By Meaghan Brown, AGS Construction
Community managers are tasked with submitting requests for proposals (or RFPs) day in and day out. As a vendor, we see RFPs come across our desks in various forms, some more detailed than others. It is not uncommon to receive a few words scratched onto a sticky note, with the expectation of accurately submitting a bid based on those few notes alone.
A properly written RFP is important for various reasons. Not only does it help vendors understand the Board’s expectations and how they would like the job to be outlined or broken out, but it also helps the Manager in obtaining apples-to-apples bids from the various vendors. This leads to a quicker turnaround time in obtaining the estimate, as it reduces back and forth questions from the vendor to the Manager. It also allows the Board to make a clear decision and better understand that in which they are investing.
Having a clear understanding of your Board of Directors (BOD) is an integral first step to writing an effective RFP. Knowing the level of experience the BOD has with projects, who from the BOD will be spearheading the project, and overall BOD goals as it relates to the project are essential considerations to start from.
At a minimum, the Board of Directors should take a physical look at the work and agree on the desired outcome. A community’s needs must be fully addressed in the scope and specifications. The Board of Directors should be involved in the scope development, so they know exactly what they are investing in and to ensure proper expectations are set. Ideally, the BOD should walk the project with the Manager and bidding contractors to determine details prior to the formal RFP being issued.
Setting and managing the Board’s expectations is another crucial step to this process. The timeline is key here… for example, is this project something they’d like to take care of this year or are they simply looking into budget numbers? When would they like all of the bids turned in? What is the timeline of when they plan on making a decision and when they want the project to start? Will they be holding interviews to meet the contractors before making the decision or would they hire someone based only on their resume? These are all fundamental questions to ask your BOD and information to provide to the vendors that are bidding the work.
Next, you need to develop the scope. Based on BOD input, create a specific written scope of work. Ask a trusted business partner (such as a contractor or engineer) for assistance. For example, if the Board is interested in an exterior repaint, find out exactly what is to be painted (siding, trim, fascia, eaves, mailboxes, garage structures, trash enclosures, etc.) and what type of paint is to be used. Include written job processes and expectations (spray and back roll, two coats, schedule, etc.) The goal here is to develop a comprehensive scope that all vendors will bid thus ensuring apples-to-apples bids.
An easy way to get some help with this is to reach out to manufacturer representatives. Specifications are typically provided by a material manufacturer and should accompany the scope of work. A specification details material used, preparation process, application procedures, etc. These are factors that can drastically affect the price. For example, when renovating balcony decks, there is a big difference between using a multi-layer balcony waterproofing system and using a cheaper elastomeric deck coating instead. They both look similar but perform differently.
Subsequently, to ensure everyone is on the same page, the Community Manager should schedule a pre-bid site walk with all bidding contractors. Ideally, this happens all at once with all bidding contractors present at the same time. Don’t be afraid to insist that all contractors follow the scope of work and specifications provided (and feel free to state that in your RFP). At the same time, other ideas may be recommended by a contractor, so be sure to encourage the bidding contractors to provide alternate materials/methods as a separate line item.
Recognizing how this process works for the bidding vendors will facilitate being able to set proper expectations for your Board and the contractors alike. Once the RFP is received by the Account Executive or Business Development Representative, the estimating team reviews the RFP and scope of work to clarify details. The estimator will then inspect the property and determine the means/methods for project execution. Once the estimating team quantifies and calculates scope of work, the team then reviews the bid for accuracy, feasibility, schedule, exclusions and unforeseen conditions. At that point, the Account Executive formats this information into a bid-packet presentation and delivers the proposal to the manager. It’s important to note, that on average, the bidding process takes vendors 40+ hours on a $100k project. This is not including the community manager’s time or any revisions.
