By Joseph A. Bucceri, Orten Cavanagh Holmes & Hunt, LLC
Anyone who works in the community association industry in Colorado knows by now that the legislature imposed major changes to the Colorado Common Interest Ownership Act (“CCIOA”) during the 2022 session which significantly affects the operation and governance of common interest communities. HB22-1137 became effective on August 10, 2022. While the final version was less draconian and onerous than the initial drafts, it still represents an overreaction to a small number of bad actors. Unfortunately, for the vast majority of associations, the new requirements force associations into a one-size fits all system which seems to assume that most covenant violations are insignificant, and which fails to take into account the wide variety of building types and living arrangements that make up owner associations in Colorado.
How has the new law changed the face of covenant enforcement in Colorado, and what are some of the unintended consequences?
Major Changes and Challenges
HB22-1137 represents a major overhaul for association covenant enforcement and assessment collections. For covenant enforcement, there are several major changes to the way associations are now required to operate:
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First, there is the bifurcation of violations into two distinct categories: violations that “threaten the public safety and health” and those that do not. This poses several questions and challenges: What is considered a threat to public safety and health? How significant must the threat be? What is meant by the term “public” in the context of private communities and enforcement of private covenants? The new law contains no guidance to clarify these issues or assist associations in making these determinations.
Another challenge with health and safety violations is that associations can’t take legal action until at least 72 hours after the owner has received written notice of the violation. Will associations be forced to prove the owner received notice, or can they rely upon a “deemed received” standard?
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HB22-1137 also imposes additional violation notice requirements. While CCIOA has had a requirement for some time that owners be given notice and an opportunity to request a hearing before fines could be imposed, the new (additional) notice requirements are significantly more cumbersome, requiring a minimum of two 30-day notices before legal action can be taken. This requirement does not take into account the nature, severity or impact of particular violations. While the 30-60 day “cure period” approach might be appropriate for certain types of violations such as failing to adequately maintain your lawn, it does not lend itself to others that may have a more direct and consequential impact (e.g., noise, shooting fireworks, property damage, parking, short term leasing, harassment, etc.).
What Didn’t Change?
Some enforcement remedies other than fining or filing a lawsuit are still (ostensibly) permitted under the new law. While an association is required to give an owner at least 60 days to cure a violation on their own, there are no express legislative constraints on associations exercising self-help remedies (if authorized by the governing documents). Additionally, default or individual assessments can arguably still be assessed against the property as long as they represent actual costs to the Association.
Unintended Consequences
As with any type of legislation, HB22-1137 has a number of unintended consequences that could, paradoxically, result in increased costs and assessments to owners. Because of the specificity of the notice requirements and capping fines at $500, the new law may lead to more lawsuits being filed by associations. An Airbnb generating $100 per night is not going to close from a $500 fine. If the matter is referred to an attorney, associations and/or owners may incur substantial attorney fees.
Another example of unintended consequences is an association choosing to tow for parking violations in lieu of imposing nominal fines. Before HB22-1137, if an owner parked in an authorized parking space, the association could impose substantial fines without a mandatory cure period. Now, associations must (1) send a violation, (2) wait at least 30 days, and (3) after 30 days, conduct an inspection to determine if the violation still exists before the association can impose an initial fine. Consequently, some associations may elect tow vehicles instead of levying fines.
Remaining Questions
In addition to the challenges identified above, there are many other questions raised by HB22-1137 that will need to be addressed in order for an association to proceed with enforcement with confidence. The new law states that “the total amount of fines imposed for the violation may not exceed five hundred dollars.” But what is “the violation?” If an owner gets a notice for weeds, and pulls them all but they grow back, is that the same violation or a new one?
Another major uncertainty is how a violation may be “cured” if it is not an ongoing condition. For an excessive noise violation, if an owner has 29 days straight of raucous parties, but doesn’t have one on day 30, has the violation been cured? What if there is another party on day 35 - can the association send the second violation notice?
While there is always hope that a future bill could clean up some of these issues, or remove some of the more cumbersome requirements, it is likely that many of these are here to stay and homeowner associations in Colorado will have to get used to these new requirements moving forward.
Joseph A. Bucceri is an attorney at Orten Cavanagh Holmes & Hunt, LLC. He provides covenant enforcement services to community associations throughout Colorado.
