Blog
By Chris Marion, 3.0 Management
It is common knowledge that community associations often struggle to adequately fund property maintenance and upkeep. The unfortunate outcome is something that no manager, board member, or HOA resident wants, yet it continues to happen year over year. At best, the property appears unkept and unsightly. At worst, the property may experience serious hazards or safety concerns due to deferred maintenance.
Board members and community managers alike always speak to the importance of being proactive, rather than reactive when it comes to property maintenance. Being a responsive manager is undoubtedly important in this proactive endeavor. Work orders need to be received and issued in a timely manner. Vendors need to be scheduled and given the right amount of information to complete the work successfully. However, the deferred maintenance scenario is not always a result of poor management. Rather, many times, an association’s lack of financial planning is the true cause. In this article, let’s look at five ways to adequately plan for property maintenance from a financial standpoint:
It is important to acknowledge the difference between these two categories and to understand when good money is being thrown at bad. A quick sealcoat might enhance the appearance of a parking lot for example, but if the asphalt needs a more comprehensive repair like a mill and overlay, the maintenance money would be better appropriated towards the larger capital improvement project.
Maintenance issues are not going anywhere in the community association industry. It is an issue that we will continually learn to solve in creative ways. Many communities are realizing the benefits of diligent analysis and the ability to look at community comprehensively. By investing time and effort into these types of planning activities, we’re seeing greater levels of predictability and confidence in HOA maintenance spending.
Chris Marion is the Chief Strategy Officer and founder of 3.0 Management. Chris is continually motivated to help HOAs develop comprehensive plans that enable communities to thrive both today and for many years into the future.
By Matt Blackmer and Rachel Schmidt, Higgins & Associates, Inc.
Preventative maintenance for water management around commercial and residential buildings is commonly overlooked unless an active leak is occurring from a roof or from a lower level basement area. Active water intrusion issues are primarily due to the lack of preventative maintenance on the exterior of the building. These overlooked conditions typically exist at the roof level in the form of roof covering or flashing maintenance, at the wall claddings (siding, stucco, etc.) due to a lack of sealant maintenance, and at the ground level due to a lack of surface water control.
Another problem area is the grading adjacent to foundation walls when improperly sloped and thus, does not provide for quick drainage of water away from the backfill zone. In addition to these flat or low-sloped areas, downspouts from the roof gutters are not always extended well away from the building and this backfill zone. Relative to preventative maintenance, flat or low-sloped areas of grading should be addressed to provide slope away from the building as required by the site-specific geotechnical (soils) report or as required by the International Building Code (IBC) or the International Residential Code (IRC), whichever is more stringent. For older buildings, the requirements of the IBC and IRC typically apply for preventative maintenance slopes. The IBC and IRC require a minimum 5-percent slope and specifically require that “Lots shall be graded to drain surface water away from foundation walls. The grade shall fall a minimum of 6 inches (152 mm) within the first 10 feet (3048 mm).”
In addition to addressing in low or flat spots in the graded landscaped areas adjacent to buildings, the roof downspouts should be adjusted, and downspout extensions should be added to discharge roof water at least 5 feet away from the building. Roof downspouts should not direct water over sidewalks or walkways to prevent icing during the winter and other potential slip hazards. Downspouts should also be adjusted to discharge well away from window wells or other areas where water could infiltrate to lower levels of the building. As part of preventative maintenance, water management around the building should be observed and repaired regularly as required to prevent water infiltration and other damages to the building and site components such as concrete flatwork.
Wall claddings should be observed regularly to assess and repair any necessary sealants at control joints, at window and door perimeters, and any other locations where sealants may have aged, pulled out, or otherwise failed. Flashings at windows and doors should also be reviewed regularly and repaired as necessary if damaged during the winter season by wind, snow, or ice. Regular maintenance of sealants and flashings at the wall claddings can help prevent windblown water from entering the building interior during rain events.
