and (3) adequate insurance requirements being met.

Under the temporary regulations, the following restrictions apply:

•          Project concentration of FHA insured loans temporarily increased to 50% (from 30%), and under certain conditions can be increased to 100%.

•          Owner occupancy ratios are still 50% that must be owner-occupied or sold to owners who intend to occupy the units. However, vacant or tenant-occupied real estate owned, including properties that are bank owned may be excluded from the calculation of the required owner-occupancy percentage.

As noted previously, there are other requirements as well. However, these are the provisions that, in our experience, have the potential to most significantly affect an existing condominium community. Associations will need to make sure that they comply with these requirements, and that their governing documents address them, so as to maximize owners’ ability to sell their homes. Please call us if you need assistance in gaining compliance with the Fannie Mae guidelines or HUD regulations.

]]> http://www.cohoalaw.com/governance-new-lending-rules-continued-hud-requirements.html http://www.cohoalaw.com/governance-new-lending-rules-continued-hud-requirements.html Governance Money Matters Off the Top Your Governing Documents Tue, 19 Jan 2010 15:38:33 -0700 mpayne@wlpplaw.com (Mark K. Payne) New Lending Rules - Fannie Mae and HUD The fallout from our current economic crisis is hitting all of us, sometimes in ways we least expect. While many homeowners are struggling to hold onto their homes, many are faced with the prospect of having to sell. In the present economy, that is difficult enough. However, for those whose homes are condominiums, Fannie Mae has implemented new guidelines that can make it more difficult than previously to complete a sale. HUD has adopted similar new temporary regulations which went into effect on December 7, 2009 and remain effective until December 31. 2010, at which time more restrictive permanent regulations become effective.

]]> Why is this a concern? Historically, Fannie Mae and Freddie Mac (which tends to follow Fannie Mae closely) own or guaranty over 50% of the country’s outstanding first mortgages. HUD insures another significant amount. If condominium communities don’t follow the new guidelines or regulations, their units will not be eligible for Fannie Mae underwritten or HUD insured loans. Imagine the difficulty in selling condominium units when the only financing available comes from sources that are not connected to Fannie Mae or HUD.

This bulletin only addresses the new Fannie Mae guidelines. Next month we’ll discuss the new HUD regulations.

Some of the more significant requirements for a condominium community to obtain Fannie Mae approval include:

  • Insurance must cover 100% of the insurable replacement cost of the project improvements, including the individual units in a condo project.
  • No more than 20% of the total square footage of the project can be used for nonresidential/commercial purposes.
  • No more than 15% of the total units in a project may be 30 days or more past due on their association dues.
  • At least 51% of the total units in the project must have been conveyed or be under a bona fide contract for purchase to owner-occupant principal residence or second home purchasers.
  • Lenders must review the homeowners’ association projected budget to determine that: (1) it is adequate (i.e., it includes allocations for line items pertinent to the type of condo); (2) it provides for the funding of replacement reserves for capital expenditures and deferred maintenance at least 10% of the budget; (3) and it provides adequate funding for insurance deductible amounts.
  • No single entity—the same individual, investor group, partnership, or corporation other than the developer during the initial marketing period—may own more than 10% of the total units in the project.

There are other requirements as well. However, these are the provisions that, in our experience, have the potential to most significantly affect an existing condominium community. Associations will need to make sure that they comply with these requirements, and that their governing documents address them, so as to maximize owners’ ability to sell their homes.

If you have questions about whether your association's governing documents satisfy Fannie Mae guidelines, please give us a call.

