While this may not seem such a big deal to many of our readers, – read: nonlawyers -, HOA lawyers have a very difficult practice. Not only is it important to be well versed in the major areas of the practice, such as Real Estate, Colorado Common Interest Ownership Act, Corporation and Non-Profit Corporate Acts, Contracts, Litigation, especially Collections, but also knowledgeable in other areas to seek expert advice to make sure the client receives the best and most accurate information. Examples include laws regarding fair housing, employment, bankruptcy, taxes and other esoteric areas.

With all the new laws being passed directly involving HOA’s (see Mark Payne’s most recent posting) and those affecting HOAs indirectly, it is important to be aware of situations that may have impact how we attorneys offer advice.

Last year Congress passed Public Law 111-22, Title VII –Protecting Tenants at Foreclosure Act, effective May 20, 2009. The law was passed to protect bona fide tenants against immediate evictions by the successor in interest of “any foreclosure on a federally-related mortgage or loan or on any dwelling or residential real property after the date of the enactment [May 20, 2009]…” The law appears to focus on public trustee foreclosures on mortgages covered under federal law. But, because of the inclusion of “…or on any dwelling or residential property after the date of enactment…,” I would interpret the intent of “or” to include all foreclosures on dwellings and residential real property with or without it being a “federally-related mortgage,” – including HOA lien foreclosures as well.

 

Continue Reading Protecting Tenants under Foreclosures

The Colorado  Supreme Court held that the non-developer owner of a parking space did not receive an unrestricted title that would allow it to sell the space to a third party non-condominium owner B.B. & C. v. Edelweiss Condominium, 218 P.3rd 310 (Colo. 2009)

The developer built a 21 unit complex that had thirty parking spaces. One parking space was conveyed to each condominium unit, leaving ten unassigned. The condominium Declarations allowed the developer to sell the unassigned spaces to condominium owners or to third party non-condominium owners. Under the Declarations no other person other than the developer was able to sell or lease a parking space to a non-owner.

In 1971, Edward Lana, an owner of a unit, purchased parking space no. 21 from the developer. Lana sold his unit and two parking spaces in 1972, but maintained ownership of parking space 21. Two years later he sold space 21 to Justin and Isabella Lana (the “Lanas”) who were owners of a unit in the complex.

The Lanas then sold their unit with its two spaces, but maintained ownership of space 21 after the sale. A year later they sold the parking space to the Plaintiff, B.B. & C.,  via a warranty deed, which contained language that made the conveyance subject “to the terms, covenants, conditions, easements and restrictions, uses, limitations and obligations set forth in the Declarations.”   Because the Lanas were not the developer nor was the B.B. & C. an owner, the conveyance of space 21 violated the requirement that only the developer could sell or lease the parking space.

B.B. & C. owned the space for over twenty years, paid all taxes, maintenance fees and insurance fees during this period and appeared to be able to take adverse possession of the property under color of title. Section 38-41-108. C.R.S.

In 2003, the Condominium Association adopted an Amended Declaration which declared the Association members (“owners”) to be the owner of space 21 as a general common element, and excluded B B. & C. access to parking space 21.

B. B. & C. filed a quiet title action claiming unrestricted  fee simple ownership of the parking space by adverse possession under color of title pursuant to sections 38-41-108, and the right to sell the space regardless of the restriction in the Deed.

The trial court ruled that the Amended Declarations changing ownership to the members of the Association and denying CPM access was unconscionable and voided the Amended Declarations. The Court of Appeals, in an unpublished opinion, reversed the trial court and held that the Amended Declarations was a valid amendment, but as a bone, gave  B. B. & C. its costs and attorney fees.

B. B. & C. appealed. The Supreme Court affirmed the court of appeals decision on different grounds. It went on to say that under section 38-41-108 C.R.S., if the party proves all the elements it is entitled to judgment of legal ownership, but only to the extent and according to the purport of the title.

