By Lee Freedman, VF Law

Alternative Dispute Resolution (“ADR”) has been a moving target for various disputes over the years. In the community association industry, it is no different. On May 7, 2025, the Colorado legislative session ended. ADR in the community association industry was a focus during this recent legislative session through House Bill 25-1123, a bill that ultimately died at the end of the session. HB25-1123 fell short of providing a fair and amicable dispute resolution mechanism that would not impact the affordability of home ownership in common interest communities.  Future legislation in this area should be well focused on not duplicating prior legal issues, ensure ADR applies to actual legal disputes, and focused on maintaining the affordability of residences in common interest communities.

The Community Association Institute (“CAI”) describes itself as “an international membership organization dedicated to advancing excellence in the governance, management, and quality of life of community associations.” CAI, through its local legislative action committee in Colorado, supported sensible amendments to HB25-1123 which would provide a reasonable dispute resolution approach to community association disputes without unreasonable expense to community associations, and ultimately, all of the owners within such common interest communities.

Such a position is consistent with CAI’s recently adopted ADR policy, which states, “CAI recognizes the need for and supports the use of fair alternative dispute resolution mechanisms to resolve disputes arising in community associations, particularly in appropriate cases where such measures can facilitate efficient and equitable resolution.”

Unfortunately, after a multitude of unsuccessful attempts by numerous groups and the bill sponsors to amend HB25-1125, it was postponed indefinitely in the Colorado Senate committee. 

ADR can be used to facilitate face-to-face discussions in situations where, for example, an owner does not understand their obligations under the governing documents in a community or the association's board does not acknowledge or understand the owner’s concerns.  There is a saying that the best settlement is one where neither party wins. This means that the goal of negotiations and mediation is to have both sides give up something to reach a fair resolution.

Most disputes in the common interest communities are between neighbors. Board members are normally owners elected to the association’s board. These disputing parties must continue to live together within the community. The hope in these settlement negotiations is to work towards maintaining the communal nature of the community and limiting the number of similar disputes that may arise in the future.

Historically, it was thought that arbitration was a less expensive and quicker method to have a legal case heard by a finder-of-fact. However, that is not always the case. Especially in community association disputes, arbitration can take as long to get to the arbitration hearing as a court case can get to trial. 

During this past legislative session in Colorado when HB25-1123 was introduced, the initial goal was to require “a dispute between a unit owner and a unit owners’ association to go through an internal dispute resolution process before the parties can file a complaint with the court. If the parties are unable to reach a mediation agreement, the bill allows the parties to undergo arbitration or commence a legal proceeding.”

The last version of the ADR procedure submitted for approval under HB25-1123 would have cost community associations, and, in turn, owners a substantial amount of money and negatively impact the affordability of homes in common interest communities.  It placed few restrictions on the types of disputes that a party could seek mediation, encouraged disparate treatment of the various owners, favored non-compliant owners over compliant owners, and would have created situations that left compliant owners to have to cover most of the expense caused by non-compliant owners. 

Without limiting the type of disputes that could be raised, any “dispute” an owner in a community could raise would require the board members to not only take time out of their private schedule to participate in a meeting with each disputing owner, but it would require an association board to consult with their attorney to determine if the dispute is a legal issue, what are the association’s legal duties, and to what resolution, if any, can the association legally agree. 

Allowing an unlimited number and type of disputes to be presented to an association would have resulted in an enormous expense for most associations. Community associations are nonprofit corporations that do not operate from any funds they make from selling something. They operate only from funds received from assessments levied against the units within the community based on an annual budget. The amount and type of services an association provides are based on the governing documents and requirements under the law.

If the expenses for an association increase because it has to participate in some kind of ADR for each and every kind of dispute that could exist in the community, the association either has to cut the services it provides to or for the benefit of the owners or it has to increase the assessments levied against each unit, which impacts the affordability of living in a community association or the fair market values of the units within the community.

An ADR bill like HB25-1123 must be drafted carefully to properly balance the need for covenant compliance, proper governance, and affordability and protection of the homes in the community. HB25-1123 failed to pass and did not become law for a number of varying reasons. It did not contain the right balance for the best interests of both associations and owners alike.

C.R.S. § 38-33.3-209.5 requires community associations to adopt responsible governance policies, including “[p]rocedures for addressing disputes arising between the association and unit owners.”

Requiring arbitration of all such disputes, though, does not benefit owners or associations alike. Requiring them to pay the high costs for arbitration is cost-prohibitive to both parties and would result in increasing assessments in community associations at the expense of services an association can provide. 

One proposal gained steam this past legislative session among a number of different stakeholder groups for a post-filing mediation and negotiations procedure for certain disputes between an owner and an association.

C.R.C.P. 11 helps limit the number of frivolous claims that can be asserted in a court of law in Colorado by requiring attorneys of parties to sign every complaint affirming that, among other things, the attorney has a reasonable and good faith belief that the complaint (or other pleading) is well grounded in fact and law and is not presented for an improper purpose.  This helps limit the filing of frivolous or groundless complaints. 

The expense for filing litigation also helps assure that most filed lawsuits have a true legal basis that a court has authority to resolve. If mediation is required pre-filing, associations would again face the consequences of having to incur the substantial cost associated with having to participate in mediation for issues that do not have legal sufficiency.

Post-filing mediation would require the court to immediately keep the case while the parties participate in mediation. If a resolution occurs, the case will be dismissed. Costs would be limited at that point to mediation unless mediation failed to result in a resolution.

 Initial amendments approved by the Colorado House on HB25-1123 excluded the following types of disputes from the ADR process, among others: disputes involving violation of law; claims of discrimination, harassment, or other civil rights violations; emergency or injunctive relief; those which have already been adjudicated in court or through arbitration, and those which involve collection of past-due assessments claimed by an association. These exclusions are fair and will help maintain the affordability in community associations.

It is expected that new legislation will be introduced during the next legislative session in Colorado seeking to create a fair mechanism for dispute resolution of association and owner disputes.  

The search continues for the holy grail of legislation in Colorado for fair ADR mechanisms to resolve disputes arising in community associations, but the parameters for such a mechanism exist. We will see where this next legislative session leads us.

Lee Freedman is of counsel in VF Law’s Colorado office. He may be reached at Lee.Freedman@vf-law.com.