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?


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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.  


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 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?


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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.


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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.


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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

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?


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 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. 


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In my first installment of this blog series entitled HOA Board Meeting Basics, I discussed whether the Colorado Common Interest Ownership Act ("CCIOA") or the Colorado Revised Nonprofit Corporation Act ("Nonprofit Act") require that members of an HOA be provided with notices of board meetings and agendas.  In this installment of the series, I will discuss open board meetings in HOAs.

For most folks living in Colorado, our home is the biggest investment we will ever make in our lives.  For those of us with a home in an HOA, we know that in addition to our normal obligations as homeowners, we must pay assessments for our share of the common expenses of the community and comply with the governing documents of our association. 

Our HOAs are governed by boards of directors which have a great deal of authority over our how our communities are maintained, the fiscal health of our communities, how the governing documents are enforced and the overall culture of our communities. Since boards of directors have a great deal of power, it only makes sense that CCIOA requires that Board meetings be open to the members of the HOA or their designated representatives.  Having open meetings provides members with an opportunity to see their boards in action and to observe the due diligence they engage in before making important decisions. 


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Just last week, I had the privilege of teaching a class for the Aspen Pitkin County Housing Authority on HOA meetings.  Since my friends in Aspen and Pitkin County had numerous and excellent questions relating to meetings, I thought it would be helpful to post a series of blog entries on HOA board and membership meetings.  In order to avoid confusion, I will start this series of blog entries by addressing issues relating to HOA board meetings.

For those of you who follow our blog, you know that the Colorado Common Interest Ownership Act ("CCIOA") is the primary body of statutory law in Colorado that regulates HOAs.  Since most HOAs are nonprofit corporations, when we are dealing with issues relating to governance, we must also look to the Colorado Revised Nonprofit Corporation Act ("Nonprofit Act") for guidance. 

The first question I will address is whether HOA boards must provide notice of their board meetings to the members of their associations.  Interestingly, CCIOA and the Nonprofit Act do not require that members of an HOA be provided with notice of board meetings.  However, it is important to check out the bylaws for your association to determine whether the bylaws require that notice of board meetings be given to the members.  If your bylaws require that notice be given to members, make sure to carefully follow the notice requirements outlined in your bylaws. 


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