Below is the information that should be included in the RFP:
1. General Information: Address, year built, number of buildings/units, access codes, site map.
2. Detailed Scope of Work: Paint, concrete, siding replacement etc.
3. Specifications: What materials are being used and what is the application process.
4. Pricing: How would the client like the pricing broken down?
5. Additional Requirements: References, insurance requirements, schedule demands, staging.
6. Protection of Property: What is the expectation for any damage that occurs during the project?
7. Warranty: Make sure everyone is offering the same duration.
8. Deadlines: When do you need everything submitted?
Lastly, upon receipt of the bid, comes bid review. Be sure to review bids with the Board of Directors to ensure each item that is spelled out in the RFP is covered. Utilizing a ‘bid comparison worksheet’ comes in quite handy here while evaluating the multiple bids. Interviewing potential contractors with the Board will also help to speed up the process and reduce back-and-forth questions.
All in all, there are several factors that can make it difficult to create the perfect RFP, but we all know a bad one when we read it. Be sure to take the time to develop an RFP correctly from the get-go, as it will ultimately save you time in the long run. By following the aforementioned steps, not only will you receive higher quality responses, but you also will be more likely to end up with a vendor who will give you the results that you desire.
About the Author: Meaghan Brown is the Director of Business Development AGS Construction and works with HOAs, multifamily, and commercial properties for their exterior, communitywide reconstruction projects. Meaghan acts as the liaison between their production team, the community/property manager, board of directors, and residents throughout the course of each project. Some of their core services include roofing, carpentry, EIFS/stucco, concrete, painting, decks/ walkways, steel fabrication, and construction defect services.
By Geneva Cruz-La Santa, CP&M
Crawl spaces are built when a basement is unwanted or is otherwise not feasible. They are vital to a residence to provide access to electrical wiring, mechanical systems, and plumbing. When adequately sealed and maintained, crawl spaces provide a defensive buffer between the damp ground and the interior structure of a home and can additionally aid in radon mitigation.
Due to changes in code and new construction practices, crawl spaces in buildings constructed ten or more years old may need updates to comply with current standards. Serious consequences can occur if your crawl space is not routinely maintained. For example, debris left in a crawl space from the original construction in combination with poor interior grading and moisture problems can result in mold growth. Mold can develop from condensation or groundwater entering the crawl space. Inadequate exterior drainage measures can also create moisture problems; this often results in water accumulating around the outer foundation walls and making its way into the crawl space. Structural damage from either cracks or gaps in foundation walls can allow water to seep into your crawl space exacerbating problems. Also, plumbing leaks from cracked or corroded pipes can cause water to accumulate in crawl spaces. Mold growth needs to be identified; mold mitigation plans must be conducted to eliminate the cause and address severe issues adequately.
Often Associations and Managers are not aware of what to watch for with crawl space maintenance. The following can be red flags when walking properties:
Preventive maintenance begins with a simple inspection. A specialized professional can identify pre-existing or potential problems that need to be appropriately addressedbefore they lead to more extensive and costly repairs.
Geneva Cruz-La Santa has over 19 years of experience with CP&M and its related companies. CP&M specializes in providing solutions for Commercial Property Managers, HOA-managed multi-family communities, REO rehabilitation, apartment industries, and government housing entities.
By Kevin Olmstead, Western States Fire Protection
The life safety of a commercial or residential building has many aspects. One vital concern for life safety is the maintenance and inspection of your fire system. A building may also have a fire alarm panel and a sprinkler system.
If the building has a fire panel, several electrical devices are connected to the fire panel to detect a fire and send out notification if one is detected. The basic design of a fire system will include smoke or heat detectors, pull stations, and horns/strobes. Depending on the building size, there might be other devices as well.
If the building also has a sprinkler system as part of the design, the building will have sprinkler heads throughout the structure. The sprinkler system is wired to the fire panel and has various switches to indicate water flow or system tampering.
The fire panel is like a laptop on the wall wired to all system devices described previously. These various devices can communicate system issues that cause the panel to beep and indicate an abnormal status. When the panel is beeping, please don’t ignore it; instead, you need to call for service.