]]> http://www.cohoalaw.com/governance-new-lending-rules-fannie-mae-and-hud.html http://www.cohoalaw.com/governance-new-lending-rules-fannie-mae-and-hud.html Governance Money Matters Off the Top Your Governing Documents Tue, 08 Dec 2009 16:11:15 -0700 mpayne@wlpplaw.com (Mark K. Payne) When Can a Homeowner Be Joined as an Indispensable Party In a recently reported appellate court case, Clubhouse at Fairway Pines v. Fairway Pines Estates Owners, 214 P.3d 451 (Colo. App. 2008) the appellate court based on prior court holdings stated that joinder of an indispensable party can be raised for the first time on appeal. The appellate court pointed out a decision in the Colorado Supreme Court that held, “….a court of appeals should, on its own initiative, take steps to protect the absent party, [by ordering joinder of the unnamed party] who of course had no opportunity to plead his interest below [in the trial court]” (cite omitted) at p. 455. The Court of Appeals then reasoned, that if the Court could on its own initiative protect the interest of an absent party, then there should be no reason a party should be foreclosed from raising the same issue on appeal. 

Colorado Rules of Civil Procedure, Rule 19, Joinder of Persons Needed for Just Adjudication, provides for the addition of parties who are necessary for a complete adjudication of all issues. This column does not answer the question of who is an indispensable party necessary for joinder in a lawsuit. The intent is to discuss the timing of when homeowners can be added as indispensable parties during pending litigation. The case cited below does talk about homeowners as indispensable parties, but it does not focus on the factors that make the owners indispensable to the litigation. In fact the law on whether homeowners are necessary parties in homeowner association litigation has the possibility of being radically revised as the Supreme Court has granted review of the case discussed below. 

]]> The Association in this case was allowed to move for joinder after the trial, because it was determined that the Association was seeking to protect the absent owners and not itself against possible future claims; and the Association as the defendant did not chose the parties to the action.

As implied above, not every party to the litigation can successfully argue the need to join an indispensable party after the judgment in the trial court or even during the course of the trial. The purpose of allowing joinder of parties is to protect the interest of the absent party. Where a party is only moving for joinder to protect his/her own self –interest, and not the interest of the alleged indispensable party, the Court can deny the request as a waiver by the party raising the issue. 

The appeals court cited a case for the above proposition where the issue was raised after entry of the judgment and six years of litigation. It held that the rule, C.R.C.P. Rule 12(h) Waiver or Presentation of Certain Defenses, “…does not mean that a party with information to make a motion for joinder can sit back and raise the issue at any time when the only effect would be to protect himself,” at p. 454.

 

In a second cited case a tenant in a landlord –tenant lawsuit waited until the end of the trial and then requested that the landlord only be awarded half the damages because his wife, a co-owner of the property, was an indispensable party and was not a party to the lawsuit. The trial court rejected the tenant’s assertion because he had the opportunity to insist upon joinder of the party from the beginning and failed to do so. The tenant was only raising it for his protection and not the alleged “indispensable party” at p. 455. The court was not going to let the tenant game the process by sitting back and doing nothing in hopes if not defeating the landlord, minimizing his damages.

 

If a party becomes aware that there are others out there who are “indispensable” for full relief, he/she can raise the issue at any time during the proceeding – if the joinder is for the protection of the absent party(ies) and not for the sole purpose of serving the moving party’s self-interest. Alternatively, if the party becomes aware of a necessary party to be named to protect him or herself, he/she should move as quickly as possible in bring that party into the case or lose the right, and suffer the resulting harm of being sued multiple times for the same matter.

 

The Clubhouse case was decided August 7, 2008. The Colorado Supreme Court granted certiorari August 31, 2009. The issues the Supreme Court agreed to review have the possibility of making significant changes in the law regarding joinder of homeowners. As certiorari has only been recently granted a decision on the issues is probably a year down the road.

 

The issues the Supreme Court is looking to review are:

 

Whether the court of appeals incorrectly concluded that the defendant [the Association] did not waive its right to raise the need for indispensable parties by failing to raise the issue in a timely manner.

 

Whether the court of appeals decision is not in accord with the Colorado Common Interest Ownership Act; e.g. section 38-33.3-311, CRS.

 

Whether the court of appeals incorrectly concluded that the interests of the homeowners were not adequately represented.