Section 38-41-108  Every  person in the actual possession of the lands, … under claim and color of title, made in good faith,who for seven successive years continues in such possession and also during said time  pays all taxes legally assessed on suchlands … shall be held and adjudged to be the legal owner of saidlands to the extent and according to the purport of his paper title.

The Supreme Court said the trial court and the appellate court did not need to reach the issue of the Amended Declarations’ applicability to the case at issue.  It held that the original Declaration incorporated into B. B. &.C’s deed precludes B. B. & C from obtaining an unrestricted fee simple estate in the parking space.

The Supreme Court said, on remand to the trial court, that B. B. & C., regardless of the Amended Declarations could obtain a quiet title judgment recognizing its ownership of the parking space. But it would not be entitled to a judgment for an unrestricted fee simple estate; it could not obtain under color of a title any more rights than it was deeded. It would be the owner of the space, but it would only be allowed to sell or lease it to members of the Condominium Association as restricted by the deed. It was only entitled to ownership of the space to the extent and according to the purport of his paper title. subject to the terms, covenants, conditions, easements and restrictions, uses, limitations and obligations set forth in the Declarations.

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. 

Continue Reading When Can a Homeowner Be Joined as an Indispensable Party

We have received many questions regarding when a homeowner’s obligation to pay assessments terminates as a result of being in or having completed a divorce, bankruptcy or foreclosure proceeding. The quick answer is that an owner is responsible for all assessments for as long as he or she is an owner as evidenced by a recorded document, a deed. For purposes of discussion it does not matter what type of deed is recorded to prove ownership or how the party came into ownership. Also, this article will only deal with collection cases, not lawsuits for foreclosure or receiverships. 

Continue Reading Who is Responsible for Assessments

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

 

Continue Reading What Would John Wayne Do

When the documents say how tall it is. And when it does not say how tall one story is, there is a very good chance that language in the governing document limiting a structure to one story will be unenforceable as a restrictive covenant.

In a recent Colorado Court of Appeals decision, Allen v Reed, 155 P.3rd 443 (Colo. App. 2006) the appellate court reversed the trial court’s granting a permanent injunction ordering the defendants to remove their A-frame addition to their home, which contained a bedroom loft suite. The lawsuit did not involve the Association, but was an action between two homeowners regarding an interpretation of the Association’s restrictions limiting structures to one story.   It was unclear whether the Association Board had the authority to enforce and there was no existing architectural control committee to enforce the restriction.

Continue Reading When is One Story One Story?

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.  Rywalt v. Writer Corp, 526 P.2d 316, 317 (Colo. App. 1974).

It is educational to review the Rywalt case, above, to show the deference the courts will give to Board decisions. In this case, a group of homeowners sued the Association in an attempt to prevent the Association from entering into an agreement with the developer to build a second tennis court on the common area close to the plaintiffs’ homes. The cost of the tennis court would be borne by the developer. The plaintiffs argued, among other things, that the Association’s decision was arbitrary and capricious.

Continue Reading Court Deference to Board Business Decisions

We want to let you know about an issue that is important to us at Winzenburg, Leff, Purvis and Payne, LLP. In fact we think it is important enough for all of you that we are for the first time coming out with a public opinion on a political issue. We are asking you to Vote NO on 40 which will term limit judges. Whether you are conservative, liberal, Republican, Democratic or Independent Amendment 40 is a bad idea with serious consequences which you should oppose.

Even though the proponents are pushing Amendment 40 purpose of term limiting judges as a good idea; the negatives far out-weight any gains they offer for passage.

Continue Reading AMENDMENT 40 – VOTE NO THIS NOVEMBER

In a recent decision, the Colorado Supreme Court has affirmed the authority of Associations to seek damages from subcontractors for defective construction. The HOA filed a lawsuit against the developer, the contractor and various subcontractors for defective construction of the project. The HOA settled with the developer and general contractor before trial. The trial court dismissed the negligence claim against the subcontractors before trial. Continue Reading HOMEOWNER ASSOCIATIONS WIN STANDING AND RIGHT TO SUE SUBCONTRACTORS