If an actual fire is detected by an activated sprinkler head or smoke/heat detection, the fire panel will alert residents by activating the horns and strobes throughout the building. Everyone should evacuate immediately. The fire panel will automatically contact the monitoring call center, which dispatches the fire department and contacts emergency on-call personnel for that building.
If there are sprinkler heads in the building, these heads are activated to release water or a mixture of water with glycerin/glycol. The sprinkler head is only activated by heat (not smoke), causing the head to release.
However, if an object accidentally damages the head, that will activate the head as well.
All fire systems need regular maintenance and annual inspections to operate correctly continuously.
There are national and local fire codes that provide specific requirements for each district.
Generally, a system needs to be inspected by a licensed fire protection company at a minimum of once a year (maybe more, depending on the local jurisdiction codes). The local fire department may also do spot inspections at any time to check if a property complies. If the fire department finds deficiencies during their inspection, they will write up the violations that must be addressed promptly. The fire department’s random inspections do not replace the properties’ requirements to complete annual inspections and repairs with their fire protection vendor.
Whenever the fire panel starts to beep (driving you crazy), it indicates something is in trouble status; this is NOT an alarm unless the horns go off. This beeping indicates that the fire panel and/or sprinkler system needs service to determine the issue. When the fire panel is in a troubled status, the property must contact its fire protection vendor for service. Don’t wait until you have more severe issues.
Maintaining the rooms where your fire sprinkler systems are located is crucial. The fire sprinkler rooms are labeled as the “riser room .”If the fire panel is in the same room as the sprinkler systems, then you will likely see that door also marked with “FACP” (fire alarm control panel). Most fire panels are in the same room as the fire sprinkler controls, but they can be in another location in the building. If the fire sprinkler rooms are on a building’s exterior, they need proper heating to prevent freezing damage. It is recommended to turn your heaters on in these rooms at Halloween and off at Easter. Don’t forget to turn off heaters in spring because excessive heat damages electronics and batteries.
You can opt to have a temperature alert placed in the sprinkler room and wired to the fire panel.
This device will communicate whenever the temperature drops too low in the room. This simple temperature alert can save thousands of dollars of damage caused by a frozen sprinkler system during a cold snap.
Always include a line item in your budget for annual inspections and ongoing fire alarm and sprinkler repairs. Plan ahead in your budget for more oversized ticket items. As the system ages, you will need repairs and replacements. The average lifespan of a fire panel is 12-15 years.
Inquire with your fire protection vendor for an approximate cost for repairs or replacement.
The fire systems in a building are designed to protect lives and property; therefore, they need to be regularly inspected and maintained to operate when required appropriately.
Kevin Olmstead has worked with Western States Fire Protection for 12 years. Western States Fire Protection is a full-service fire protection company with over 40 locations across the United States.
By Stephane Dupont, Dupont Law Firm
The words “fiduciary duty” are ones that many of us in the community association industry come across frequently. It is especially common to hear these words thrown around loosely when one or more members of a community association board of directors are “misbehaving”. In legal terms, it can be simply defined as owing a duty of good faith and loyalty to the association with an obligation to act in its best interests. But what does this mean in practice and layperson terms?
Pretend for a moment that you are one of three owners of a small culinary business that prepares meals for residents of a small group of assisted living facilities. Let’s assume that you are also a single parent of ten (10) young children, so it is critical that the business succeeds to make ends meet. Would you show up every day and get it your best? What would you do to ensure that your business flourished and stood out from others? Would you ensure the financial stability of your business by providing a high quality of service to your customers? How would you deal with customers, especially difficult ones? In the event of a dispute between business owners, would you make sure to respect the majority decision of the owners to ensure that the business can move on to ‘bigger and better’ things and convey an image of stability and productivity to your customers? As a board member, embodying that same passion for success and order is critical towards ensuring that fiduciary obligations are met. So how can members of the board minimize their liability against claims that they violated their fiduciary responsibilities? Here are suggestions that may help board members stay on track and out of legal trouble:
Stephane Dupont is the owner and an attorney with The Dupont Law Firm that provides comprehensive legal services to common interest communities throughout Colorado.
