Short-Term Rentals (“STRs”), which can encompass everything from nightly rentals to thirty day rentals to six month rentals, have become a hot button issue in common interest communities since the inception of websites such as airbnb, VRBO and HomeAway. The market for STRs in Colorado increased exponentially with the legalization of recreational marijuana. The dramatic increase in STRs has compelled many common interest communities to consider ways to restrict, or at least regulate, leasing in their communities.
When a common interest community wants to restrict leasing to eliminate or control STRs, the first question is whether this can be done by the Board through the adoption of a rule or policy, or whether it requires an amendment to the covenants upon approval of the required percentage of the owners. The prevailing view is that leasing restrictions may only be imposed by an amendment to the recorded covenants, and not by the adoption of a rule.
The Colorado Common Interest Ownership Act, C.R.S. § 38-33.3-101 et seq. (“CCIOA”) contains several provisions regarding the use of property within common interest communities. C.R.S. § 38-33.3-205(1)(l) requires that restrictions on the use, occupancy, and alienation of units be contained in the recorded declaration. C.R.S. § 38-33.3-217(4.5) requires that no amendment may change the uses to which any unit is restricted in the absence of a vote or agreement of at least sixty-seven percent (67%) of owners, or any larger percentage specified in the declaration. Similarly, the Restatement of the Law on Property/Servitudes provides that, absent specific authorization in the covenants, an HOA does not have the power to adopt rules that restrict the use or occupancy of individually owned units.