QUESTION:   Our Association received a check marked Paid in Full”.  But the check was for less than the full amount owed by that owner. What should we do with the check?

ANSWER:   The act of cashing the check generally constitutes acceptance of the owner’s terms.  It is not enough to simply cross out the “Paid in Full”.  It is not enough to add a reservation of rights, such as “the acceptance of this payment is under protest”.

Before depositing the check, you have two basic options: (1) Return the check and ask for one that is not marked “Paid in Full”; or (2) Send it for deposit, knowing that it may be treated by a court as “Paid in Full”

Nevertheless, if you accidentally cash a check that purports to be “Paid in Full”, do not despair. You may prevent a full satisfaction of the account if, within 90 days of payment of the check, the Association tenders repayment of the amount of the check. However, this will only work if the Association did not have previous knowledge that the check was being submitted in full satisfaction of their account.    

Legal Tip:         If your Association uses a lockbox, checks are typically deposited automatically. Colorado law allows Association’s to challenge checks deposited in this manner if it gives owners certain information in advance. At least annually, the Association should send  a “conspicuous statement” to its owners stating that “communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to” a designated person, office or place.  

For better or worse, community associations are in the news once again.   As you may have heard, a homeowner in Wheat Ridge, Colorado has been flying her U.S. flag upside down to protest the country’s role in the war in Iraq. Recently the Association in which the owner lives has demanded that she fly the flag properly or not at all. The Association contends that her flying of the flag “union down” violates Association’s patriotic and political expression policy. The owner has responded that this policy violates her 1st Amendment right of free speech. Below are a few questions that we have received in response to this controversy: 

  1. Can an association adopt rules and regulations pertaining to the display of the American flag?

Answer: Yes. In Colorado a community association may adopt reasonable rules regarding the placement and manner of display of the American flag. However, Colorado law states that an association may not prohibit the display of the American flag as long as it is displayed in a manner consistent with the federal flag code.

  1. Does the federal flag code allow flying of the flag “union down”?

Answer: Yes, in limited circumstances. The “U.S. Flag Code” states that the flag should never be displayed with the union down, except as a signal of dire distress in instances of extreme danger to life or property (for those interested in researching this, see 4 U.S.C. § 8). The homeowner described above states that she is flying the flag upside down because the war in Iraq has put the country in a very distressful situation. It is unclear as to whether this novel argument would succeed in Court.   

  1. Is a restriction on the display of the American flag a violation of the 1st Amendment or state constitutional rights of free speech?

Answer: The answer to this question is currently unclear. It has been generally held that the 1st Amendment does not apply to speech and assembly on private property or within a private organization. In other words, a private community generally has the right, through its covenants, to restrict the speech within its borders. This is basically a contract that an owner agrees to when it purchases property in a covenant controlled community. However, a recent case in New Jersey has questioned this notion, holding that the proliferation of common interest communities have made them “constitutional actors” that must respect their members’ fundamental constitutional rights. This case is currently under review by New Jersey Supreme Court. The Colorado Supreme Court has not yet addressed this issue.

           

When townhome or condominium owners do work inside or outside of their unit, it could impact the AssociationSome issues that need to be discussed and addressed if they will affect the Association are:

1.         Will it adversely affect building systems? Example: might water overflow to another unit?

2.         Cosmetic issues: will it affect the exterior? Set standards for style, materials, etc.

3.         Mechanic lien issues and claims which could be brought against the Association as a result of the work.

4.         Insurance issues: should contractors have insurance?

5.         Noise, inconvenience, mess, dust, and debris disposal may cause problems for neighbors.

6.         Costs may be incurred to supervise the work.

7.         Is all future maintenance and repair to be at the owner’s expense?  If so, a written and recorded agreement may be needed to protect the Association. 

8.         Environmental issues. Example: asbestos removal by an owner in a pre-1980 building could force evacuation of the building’s residents.