By Alyssa Chirlin, Smith Jadin Johnson PLLC
It is an issue that every community association faces homeowner requests for association documents. But what are homeowners entitled to, and what documents, if any, can an association withhold?
Colorado law establishes some requirements which an association's governing documents may supplement. Colorado community association law is focused on increasing the transparency of associations' operations and, along these lines, requires that specific documents be maintained as association records and that those records be available for inspection to all owners.
The list of documents to be maintained as records by an association is extensive and includes meeting minutes, an association's most recent reserve study, ballots, proxies, and written communications among board members related to any action taken without a meeting, among other documents. These documents must be made available for inspection to owners upon request. An association does not have to compile or synthesize information; it can require that owners submit their requests in writing and describe the documents requested with reasonable particularity. However, the association can never require owners to provide a purpose for their request. Their membership in the association alone entitles them to this information.
There is certain information that the association must withhold from inspection for privacy reasons. This information includes personnel, salary, or medical records of individuals and any personal identification and account information of members and residents. Personal identification information consists of obvious bank account information, social security numbers, and driver's license numbers, but it also includes telephone numbers and email addresses, which may only be disclosed with the owners' prior written consent.
The association may withhold any document that is not specifically required by Colorado law to be maintained as a record. This includes specific documents listed in Colorado law as able to be withheld, including architectural drawings, contracts under negotiation, and records relating to individual owners other than the requesting owner. It also includes documents that an association maintains pursuant to requirements in its governing documents if those documents are not also specifically required to be held as an association record by Colorado law. While this allows associations some discretion in its productions to homeowners, it also allows for inconsistent handling of homeowner records requests.
In order to combat these potential inconsistencies, associations should draft comprehensive inspection and copying of records policies. Not only are such policies required by Colorado law, but they provide necessary guidance to associations. Colorado law does not dictate the contents of an inspection and copying of records policy, but an effective one should not only address what discretionary documents will and will not be produced but should also contain provisions regarding the submission of owner requests, timelines for responding to such requests, the ability of the association to charge for fulfilling the requests, and how the association will fulfill the requests. A thorough policy can act as a quick- reference guide and eliminate the need to analyze the statute every time the association receives a records inspection request.
Once adopted, consistent compliance with the policy can minimize the risks of discrimination allegations against the association and of financial consequences for an association's failure to allow inspection of requested documents in a timely manner. If an association receives a written request from an owner via certified mail with a return receipt requested, and does not allow inspection within thirty days, the association may be liable for fines of fifty dollars a day. An association's inspection and copying of records policy should therefore provide a turnaround time of fewer than thirty days for inspection of records upon receipt of an owner request.
In these ways, a comprehensive records inspection policy will meet legal requirements and increase owners' transparency while protecting the association from liability. While it may seem inconsequential, the inspection and copying of records policy is an important tool in an association's arsenal that should not be overlooked.
Alyssa Chirlin is an attorney at Smith Jadin Johnson, PLLC, a law firm that handles all an association's legal needs, from daily governance issues such as collections and drafting governing documents to insurance claims and construction defect matters.
By Amanda Ashley, Altitude Community Law
HB22-1137 revises the “pre-turnover” steps that the association must take before it may proceed with a foreclosure action. Most importantly, and perhaps the biggest point of contention giving rise to this portion of the bill, is that an association may not foreclose on a unit if the lien consists only of one or both of the following: (i) fines; or (ii) collections costs or attorney fees that the Association has incurred and that are onlyassociated with assessed fines.
And of course, the association must follow all required steps of the statute, including the new requirements set forth by HB22-1137, before it can turn the matter over to an attorney to proceed with foreclosure including a board vote on whether to turn the matter over for foreclosure.
Prior to initiating foreclosure, the association must first contact the owner at least one time and send the required delinquency notice just as it would need to if it were turning the action over to an attorney for collection.