 

Whether the court of appeals decision that lot owners are indispensable parties is contrary to public policy, unduly chilling the rights of litigants and rendering cases excessively cost prohibitive.

]]> http://www.cohoalaw.com/what-the-courts-say-when-can-a-homeowner-be-joined-as-an-indispensable-party.html http://www.cohoalaw.com/what-the-courts-say-when-can-a-homeowner-be-joined-as-an-indispensable-party.html What the Courts Say Thu, 22 Oct 2009 15:43:28 -0700 lbleff@wlpplaw.com (Lawrence B. Leff) Duties of Volunteer Directors - What Do They Want From Us? But we are all just volunteers! We all have regular jobs to do too! They can’t expect us to do everything!

We are surprised by the number of times that we’ve heard these statements from board members when they are being challenged for actions they’ve taken, or decisions they’ve made. However, Colorado law does not make any explicit distinction between board members who are volunteers as compared to board members who receive compensation for serving on the board (such as for other types of non-profit corporations).

]]> Generally, courts in Colorado state that the association’s board has a fiduciary duty to the association and its members. A fiduciary duty means the board has a duty to act in the best interests of the association, with utmost loyalty, in good faith, and with reasonable skill. The Colorado Revised Nonprofit Corporation Act (“Nonprofit Act”) has codified this duty as follows:

Each director shall discharge the director’s duties as a director, including the director’s duties as a member of a committee of the board, and each officer with discretionary authority shall discharge the officer’s duties under that authority:

            (a) In good faith;

            (b) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

            (c) In a manner the director or officer reasonably believes to be in the best interests of the nonprofit corporation.

 

However, the Colorado Common Interest Ownership Act (“CCIOA”) provides that, for associations that are subject to its provisions, if not appointed by the declarant, no member of the board and no officer is liable for actions taken or omissions made in the performance of such member’s duties except for wanton and willful acts or omissions. This is a significantly lower standard than a fiduciary duty, and ought to give some measure of relief to board members of communities that were formed under, and are subject to the provisions of CCIOA. Unfortunately, there are no court decisions interpreting this provision, and some courts continue to speak in terms of fiduciary duties of board members even where the community is subject to CCIOA.

In interpreting the validity of certain actions of homeowners association boards, Colorado courts have also recognized what is commonly termed the “business judgment rule.” The business judgment rule was first enunciated with respect to a homeowners association in Colorado in the case of Rywalt v. Writer Corp., a 1974 Colorado Court of Appeals’ decision. In that case, the court said:

The good faith acts of directors of profit or non-profit corporations which are within the powers of the corporation and within the exercise of an honest business judgment are valid. Courts will not, at the instance of stockholders or otherwise, interfere with or regulate the conduct of the directors in the reasonable and honest exercise of their judgment and duties.

In addition to the protections afforded by the business judgment rule, the Nonprofit Act also provides additional protection to board members who rely on advice or information provided by others if certain criteria are met. It provides:

In discharging duties, a director or officer is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:

                                    *                                  *                                  *

            (b) Legal counsel, a public accountant, or another person as to matters the director or officer reasonably believes are within such person’s professional or expert competence;

                                    *                                  *                                  *

A director or officer is not acting in good faith if the director or officer has knowledge concerning the matter in question that makes reliance otherwise permitted.

A director or officer is not liable as such to the nonprofit corporation or its members for any action taken or omitted to be taken as a director or officer, as the case may be, if, in connection with such action or omission, the director or officer performed the duties of the position in compliance with this section.

Therefore, board members need to make sure that they are acting:

  • In good faith;
  • In the best interests of the association;
  • In a reasonably prudent manner;
  • In the exercise of honest business judgment; and
  • In reliance on the opinions, advice and information of experts.

If these standards are met, then board members will continue to serve without pay and in their free time, but at least knowing that they have protected themselves to the extent they are able from liability to ungrateful homeowners.