Similar to wall claddings, roof coverings, flashings, and gutters should be reviewed regularly and repaired as required. Gutters should be cleaned-out at least twice a year so that roof water is adequately drained off the building. We have seen numerous roof damage claims, including roof collapses, where the gutters were plugged with debris from trees and water and/or ice was allowed to backup onto the roof. It is also common for metal flashings to be pulled apart or otherwise damaged from snow and ice over the winter. These damaged flashing areas then become areas for water intrusion during summer rain events. Roof coverings, flashings, and gutter systems should ideally be reviewed at least in the spring and fall to provide ongoing protection of the interior building components from water intrusion.
With a regular preventative maintenance plan, building owners and homeowners can protect their properties from water intrusion with some basic and cost effective repairs. These annual reviews and repairs can help prevent potential significant damage if left unchecked. In an ideal situation, preventative maintenance can occur so that repairs are not only performed in response to emergency water leakage events.
Higgins & Associates, Inc. is a multi-disciplined forensic engineering firm providing the highest quality service to property owners, contractors, insurance companies, and attorneys. We offer comprehensive forensic engineering and expert testimony services specializing in the areas of structural, geotechnical, civil, mechanical and electrical engineering. Our firm also conducts cause-and-origin investigations of fire and explosion losses.
By Jesus Burciaga, CP&M (Community Preservation & Management, Inc.)
Grading and drainage are critical aspects of both multifamily and single-family residential development that are often overlooked despite the importance of proper grading and drainage. Parking areas or common areas of multifamily developments sometimes are not adequately graded, resulting in damages ranging from shortened parking lot life to catastrophic building damage, even liability hazards such as:
Poor grading/drainage is not always evident. When walking the property, the following can be a red flag that there are underlying issues:
A moderate amount of time is needed to address poor/negative grades to avoid significant property damage. Drainage corrections can consist of numerous solutions defined by specific grading and drainage issues.
While doing annual walks to inspect exterior aspects of a community are an industry standard, grading and drainage are often overlooked during these inspections. Grading and drainage issues are not evident to the naked eye. Ensuring that someone is looking out for the above issues can help extend the life of your community and buildings and avoid costly damages created by negative grading and drainage.
Jesus Burciaga has been with CP&M (Community Preservation & Management, Inc.) and its many entities for over three years. Being part of the growth of CP&M, a full-service General Contractor along with its in-house roofing division, R3NG, has been a fantastic journey. CP&M specializes in providing solutions for Commercial Property Managers, HOA-managed multi-family & single-family communities, REO rehabilitation, apartment industries, and government housing entities.
By Jamie Cotter And Jacob Hollars, Spencer Fane
The short answer is because the distinctions between Metro Districts and HOAs are murky to say the least. Additionally, people who are not integrally involved with Metro Districts often don’t use precise language. All of this leads to understandable confusion around the similarities and differences between Metro Districts and HOAs.
Metro Districts v. HOAs – How each are created.
Putting aside all of the legalese that we lawyers are famous for, the decision to create a Metro District or an HOA usually goes something like this:
A developer buys a vacant piece of property where it intends to develop a new residential community. The developer has two choices at this early stage. First, the developer can fund the costs associated with constructing all of the infrastructure and then build those costs into the price of every new home, resulting in a higher price for the new homes. This option also usually involves the creation of an HOA that is initially controlled by the developer. The HOA usually funds maintenance and improvements on HOA property. That is, while the infrastructure is usually dedicated to either a city or town, the HOA remains responsible for maintaining community resources (open space, parks, etc.). HOAs also routinely adopt covenants that the HOA then enforces through a board of homeowners. Homeowners pay for the maintenance and covenant enforcement through dues and special assessments.
The second option is to create a Metro District. A Metro District is created by the approval of a “Service Plan” by the local municipality (usually a city, town, or county). The Service Plan outlines the guideposts for the development. The Service Plan recites what powers the Metro District has, how much debt the Metro District can incur, and whether the Metro District will continue after such time as the development is built and the debt is paid off. Once the locality approves the Service Plan, a court must create the Metro District as a quasi-governmental entity and an election is held to determine who will serve on the board of directors.