However, one of the primary differences here is the information that must be in the delinquency notice if the Association intends to proceed with foreclosure. While the owner must be offered the repayment plan as s/he would have been for the collection action, the owner is allowed to choose the monthly repayment amount, as long as the monthly repayment amount is at least $25.00 per month. What does this mean for balances that will not be paid off over 18 months at $25.00 per month? HB22-1137 remains unclear, but theoretically, it means there will likely be a large balloon payment in month 18 to cover the remaining balance due at that time.
Once the above Notice of Delinquency has been sent to the owner, the association must wait 30 days to see if the owner declines the repayment plan. If declined, then the Association may proceed with turning over the file to an attorney to initiate foreclosure proceedings. HB22-1137 is silent as to what happens if the owner simply fails to respond to the payment plan notice rather than expressly declining the repayment plan. At this time, the general school of thought seems to be that the failure to respond is, in effect, the same as declining the repayment plan.
However, if the owner does accept the repayment plan, then the association may not proceed with a foreclosure proceeding unless and until the owner defaults on the repayment plan at least three times during the 18-month plan. The owner has up to 15 days after the due date to make each monthly installment, so the owner is not in default unless the monthly installments have not been remitted by the 15th day after the installment is due.
Keep in mind that if an association has violated any foreclosure laws (whether discussed above or any other applicable foreclosure laws), the owner may file a lawsuit against the association to seek damages for the violation. The owner must file the lawsuit within 5 years after the violation occurred and, the association may face up to $25,000.00 in damages, plus costs and attorney fees, if the Court finds that the foreclosure violation occurred. Lastly, if the association does foreclose, the law now prohibits board members, an employee of a management company that represents the association, or an immediate family of board member or employee, from purchasing the property at the foreclosure sale.
By Bujar Ahmeti, Esq. and Timothy Moeller, Esq., Moeller Graf, P.C.
What many community association members in Colorado believed would be temporary measures to accommodate social distancing guidelines due to the COVID-19 pandemic have since become standard operating procedures for those same community associations. Even as the emergency orders were lifted and the restrictions on in-person gatherings expired, the ease and convenience of conducting meetings virtually has been one byproduct of the COVID-19 pandemic that is here to stay.
Administering a Virtual Meeting
The Colorado Common Interest Ownership Act (“CCIOA”) does not have any specific provision that addresses electronic or virtual meetings. The Colorado Revised Nonprofit Corporation Act (“Nonprofit Act”), in C.R.S. § 7-127-108, provides that:
“Unless otherwise provided in the bylaws, any member may participate in an annual, regular, or special meeting of the members by, or the meeting may be conducted through the use of, any means of communication by which all persons participating in the meeting may hear each other during the meeting. A member participating in a meeting by this means is deemed to be present in person at the meeting.”
The Nonprofit Act, unlike CCIOA, expressly allows for virtual or electronic meetings as long as there is not any prohibitive language in the community association’s bylaws. The first step is to check the governing documents, especially the bylaws, to determine if there is any language that would prohibit the community association from conducting a virtual or electronic meeting. If not, then any platform chosen (e.g., Zoom, Microsoft Teams, etc.) must allow all persons attending the meeting to hear each other during the meeting.
While CCIOA does not address electronic or virtual meetings, it does require that certain information be included in any meeting notice for a valid meeting to be held. C.R.S. § 38-33.3-308(1), states that any member meeting notice include “the time and place of the meeting and items on the agenda.” This requirement of a “place” for the annual meeting does not completely align with the idea of everyone attending a meeting from the comfort of their own home. Whether “online” is considered a place for purposes of the statute has not been tested in court. Thus, some Associations try to satisfy this requirement by holding a “hybrid” meeting that consists of the Association naming a “place” in the meeting notice (e.g., the clubhouse for the Association, the address for the management company, etc.) where a board member or the community manager is physically present and all other owners attend virtually.