Legal Tip:  Most governing documents require owners to get approval if they plan on doing work that will affect the Association. 

Summer time is the season of vacations, fun and, for many Community Associations, construction.  Most Managers are very thorough and knowledgeable, and have assisted Associations with construction projects. Some Board members have worked in the construction industry and have valuable insights. So why is it wise to involve an independent engineer, architect, or construction expert (here called "engineer") in your Association’s repair projects (such as painting, roofing, siding or asphalt projects)? Here are a few reasons for an engineer to be involved on repair or restoration projects in your community:

Continue Reading CONSTRUCTION PROJECTS: IT MAKES SENSE TO HIRE AN EXPERT

A question we are frequently asked by associations is how strictly they should enforce their covenants. This was exactly the dilemma faced by a small patio home community located in North West Denver. Apparently a homeowner had painted her house golden yellow. The color was not unattractive – it actually looked quite nice – but it was clearly not one of the earth tone colors approved by the association. After some investigation by the Association’s Board of Directors, it became apparent that this was an honest mistake by the homeowner. She was new to the community and was unaware that she was restricted in her color choices. Although she was also willing to work with the Association to correct things, money was an issue. She had recently experienced some serious personal problems and could not afford to repaint her house. This is when I received a call from the Board’s president asking “What should we do?”

Continue Reading Covenant Enforcement – The Golden Rule

Below is a trial story from Larry Leff, senior partner here at WLPP:

Not Your Ordinary Collection Case

In the not too distant past our firm took on a collection case for one of our associations that took an interesting twist. We filed a lawsuit in our county court, jurisdiction under $15,000.00, against a homeowner for the non-payment of assessments. The debtor homeowner filed a counterclaim against the Association, asserting claims that the association breached its contract with him – failing to maintain the property – and   that it breached its fiduciary duty to him, among other claims. He also requested exemplary damages. During the course of litigation, the homeowner brought his account current, minus the attorney fees and costs. At trial, the Association was granted an award for its attorney fees and costs, and the court dismissed all the homeowner’s counterclaims.

The homeowner refused to satisfy the judgment, so garnishment proceedings were initiated.   The garnishment was successful and the Association collected the full amount.

Subsequent to the satisfaction, the homeowner decided he wanted to do landscaping work to enhance his property. He put up a retaining wall of concrete, railroad ties, gravel and Continue Reading Not Your Ordinary Collections Case

Issue: A large homeowners association is looking to make repairs to the common area fences within the community. What options are available to them to finance this project?

Background: Recently, the Board of Directors of a large homeowners association called our office to discuss a problem. It seems that they had common area fences that were fairly old and in desperate need of some TLC. Unfortunately they did not have any funds available to make the necessary repairs.    Pursuant to the Association’s covenants, the Board was severely restricted in the amount it could set for the annual assessments each year (without approval of at least 2/3 of the members, the covenants limited the annual assessment to a 10% increase from the previous year). As a consequence, the Association’s reserve fund was nearly empty. The Board had tried on several occasions to get the members to approve a special assessment, but it was turned down each time. The Board was now wondering what options it had available to pursue.

Continue Reading Financing Repairs to the Common Elements

County Court, where most collection cases are heard, tends to judge a case more by equity rather than the letter of the law. Each County Court Judge or Magistrate has their own interpretation of what is fair and reasonable. Thus, we must proceed with caution when going to trial, even if we know the law is on our side. Our first trial story took place last summer and illustrates this point.

Continue Reading Trial Story 1

The Community Associations Institute (CAI) held its annual Law Seminar this year from February 22-24 in New Orleans.  All the attorneys from our office were able to attend and discuss current trends in HOA law with colleagues from around the country.  Topics this year included "Cyber Issues and Electronic Voting", "7 Deadly Fair Housing Sins of Community Associations", and "The Latest Trends in Rental Restrictions".  Much was learned and a good time was had by all.

Continue Reading Attorneys Attend CAI Law Conference