 

]]> http://www.cohoalaw.com/governance-duties-of-volunteer-directors-what-do-they-want-from-us.html http://www.cohoalaw.com/governance-duties-of-volunteer-directors-what-do-they-want-from-us.html Governance Sun, 04 Oct 2009 21:24:47 -0700 mpayne@wlpplaw.com (Mark K. Payne) The Importance of Signed and Recorded Covenants The Colorado Court of Appeals, in the recent court decision of Abril Meadows Homeowner’s Association v. Castro, 211 P.3d 64 (Colo. App. 2009), ruled that an association whose declaration of covenants was unsigned did not have the right to enforce its covenants against its homeowners.

]]> The association sued two homeowners to foreclose a lien for unpaid covenant violation fines which exceeded $100,000. At trial, the homeowners argued that the declaration of covenants was invalid since it was never signed by the developer. The trial court found in favor of the association, however, the homeowners took an appeal.

The appellate court reversed the trial court’s decision and found in favor of the homeowners.  The court stated that the association could not prevail since the declaration of covenants was required to be signed and executed in the same manner as a deed.  The court further rejected the argument that the association’s signed and recorded property plat was sufficient, since it did not specifically incorporate the terms of the declaration or state that the property was subject to the covenants.

The court’s decision underlines the importance of verifying that the association’s covenants are properly signed and recorded in the public records.

]]> http://www.cohoalaw.com/what-the-courts-say-the-importance-of-signed-and-recorded-covenants.html http://www.cohoalaw.com/what-the-courts-say-the-importance-of-signed-and-recorded-covenants.html Covenant Enforcement What the Courts Say Your Governing Documents Tue, 08 Sep 2009 08:58:02 -0700 sdupont@wlpplaw.com (Stephane Dupont) Receiverships: An Effective Collection Option Sometimes, when circumstances prevent collecting delinquent assessments from owners by more traditional methods, a receivership may assist the association in getting paid. Further, even if other collection options are available, a receivership may help you receive your assessments more quickly.

A receivership is started by filing a lawsuit in County or District court. Unlike other lawsuits, the court will normally grant our request for a receivership and appoint a receiver without first scheduling and conducting a trial or court hearing.

A receiver is an independent third party, unrelated to the Association or the homeowner, appointed by a court to take over possession and control of the property. In legal parlance, the receiver is an officer of the court, and answers to the court. However, being an officer of the court does not mean that the receiver is part of the court system. Typically, a receiver is a person who has experience in managing and operating real property, oftentimes a real estate broker.

The receiver, once appointed, will make reasonable efforts to rent the property. It is possible that the property can only be made habitable following the completion of repairs. Oftentimes, it is not possible to determine whether repairs are necessary until after a receiver has been appointed and has accessed the inside of the property to determine its condition.

Once the property is made habitable, a receiver is normally able to locate a tenant quickly by setting rent slightly below the average market value in the area. If the property is already rented when the receiver takes possession, the receiver is typically able to collect rent from the existing tenant in the property that would otherwise have been paid to the owner.

Once rented, the monies collected are applied as follows: first to pay or reimburse the receiver for his fees; second to reimburse the receiver for any costs in getting the property in habitable condition; third to reimburse the association for attorneys fees and costs in having the receiver appointed; finally, to the association to pay delinquent assessments, late charges, interest and other fees.

The association is still responsible for payment of the receiver’s fees, attorneys fees and costs and other expenses incurred in the event that: (a) the receiver is unable to rent the property; (b) a homeowner occupies the property prior to the receiver finding a suitable tenant; or (c) the association does not want to pay for repairs to make a property habitable.