Voting at an Electronic or Virtual Meeting
While conducting and attending electronic or virtual meetings can be quite convenient for the membership, conducting a vote during an electronic or virtual meeting may sometimes be anything but convenient. In some instances, an actual vote may not be necessary if the meeting is to ratify a budget and the number of attendees does not reach the voting threshold to veto the budget or it is a board election where the number of candidates equals the number of vacant positions.
However, if the need to hold a vote is required, then the community association will want to ensure that it has implemented a system to accept and verify proxies prior to the commencement of the meeting. C.R.S. § 38-33.3-310(2)(a) provides that “votes allocated to a unit may be cast pursuant to a proxy duly executed by a unit owner.” The Nonprofit Act, in C.R.S. § 7-127-203(2), provides broad authority for a member to designate a proxy. Prior to the date of the electronic or virtual meeting, the association will want to ensure there is an internal procedure in place to accept and validate any submitted proxies.
Prior to the rise in popularity of electronic and virtual meetings, many associations conducted any necessary vote(s) that occurred outside of a physical meeting by utilizing a mail-in ballot. To that end, C.R.S. § 7-127-109 provides that “unless otherwise provided by the bylaws, any action that may be taken at any annual…meeting of the members may be taken without a meeting if the nonprofit corporation delivers a written ballot to every member entitled to vote on the matter.” Similar to the section of the Nonprofit Act that permits electronic and virtual meetings, the first step for an association is to determine if the association’s governing documents permit the use of a mail-in ballot. If so, then the mail-in ballot must contain the following information pursuant to C.R.S. § 7-127-109(4):
1.The ballot must indicate the number of responses needed to meet the quorum requirements;
2.The ballot must state the percentage of approvals necessary to approve each matter other than the election of directors;
3.The ballot must state the time by which a ballot must be received by the nonprofit corporation in order to be counted (typically 60 days or less); and
4.The ballot must be accompanied by written information sufficient to permit each person casting such ballot to reach an informed decision on the matter.
During the height of the COVID-19 pandemic, many associations conducted electronic or virtual meetings (without a vote being held at the virtual meeting) in conjunction with a mail-in ballot to complete an election of directors that was contested (raise your hand if you ever had to utilize the “two-envelope” system for board member elections). However, this process is costly and time consuming. Inevitably, it also led to ancillary issues such as whether or not nominations from the floor would be allowed. These issues, in part, have caused many associations to explore the option of using an on-line voting platform such as VoteHOAnow.com or The Inspector of Elections to name a few.
Initially, it is important to note that neither CCIOA nor the Nonprofit Act contain any statutes that address using an on-line voting platform. The Nonprofit Act permits three (3) different voting procedures:
1.Voting at an annual or special meeting in-person or by proxy;
2.Action by Written Ballot (C.R.S. § 7-127-109); or
3.Action Without Meeting (C.R.S. § 7-127-107).
When a community association’s bylaws do not expressly authorize electronic voting, the association may still be permitted to use an online electronic voting platform if it also complies with C.R.S. § 7-127-109. Under C.R.S. § 7-127-109, the Association would be required to deliver a ballot to each Owner. However, the statute does not address how the delivery must occur. Typically, community associations will meet this requirement by mailing a copy of the ballot to each owner, especially when there are owners without email addresses registered with the association. It will be important for the selected service provider (or the association’s legal counsel) to ensure that their ballot meets the requirements of C.R.S. § 7-127-109 and can be legally delivered to each owner.
The board should be mindful that C.R.S. § 7-127-109(5) provides that, “[u]nless otherwise provided by the bylaws, a written ballot may not be revoked.” In a situation where a ballot is only mailed to the owners, any returned-and-voted ballot cannot not be revoked, and the vote marked on the ballot will be final. If owners are given two methods to cast their ballot, and an owner returns a paper ballot and votes on-line, the association will need to ensure that only the ballot that is received first is counted to ensure compliance with C.R.S. § 7-127-109(5). The instruction on the ballot should be clear that the choice is either electronic or paper, not both.
