We have received a number of questions about whether SB 100 limits an Association’s ability (acting through its board of directors) to make changes to its common elements – as an example, can the board change hardscape landscape improvements to irrigated sod? While SB 100 does a number of things, including imposing a number of additional requirements on the association’s board of directors, the simple answer is that it does not restrict the board’s authority to make this type of decision.
Generally, the board’s authority to act on behalf of the association is set out in the association’s governing documents – the declaration, the articles of incorporation and the bylaws. Oftentimes, any one, or all of these documents, in addition to express specific powers, will also provide that the board has the authority provided for in the Colorado Common Interest Ownership Act, or the Colorado Revised Nonprofit Corporation Act, and such other powers as are necessary for the board to effectively carry out its duties on behalf of the association. This is a very broad grant of authority, and absent a specific limitation on the board’s authority in the governing documents, Colorado courts have held that the board has the right to exercise its business judgment in its decision making.
The business judgment rule requires that the board act within its authority, in good faith, in a manner that it believes to be in the association’s best interests. If the board does so, then a reviewing court will not second guess the decision of the board. Put another way, the board’s decisions do not need to be perfect, or even correct, so long as it was acting with the correct motives, and within its authority. Therefore, in addressing the questions of the board’s authority to make changes to the common elements, if the board has the necessary authority, and is acting in good faith and in a manner that it believes is in the association’s best interests, it will have the authority to make changes to the common elements, and SB 100 does not prevent otherwise.