Factors to consider before having a receiver appointed include the following:

  • whether the property is vacant or occupied by a non-homeowner
  • the condition of the property
  • the amount owed to the association
  • whether one or more of the homeowners have filed for bankruptcy
  • the cost of appointing the receiver, including the receiver’s fees, attorneys fees and costs;
  • whether the court will require service of process on the owner before appointing the receiver, and how difficult it will be to obtain service of process;
  • whether the receiver will need to incur any expenses to make the property habitable;
  • the amount of rent that the receiver thinks the property can be leased for, usually on a short term basis; and
  • whether the property is currently in foreclosure by the first mortgage holder - many times, if the property is in foreclosure, the amount of rent that a receiver can collect over the short period of time that the receiver can rent the property will not be enough to offset the cost of having the receiver appointed.

If your association would like to commence a receivership lawsuit or you have any additional questions related to the receivership process, please contact one of our attorneys.

]]> http://www.cohoalaw.com/money-matters-receiverships-an-effective-collection-option.html http://www.cohoalaw.com/money-matters-receiverships-an-effective-collection-option.html Money Matters Mon, 31 Aug 2009 09:50:13 -0700 sdupont@wlpplaw.com (Stephane Dupont) Rain, Rain, Go Away -- All this damage ... who will pay? With record rainfalls this season, Colorado community associations and managers have stayed busy responding to reports of water intrusion and hail damage. After the immediate excitement subsides, our phones start ringing. Managers and board members typically ask us some variation of the following questions about insurance:

Is the association or the owner responsible for insurance coverage? This question often arises in the context of condominium and townhome communities, and the answer depends on what the governing documents and controlling statutory provisions say. Often, the documents do not give clear guidance on which party bears the burden for insuring specific components, hence the call to the attorneys. The answers sometimes come as a surprise to uneducated owners and even association boards.

We recommend that associations evaluate insurance obligations with legal counsel and their insurance professionals to ensure proper coverage and to enable clear communication with owners about what coverage applies. Through the preparation of insurance and maintenance charts that summarize association and owner obligations, and the adoption of insurance guidelines that state insurance coverage responsibilities and provide step-by-step procedures for reporting and handling claims, associations can proactively educate owners and reduce confusion when losses occur.

]]> Who pays the deductible? Under certain circumstances, associations can allocate insurance deductibles to owners. We recommend that associations include insurance deductible provisions in comprehensive insurance guidelines. Associations should adopt insurance guidelines before a loss occurs to assist owners in understanding their obligations and to minimize disputes over the deductible. Associations that do not have such policies in place will need to rely on the recorded covenants and bylaws, and applicable sections of the Colorado Common Interest Ownership Act (CCIOA), to assist in determining the responsible party.

Can an owner file a claim on the association’s insurance policy? Colorado statutes clearly state that the subject matter of a potential claim must fall within the association’s insurance responsibilities before an owner may make a claim on the association’s policy.  However, subject to statutory procedures, owners can submit claims to an association’s carrier if the subject matter of the claim falls within the association’s insurance responsibilities.  In general, if the association’s insurance responsibilities cover the potential claim, an owner may make a claim on an association insurance policy as long as the owner first notifies the board in writing of the potential claim, follows any applicable policies of the association for adjustment of claims, and gives the association at least fifteen days to respond in writing and inspect the damage, if requested. The potential for owners to file claims on association insurance policies underscores the importance of associations adopting insurance guidelines that state procedures for adjusting claims.

Our office offers fixed fee pricing for insurance and maintenance charts and insurance guidelines that assist your association in addressing insurance questions. Please contact one of our attorneys with any questions or for applicable pricing. In addition, we are offering a lunch seminar about insurance issues on October 13, 2009. If you are interested in attending, please contact Kate Davis at kdavis@wlpplaw.com or (303) 863-1870. Seating is limited for the lunch seminar, so respond early to secure your place at this session.
 