As community associations continue to utilize technology and electronic platforms to conduct meetings and complete association business, community associations will need to be mindful of the statutes that address meetings. These statutes are in need of an upgrade to keep pace with the changing times. What we can say, with experience, is that the rise of video meetings has dramatically increased owner participation and inclusiveness, and that has been a large step forward in transparency in community association operations.
Moeller Graf, P.C. is a law firm whose practice is dedicated exclusively to providing legal services to Colorado’s community associations. Tim Moeller, Esq. has practiced community association law since 1999 and co-founded Moeller Graf, P.C. with David Graf, Esq. in 2005. Bujar Ahmeti, Esq. is an associate attorney at Moeller Graf, P.C. and has practiced community association law since 2010.
By Shane Fleener, Hearn & Fleener, LLC
What is a “construction defect”? A construction defect is any condition or improvement that was designed, installed or constructed in a manner that falls below the applicable standard of care. Generally speaking, this encompasses any construction that does not comply with the building code requirements and/or the applicable plans, specifications, soil reports, geotechnical reports and/or the manufacturer installation instructions for the products used.
What are the legal ramifications and remedies if construction defects exist? Under Colorado law, construction professionals owe a legal duty to homeowners (and homeowner associations) to construct homes and common interest communities in a non-defective manner. If this duty is breached, and assuming legal defenses do not apply, construction professionals are required to pay affected homeowners or associations the “reasonable cost to repair” the defects, as well as the reasonable cost to repair damages resulting from such defects.
This is the single largest benefit to asserting a defect claim: ensuring that the builders (or their insurance carriers) provide the funds necessary to repair the construction defects that they caused. Absent the assertion of a claim, homeowners or associations may be required to pay the significant cost for such repairs through increased dues or large special assessments.
Who Can Assert a Construction Defect Claim? Residential homeowners in Colorado have standing to assert a construction defect claim with respect to problems impacting their own home and lot. This is true regardless of whether the homeowner is a first purchaser or purchased from another homeowner.
Generally speaking, homeowner associations also have standing to assert a construction defect claim both on the association’s own behalf, and on behalf of two or more of the association’s homeowner members. Importantly, this standing extends to all portions of the common interest community, including common elements and individual lots and units, and regardless of whether the community is comprised of multi-family units or single-family homes. Moreover, an association’s standing generally exists regardless of any division of ownership or repair/maintenance responsibilities that exist between the association and the homeowners.
What is the Process and Timeline for a Construction Defect Claim?
A construction defect claim can be divided into three steps: (1) Completion of all pre-claim requirements under Colorado law; (2) the assertion of a formal legal claim or arbitration; and (3) the post-litigation repair process.
Colorado law contains two pre-claim requirements. The first is the 75-day Notice of Claim Process contained in CDARA. This requirement applies to homeowners and associations alike. The second pre-claim requirement is the “builder meeting” and homeowner vote process contained in CCIOA. This requirement, which generally lasts around 90-days, only applies to homeowner associations. While these two processes are statutorily required, they are also important. First, they provide valuable transparency to homeowners and give everyone in the community the right to vote on the issue of whether a claim should be asserted. They also give the builder an opportunity to resolve the problems before any formal legal claim is asserted.
Only if the Notice of Claim process is unsuccessful and the homeowners vote to approve the association’s course of action should a formal legal claim be asserted. If a formal claim is asserted, homeowners can generally expect the process claim to last between twelve and eighteen months.
After the claim is resolved through settlement or judgment, the post-litigation repair process begins. While every case is different, that process can last anywhere between six months and three years. While the goal is always to recover sufficient funds to perform all repairs, practical and legal considerations sometimes result in a lesser recovery. In that case, the homeowner or association should prioritize repairs with the assistance of counsel or a construction manager. For obvious reasons, life safety and water intrusion issues are almost always addressed first.
