By Shane Fleener, Hearn & Fleener, LLC
Most homeowners and community managers know that Colorado’s Common Interest Ownership Act (“CCIOA”) gives homeowner associations (“HOAs”) the right to assert a construction defect claim on behalf of the HOA and/or the community’s homeowners. However, there is a common assumption that this right only belongs to HOAs consisting of multi-family units (such as townhomes, row homes or condominiums). That assumption is incorrect. Single-family home HOAs have the same rights under CCIOA as any other HOA. This includes the ability to assert claims for defects impacting the single-family homes and lots that are otherwise owned and maintained by the homeowners.
The misconception that multi-family HOAs, but not single-family HOAs, have standing under CCIOA likely stems from the assumption that HOAs only have standing for common elements, or those portions of the community that the HOA otherwise owns or maintains. After all (when compared to their multi-family HOA counterparts), single-family home communities generally have fewer common elements that are owned and maintained by the HOA, and more lots / homes that are owned and maintained by the individual homeowners. However, none of this has any bearing on whether an HOA has standing under CCIOA. While some other states make exceptions for single-family home communities, Colorado is not one of them.
CCIOA states that an HOA has the power to assert claims “in its own name on behalf of itself or two or more-unit owners on matters affecting the common interest community.” C.R.S. § 38-33.3-302(1)(d). This is the only limitation to an HOA’s standing. Therefore, the question becomes: what is a “matter affecting the common interest community?”
First, common elements are not the only things that constitute a “matter affecting the common interest community,” as individual homes/units are also included. CCIOA defines a “unit” as “a physical portion of the common interest community which is designated for separate ownership or occupancy.” As a result, multiple courts have confirmed that defects impacting individual units are “matters affecting the common interest community” under CCIOA. Yacht Club II Homeowners Ass'n, Inc. v. A.C. Excavating, 94 P.3d 1177, 1179 (Colo. App. 2003). Detached single-family homes are “units” under CCIOA in the same way that condo and townhomes are.
Second, the fact that an HOA might not own the unit (or any other area of the community impacted by defects) is irrelevant to an HOA’s standing under CCIOA. In fact, the Uniform Act (upon which CCIOA is based) expressly states that an “association can sue or defend suits even though the suit may involve only units as to which the association has no ownership interest.” For this and other reasons, Colorado courts have confirmed that HOAs have the right “to pursue damage claims on behalf of two or more units’ owners with respect to matters affecting their individual units.” Id. at 1180.
Third, the manner in which a community’s governing documents happen to allocate repair and maintenance obligations between the HOA and the individual homeowners is irrelevant. As articulated by one court: “Provisions stating that the Association and individual owners have separate maintenance duties under the Declaration have no bearing on the Association’s standing under the CCIOA.” Heritage Vill. Owners Ass'n, Inc. v. Golden Heritage Inv'rs, Ltd., 89 P.3d 513, 515 (Colo. App. 2004).
The result of all this: Single-family home HOAs have the right under CCIOA to sue builders for construction defects impacting any portion of the common interest community, regardless of whether those defects are impacting individual homes or common elements and regardless of whether the HOA owns and/or is responsible for repairing and maintaining the impacted improvements. It is important that single-family home HOAs, and the community managers that work with them, be aware of these rights.
Shane Fleener is a partner and litigator at Hearn & Fleener, LLC located in Denver, Colorado. Hearn & Fleener is plaintiff’s law firm focused on housing and construction defect issues. For more information about Shane and his law firm, please check out their website www.HearnFleener.com