]]> http://www.cohoalaw.com/covenant-enforcement-rain-rain-go-away-all-this-damage-who-will-pay.html http://www.cohoalaw.com/covenant-enforcement-rain-rain-go-away-all-this-damage-who-will-pay.html Covenant Enforcement Governance Money Matters Your Governing Documents Fri, 21 Aug 2009 11:30:31 -0700 sleff@wlpplaw.com (Suzanne M. Leff) H.B. 09-1359 http://www.cohoalaw.com/links-hb-091359.html http://www.cohoalaw.com/links-hb-091359.html Links Tue, 07 Jul 2009 22:47:55 -0700 mpayne@wlpplaw.com (Mark K. Payne) New Laws Affect Association Governance The 2009 legislative session began with relatively few bills affecting Colorado common interest communities. But the last few weeks of the session more than made up for the slow start. New laws concerning community association governance do the following: (i) mandate that association boards have access to extensive, specific information to assist with their decision-making, (ii) establish qualifications for individuals serving as committee chairs, and (iii) require policies concerning reserve programs. Other laws enacted but not discussed in this article include restrictions on affordable housing units, modifications to foreclosure time frames for some borrowers, and changes to provisions of the Colorado Common Interest Ownership Act applicable to small, exempt communities. The table below gives a summary of the new laws affecting association governance, the action required by associations, and the effective dates of the laws.

]]>  

Summary Action Required Effective Date
Board members must have equal access to information, including detailed monthly expenditures, association contracts, and legal opinions Ensure that the association's documents include all of the materials required by statute and make those documents available to board members; consider amending association documents to prevent board members with disputes against the association from having access to legal opinions August 5, 2009
States the applicable guidelines for appointment of people presiding over association committees; makes committee chairpeople subject to the same qualifications as required by the governing documents for executive board members Review the association's governing documents to determine what qualifications apply to board members; check to make sure committee chairpeople meet the qualifications stated in the documents; appoint new committee chairpeople if necessary

August 5, 2009, for the appointment guidelines

August 15, 2009, for meeting executive board qualifications
Requires the adoption of an additional responsible governance policy that addresses the association's schedule for reserve studies, identifies whether a reserve funding program exists, and states the basis for the reserve study Adopt a policy concerning the association's reserve program; consult with legal counsel on what the association's documents require and how to draft this policy to comply with the law's requirements

August 5, 2009, for CCIOA communities

July 1, 2010, for pre-CCIOA communities

 

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.

]]> http://www.cohoalaw.com/from-capitol-hilllegislation-new-laws-affect-association-governance.html http://www.cohoalaw.com/from-capitol-hilllegislation-new-laws-affect-association-governance.html From Capitol Hill/Legislation Governance Your Governing Documents Mon, 15 Jun 2009 11:27:23 -0700 sleff@wlpplaw.com (Suzanne M. Leff) UCIOA 2008 and UCIOBORA For those of you who have an interest in the evolution and development of the Uniform Common Interest Ownership Act, the American Bar Association House of Delegates recently adopted the 2008 Uniform Common Interest Ownership Act as proposed by the Uniform Law Commission. This new act is an attempt to integrate, address and resolve a number of issues that have been raised in the formation, operation and management of common interest communities in the last thirty years. But, be mindful that this is only a recommended uniform act – it is not the law in Colorado (and may never be), nor any other state at this time. However, it does provide some guidance and insight into the rationale behind various provisions that we are all familiar with in the Colorado Common Interest Ownership Act ("CCIOA").

]]> In conjunction with, and as part of 2008 UCIOA, the ULC also adopted the Uniform Common Interest Owners Bill of Rights Act (UCIOBORA). It also adopted UCIOBORA as a stand alone act. Again, this act is only a model act, and is not the law in any state at this time. Nevertheless, you will recognize similarities between its provisions and recent revisions to CCIOA.

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.

]]> http://www.cohoalaw.com/from-capitol-hilllegislation-ucioa-2008-and-uciobora.html http://www.cohoalaw.com/from-capitol-hilllegislation-ucioa-2008-and-uciobora.html From Capitol Hill/Legislation Wed, 20 May 2009 14:04:03 -0700 mpayne@wlpplaw.com (Mark K. Payne) Collecting a judgment: Persistence pays off The association’s attorney has worked diligently to obtain a judgment against a delinquent homeowner. What can be done to ensure that the association gets paid? Is all hope lost if the judgment is initially not collectible?

