As reported here last month, Colorado House Bill 18-1342 becomes effective July 1, 2018. It was signed by the Governor’s office on June 8, 2018. It requires that all common interest communities, except those in which the declaration contains maximum assessment amounts or limits the increases in the annual budget, follow the process set out in Section 303(4) of CCIOA, which requires that the association’s board of directors adopt the annual budget. Then, within 90 days after adoption of the proposed budget, the board must mail, or otherwise deliver (which may include posting on the association’s website), a summary of the budget to all owners and set a date for a meeting for the owners to consider the budget. The meeting must take place within a reasonable period of time after the mailing or delivery, and in accordance with the association’s bylaws. Notice of the meeting must be provided as required by the bylaws. Continue Reading Budget Consideration for Pre-CCIOA Communities
As the title of this post suggests, as of July 1, 2018, there are big changes coming to those communities formed before July 1, 1992. Seemingly out of the blue, our legislature this year decided with little fanfare that it was time to undertake a relatively significant amendment to the budget provisions of the Colorado Common Interest Ownership Act. House Bill 18-1342, which passed out of the legislature and is now sitting on Governor Hickenlooper’s desk (and which is expected to be signed, or in the absence of a veto will automatically become law), requires ALL non-exempt Colorado community associations, with certain limited exceptions, to follow the budget consideration process set forth in CCIOA. The exceptions apply to communities formed before July 1, 1992 where the declaration sets a maximum assessment amount or limits increases in an annual budget to a specific amount and the budget proposed by the executive board does not exceed the maximum amount or limits set in the declaration. Continue Reading Big Changes to Pre-CCIOA Budget Approval Processes Coming July 1, 2018!
All the media and legislative talk of construction defect litigation and its impact on condominium construction in Colorado may seem like discussion that does not impact existing communities. But the changes to state and local laws concerning construction defect litigation do affect existing communities by creating owner notice and vote requirements that, in some cases, apply to construction undertaken by associations long after initial development of their communities. The impact of these requirements on communities will likely play out over time as defects occur and associations seek remedies.
While associations cannot unilaterally change the controlling laws, associations can take proactive steps when contracting for new projects. In particular, associations need to know how the potential for construction defects may affect insurance coverage on projects that associations contract to complete on their own. Did you know that many contractors’ insurance policies exclude multi-family housing projects from coverage?
Many owners in common interest communities might assume that when their association takes steps to increase security – such as installing street lights, security gates, surveillance cameras, etc. – they are providing additional protection to the owners who live in the community. However, the opposite may be true. If a community’s governing documents do not require the association to provide security, the association may be undertaking responsibility where it has none. While security measures are a good idea in principle, community associations must be careful not to unintentionally increase their liability for third party criminal acts.
What is it about community associations that sometimes bring out the worst in people? Is it that we’re dealing with people’s homes? Do we not like somebody else telling us what we can and can’t do? Is there a sense of power from being on the board of directors? The ability to control other people?
Board members often ask us, “What is the standard of conduct for the board of a common interest community?” The standard of conduct is known as the Business Judgment Rule. According to this rule of law, actions taken by directors of a nonprofit corporation in good faith, that are within the powers of the corporation, and that reflect a reasonable and honest exercise of judgment, are valid actions in accordance with the Business Judgment Rule. Not only does the Business Judgment Rule provide a standard by which directors can measure their conduct, it also provides a legal defense to many claims against the association.
A managing agent’s duties to the association can arise out of the common law relationship of an agent to a principal, or by virtue of the contractual relationship between the managing agent and the association, or both. In the same manner that the board has a fiduciary duty to the association and its members, the managing agent, as the agent, has a fiduciary duty to the association as the principal in all matters connected with the agency relationship.
It’s the first Monday of 2016, and while some of us might still be shaking off the eggnog, time passes and deadlines arrive. Remember to comply with your annual disclosure and registration obligations before your deadlines arrive, and take some time for education while you’re at it!
Annual Disclosures. Within 90 days of the conclusion of the fiscal year, an HOA must notify its members, at no cost, of certain information. It may do this by posting the information on its website with mailed notice to members, maintaining a notebook at its principal place of business, or by mail or personal delivery. The required information includes the following:
- The date on which the fiscal year commences;
- The HOA’s operating budget for the current fiscal year;
- A list, by unit type, of the HOA’s current assessments (both regular and special);
- The annual financial statements, including any amounts held in reserve for the fiscal year immediately preceding the current annual disclosure;
- The results of the HOA’s most recent financial audit or review;
- A list of all association insurance policies, including company names, policy limits, policy deductibles, additional named insureds, and expiration dates;
- The HOA’s bylaws, articles of incorporation and rules and regulations;
- The minutes for board and member meetings for the fiscal year immediately preceding the current annual disclosure;
- The HOA’s Responsible Governance Policies, often referred to as "SB 100 Policies."
Division of Real Estate Registration. An HOA’s registration is good for one year. Check your registration and re-register, or contact us to register for you. Registration is required if the HOA is going to undertake enforcement activity.
Secretary of State Reports. While you are re-registering with the Division of Real Estate, verify that your HOA has filed its annual report and is in good standing with the Secretary of State. This is another filing required for the HOA to have the power to assert its legal rights.
Board Education. If your HOA held its annual meeting in the fourth quarter, you likely have one or more new board members. Educate new board members, and remind veteran members, of their obligations under the Revised Nonprofit Corporation Act and CCIOA. Proper education can prevent unintentional bad acts, and the expenses related to education can be accounted for as a common expense.
Happy New Year from everyone at Winzenburg, Leff, Purvis & Payne!
We often get questions about how important it is that a particular notice goes out as required by the Bylaws or the Declaration or a particular policy. Typically, a manager or a board member will call and explain that they’ve been sending out notices a certain way for a number of years (nobody can really remember why, or for how long because the practice pre-dates current management and all of the current board members), but a homeowner just contacted the manager or the board member and said that the notice didn’t comply with the governing documents. How important is that?
In a recent decision [Houston v. Wilson Mesa Ranch Homeowners Association, Inc., 2015 WL 4760331 (D. Colo. August 13, 2015], the Colorado Court of Appeals held that an association’s covenants stating that homes could not be occupied or used for any commercial or business purpose did not prohibit a homeowner from renting out his property for short-term vacation rentals.
A homeowner in the community advertised and rented his home for rent through the VRBO website. In response to the homeowner’s actions, the association passed an amendment to its ‘administrative procedures’ prohibiting its members from renting out their properties for a period of less than thirty days without prior board approval and establishing a $500 fine for violations.