Time Limitations for the Assertion of a Construction Defect Claim
There is a limited amount of time to assert a defect claim under Colorado law. Colorado’s statute of repose prohibits the assertion of a construction defect claim six (6) years after “substantial completion” of the defective improvement. “Substantial completion” is traditionally linked to the Certificate of Occupancy date for the improvement alleged to contain the defect. On the other hand, the statute of limitations prohibits the assertion of a construction defect claim two (2) years after the discovery of the defect or a “physical manifestation” of the defect. Importantly, this two-year period can begin to run as soon as a homeowner, or a homeowner association, observes any condition related to a defect, regardless of whether a defect is known to exist at that time.
There is a strong argument that neither the statute of repose nor the statute of limitations can begin to run until Declarant turnover of an association’s board has occurred. For that reason, diligent homeowner associations and community managers should have their communities evaluated within the first six years after Declarant turnover.
About the author: Shane Fleener is the managing partner of Hearn & Fleener, LLC, a law firm specializing in the representation of homeowners and homeowner associations in construction defect disputes. Having practiced in the field since 2006, Shane is actively involved with legislative efforts aimed at protecting homeowner rights and has been recognized as a leader in the industry by Super Lawyers, Law Week Colorado, Lawyers of Distinction and Best Lawyers.
By Sean Davis, DHA Construction Management
Buying a new home is a milestone experience full of choices for your colors, flooring, and finishes. For months, you stop by and check on the progress. The anticipation builds until, finally, you close on the home and move in. As the months go by, you notice little flaws here and there but nothing that raises those little red flags. A couple of years go by, and you start seeing more prominent flaws in your home and neighborhood. The builder is long gone and so is the warranty. You begin to fear the problems are systemic and will only continue to worsen.
I know what it feels like; I’ve been through this both as a homeowner and board member. It can be very emotional; after all, it's your home. It's where you create so many incredible memories. Buying a lemon should not be one of them.
Is there anything the HOA board of directors can do? The answer is yes. The most likely option is to consult a construction defect attorney, but when should you call one? Here are a few questions to help guide you.
If you answered yes to two or three of these, you should call an attorney and get their opinion.
Once you start down the path of a construction defect claim, there are a couple of things to expect. First, it is a slow process and your board must be committed to staying the course. The board and community manager must keep excellent records to ensure continuity as board members and managers change over time. We had three different community managers and four different board members by the time the entire litigation process, preconstruction, and construction had concluded.
Once an attorney accepts your case, they will gather evidence and conduct destructive or intrusive testing. A team of construction experts will most likely remove relatively small sections of the buildings in the community. Then a forensic engineer will inspect the openings and other observable defects. They will note their observations, take pictures, and then the construction team will return to repair the test sections. The legal teams will generate and exchange many reports to prepare for a trial or negotiated settlement. This process can take several months to complete.
Once the legal process has run its course and nears completion, the board will be given copies of all the files from the claim, including pictures, reports, engineered drawings, and emails. In our case, there were more than 140 GB of files. To give you a sense of the enormity of information, it's about 15,000 volumes of the Encyclopedia Brittanica!
You will also receive an essential document called the Rough Order of Magnitude, also known as the ROM. It is the detailed list of defects, associated measurements, and costs for the entire claim. There are a couple of critical points to keep in mind. The list of defects may be lengthy, and some will be more serious than others. It would be beneficial to ask your attorney to provide a matrix that details what defects were noted at each home and for the forensic engineer to give a qualitative rating based on their observations. It will help the upcoming preconstruction team prioritize the defects.
Finally, it is possible that the financial outcome will not be enough to cover the repair cost for every defect. The board may need to prioritize the most severe defects to be addressed first. Ask to meet with the legal team and their forensic engineer to review the ROM and the settlement together. They will have the most insight into the depth and breadth of defects and help build the foundation moving forward in the reconstruction phase.
Sean Davis, PMP, MBA, is the President of DHA Construction Management. He has served on his HOA Board of Directors for more than seven years and led their effort for a successful construction defect claim. His company provides advice and construction consultation to Colorado community associations. With more than thirty years of construction experience, his mission is to help HOAs by eliminating construction risk, increasing the quality of construction, and maximizing the construction budget for them and the community managers who care for them.
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:
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?
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.
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