]]> The inability to immediately collect on personal judgments against delinquent homeowners is a major setback for associations and becoming more common in light of the current state of the economy, with unemployment rates at unprecedented levels and fewer homeowners having extra cash sitting in their bank and brokerage accounts. However, periodic follow-ups on files deemed initially non-collectible often result in favorable outcomes for associations. 

 

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. 

]]> http://www.cohoalaw.com/money-matters-collecting-a-judgment-persistence-pays-off.html http://www.cohoalaw.com/money-matters-collecting-a-judgment-persistence-pays-off.html Money Matters Tue, 05 May 2009 11:20:54 -0700 sdupont@wlpplaw.com (Stephane Dupont) Carbon Monoxide Alarms and Colorado's New Law Colorado’s new law concerning carbon monoxide alarms was signed by Governor Ritter on March 24, 2009 and applies to sales, rentals and remodels of single family and multi-family residences on and after July 1, 2009. The definition of “multi-family dwelling” in the new law specifically includes condominiums, and therefore, subject to certain limitations, would apply to units in condominium associations.

]]> The law applies to dwelling units that have a fuel fired heater or appliance, a fireplace, or an attached garage. If any of these conditions exist, then the law applies to sellers of dwelling units offered for sale on or after July 1, 2009; dwelling units where, on or after July 1, 2009, remodeling occurs that requires a building permit; or dwelling units used for rental purposes that have a change of occupancy after July 1, 2009. If any of these three events occurs, then the unit must have an operational carbon monoxide alarm installed within fifteen feet of the entrance to each room lawfully used for sleeping purposes or in a location specified by any applicable building code. This latter requirement is overridden if the multi-family dwelling has a central alarm system and the carbon monoxide alarm is installed within twenty-five feet of the fuel fired heater, fireplace or garage. In addition, in connection with rental units, the law mandates certain actions that the unit owner must take with respect to installation and replacement of alarms, and provision of batteries to assure that the alarms are operational.

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.

 

]]> http://www.cohoalaw.com/from-capitol-hilllegislation-carbon-monoxide-alarms-and-colorados-new-law.html http://www.cohoalaw.com/from-capitol-hilllegislation-carbon-monoxide-alarms-and-colorados-new-law.html From Capitol Hill/Legislation Mon, 06 Apr 2009 11:25:58 -0700 mpayne@wlpplaw.com (Mark K. Payne) Fiscal Irresponsibility In Your Association? Embezzlement and What You Can Do to Help Prevent It We have all heard from time to time about an association manager or officer who gets caught with his hand (or more) in the association’s cookie jar. The most recent account making headlines has to do with a manager in Virginia who has been convicted of stealing $3 million from over 350 different homeowners associations. We shake our heads and are thankful that our association isn’t the victim of such a potentially disastrous crime. But sometimes, it is just a matter of luck that our association hasn’t suffered such a loss, or we are lucky that everybody providing services to the association is trustworthy.

]]> Fortunately, other than luck and trustworthiness, there are a number of relatively simple measures that can be taken to protect the association. Some of these measures are protections that the association’s accountant can help put in place to provide for proper oversight of, and accounting for, the association’s funds. These steps include: (1) requiring more than one signature on association checks that exceed a relatively nominal amount – such as $500; (2) making sure that two different people serve the offices of president and treasurer; (3) requiring somebody other than the person primarily responsible for paying the association’s bills (whether the manager or the treasurer) to reconcile the monthly bank statements or to review the reconciled statements that were prepared by the manager or the treasurer; (4) establishing the association’s bank accounts at a bank that permits all designated persons (such as all members of the board) to have online access to view the account activity (note, this is not permitting all members of the board to be able to access the accounts to conduct activity in the accounts); (5) maintaining separate operating accounts and reserve accounts; (6) requiring the association’s manager to maintain the association’s accounts separate from the accounts of other associations managed by the manager; (7) do not allow checks to be made out payable to cash, or signed in blank; (8) thoroughly review invoices and supporting documentation before signing payment checks; (9) keep association records up to date and require regular financial reports at each board meeting; and (10) keep a minimum of petty cash and have board members count it periodically on an unannounced basis.

