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?

Continue Reading Construction Defects and Insurance: Proactive Steps To Protect Your Community

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.  

Continue Reading LIGHTS … CAMERA … LEGAL ACTION! Do Associations Increase Their Liability by Providing Security Measures?**

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.

Continue Reading The Business Judgment Rule

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.

Continue Reading Duties of the Managing Agents and Liability for Failure to Carry Out Those Duties

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?

Continue Reading The Importance of Process

 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. 

Continue Reading Short Terms Rentals may not be Commercial Use of Property

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. 

Continue Reading HOA Board Meeting Basics: Exceptions to Open Meetings Limited

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. 

Continue Reading HOA Board Meeting Basics: Notice to Members and Agendas