Your Governing Documents

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.

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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.

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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.

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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?

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Times change, people change, laws changes, can your covenants change too? The simple answer to this question is yes, they can. Two of the most frequent questions we get is how is this done and when should we consider it? Below are our answers to these questions.


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. 


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Our legislature continues to tinker with the responsible governance policies made mandatory several years ago. This year Governor Ritter signed H.B. 1135 which amends Section 209.5 of the Colorado Common Interest Ownership Act (CCIOA). Section 209.5 first became law in 2005 by what has commonly been referred to as S.B. 100 which required every association to adopt a responsible governance policy concerning enforcement of covenants and rules, including notice and hearing procedures and a schedule of fines. Prior to adoption of S.B. 100, CCIOA permitted an association to levy reasonable fines for violations of the declaration, bylaws and rules and regulations, but only after notice to the offending owner and an opportunity for a hearing.
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Community association board members fill tough roles that require a great deal of attention to association business. We understand that, as board member volunteers, you need guidance from professionals to facilitate informed decision-making, allowing you to uphold your fiduciary duties to the association that you serve. To assist you in evaluating the legal priorities for your community, we have created this Legal Audit checklist. 

Place a check mark in the box beside each statement that applies to your community association.

My community association has . . .

adopted the seven mandatory Senate Bill 05-100 policies

Senate Bill 05-100 requires all associations to adopt seven different responsible governance policies concerning (1) the adoption and amendment of policies, (2) board member conflicting interest transactions, (3) covenant enforcement and fines, (4) collection of delinquent assessments, (5) conduct of meetings, (6) inspection and copying of records and (7) reserve fund investments.

adopted the Senate Bill 06-89 dispute resolution policy

Senate Bill 06-89 requires all associations to adopt a policy concerning disputes between owners and the association.

updated Senate Bill 05-100 policies to conform to Senate Bill 06-89 requirements

Senate Bill 06-89 modified some of the terms of Senate Bill 05-100, creating recommended changes to the responsible governance policies.

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As part of the changes to Colorado’s foreclosure law that become effective January 1, 2008, C.R.S. §38-38-103(1)(c) will read:

If a recorded instrument does not specify the address of the party purporting to have an interest in the property under such recorded instrument, the party shall not be entitled to notice and any interest in the property under such instrument shall be extinguished upon the execution and delivery of a deed pursuant to section 38-38-501.

Meaning, if your association’s current contact information is not listed in your Declaration, a lender foreclosure could extinguish your association’s super priority lien.

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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.

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