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.

 

]]> http://www.cohoalaw.com/governance-fiscal-irresponsibility-in-your-association-embezzlement-and-what-you-can-do-to-help-prevent-it.html http://www.cohoalaw.com/governance-fiscal-irresponsibility-in-your-association-embezzlement-and-what-you-can-do-to-help-prevent-it.html Governance Money Matters Tue, 03 Mar 2009 22:34:56 -0700 mpayne@wlpplaw.com (Mark K. Payne) Towing of Illegally Parked Vehicles The towing of illegally parked vehicles is a topic that is regularly brought to our attention. In most instances, the problem involves a commercial vehicle, motor home, trailer or truck that that is parked in violation of the Association’s covenants or rules. It may also involve a vehicle that appears to have been abandoned or is not properly registered with the State of Colorado. In more egregious instances, the vehicle is parked illegally in a designated handicap parking space or fire lane. In any instance, the question is: “Can we tow the illegally parked vehicle?

]]> The answer to this question initially depends on whether or not the Association owns the property on which the vehicle is illegally parked. Colorado law only allows for the towing of a vehicle under the following conditions:

  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.      

]]> http://www.cohoalaw.com/governance-towing-of-illegally-parked-vehicles.html http://www.cohoalaw.com/governance-towing-of-illegally-parked-vehicles.html Governance Your Governing Documents Mon, 19 Jan 2009 16:46:55 -0700 sjezierski@wlpplaw.com (Stan V. Jezierski) Holiday Decorations And The Fair Housing Act

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.

]]> As you are probably aware, fair housing laws protect residents against discrimination in housing. For homeowners associations, these laws are most often encountered in the context of disabled residents and requests for “reasonable accommodations”.  Nevertheless, it is probably not a surprise that the FHA and other fair housing laws also prohibit discrimination on the basis of religion. You might ask how does this apply to exhibiting holiday decorations? Well, religious decorations and displays on the common areas may suggest to residents and guests that the community favors people who are of a particular religious affiliation. For example, extensive holiday decorations consisting of nativity scenes and crucifixes may suggest that Christians are favored in the community, or even that residents and visitors who are not Christian are not welcome.

The safest course of action is to put up only general holiday decorations on the common areas, such as lights and wreaths. Santa Claus images, candy-striped poles, and decorated trees are also considered acceptable, as are general statements such as happy holidays. Nevertheless, if the association’s membership demands to exhibit religious symbols such as nativity scenes, crucifixes, or Stars of David, they can be displayed. However, the association should take extra care to give equal treatment to all other religious affiliations. If there is mention of Christmas or use of Christian symbols in a display, there should also be equal reference to Hanukkah or other requested religious holidays.

An equally important point to remember is that FHA restrictions do not apply to religious displays by private homeowners. While common area religious displays should either be avoided or carefully monitored, residents of the community should be allowed, within the association’s rules and regulations, to display personal religious items in their homes and on their property.

Remember, the overall goal of the FHA is to allow members of community to feel comfortable about their religious affiliation. Common area decorations shouldn’t create a feeling of being left out. Open participation by all members of community is the best way to eliminate complaints and ensure a safe, happy and harmonious holiday season.

]]> http://www.cohoalaw.com/governance-holiday-decorations-and-the-fair-housing-act.html http://www.cohoalaw.com/governance-holiday-decorations-and-the-fair-housing-act.html Governance Tue, 02 Dec 2008 10:22:25 -0700 sjezierski@wlpplaw.com (Stan V. Jezierski)