Now comes the “cool” part (and yes, I recognize that the bar for what constitutes “cool” according to we lawyers is VERY low): the Metro District can sell tax-exempt bonds to fund the infrastructure costs. Because the bonds are tax-exempt, the cost to fund the infrastructure is less than if the developer had to obtain private financing to construct the infrastructure. When the Metro District sells tax-exempt bonds, a mil levy is assessed against the property in the Metro District. The mil levies are paid as taxes by the residents based on the assessed value of their property. And in most circumstances, a homeowner’s payment of their annual property taxes is tax deductible. This arrangement results in a lower home price because the developer does not have to recoup the costs of a private loan. Once the bonds have been repaid (i.e. the costs of the infrastructure have been satisfied), the Metro District must decide whether to dissolve or continue in order to maintain the community and undertake covenant control. When a Metro District continues to provide maintenance and covenant control, it fills the role of a typical HOA, resulting in confusion.
With that background, let’s dive into a couple of topics where the powers and responsibilities of Metro Districts and HOAs differ. For purposes of this discussion, let’s assume that the community is managed and maintained by either a Metro District or an HOA. It is common for a community to have both a Metro District and an HOA, but for simplicity we are going to consider an either/or situation.
Ownership and Maintenance of “Common Areas”
The main difference between Metro Districts and HOAs with respect to common areas relates to how those services are paid for and the tax advantages available to Metro Districts as owners of property. If a Metro District owns and/or maintains property within its service area, it can charge the homeowners who benefit from that ownership/maintenance for the resulting costs. This can be done either by the imposition of an operations and management mil levy or fees. If these costs are paid by an O&M mil levy, those costs are typically tax deductible to the homeowners. If the costs are paid through the imposition of fees, those fees would be treated similarly to HOA dues. A Metro District can impose fees for services that are rationally related to the costs of providing those services. The Metro District must set its fees through a resolution adopted at a public meeting. However, there is no formal “vote” of the homeowners at an election. Conversely, HOAs can impose fees and assessments in accordance with their declaration and covenants and the provisions of CCOIA.
Building Additional Infrastructure or Public Improvements
After the development has been completed and the community is operational, it is possible for the community to need to obtain additional property for new infrastructure or public improvements. For example, this can happen when a community grows to such an extent that it needs a new rec center or park. In that instance, if the community is managed by a Metro District, Metro Districts have the power of eminent domain. That means that a Metro District can take private property without an owner’s consent. The Metro District must pay just compensation for the property, but it does not need the owner’s cooperation to obtain the property. Conversely, HOAs do not have the power of eminent domain. Therefore, the HOA would have to find private property to purchase. Any purchase would have to be done voluntarily. The ability to condemn property for a public purpose is a major benefit inuring to Metro Districts but not to HOAs.
Collection of Fees
Both Metro Districts and HOAs can engage in covenant control and can impose fees related to those covenants. When a Metro District assesses a fee for services and that fee is not paid, the outstanding fees automatically become a perpetual, statutory lien against the property served. That is, the Metro District obtains a lien against the property by operation of law. That lien is also considered a tax lien and is superior to all prior liens except prior tax liens. When an HOA assesses a fee for services and that fee is not paid, the HOA can also obtain a lien against the property served. While a portion of the HOA lien may have priority over prior-recorded interests, like mortgages, it is junior to any tax lien, any Metro District lien, and any liens recorded before the recording of the declaration. The portion of an HOA lien that is superior to a first mortgage on the property is limited to the extent of six months’ worth of common expense assessments that would have become due before the filing of a foreclosure lawsuit. In short, Metro District liens are “easier” to foreclose given their priority.
Conclusion
Metro Districts and HOAs are responsible for maintaining numerous residential developments in Colorado. They both serve important purposes and often work together rather than the “either or” situation discussed in this article. While Metro Districts and HOAs are similar, they have key differences of which developers and homeowners should be aware.
Jamie Cotter, Esq. and Jacob Hollars, Esq. Jamie and Jacob are both litigators at Spencer Fane. They specialize in helping municipalities, special districts, and other quasi-governmental entities that are facing litigation by advising them on how to pursue or defend against claims so that they can move through the litigation process as efficiently and successfully as possible. They have a keen understanding of the specific laws affecting these entities and represents them in the district court and appellate court level.
By Connor B. Wilden, Orten Cavanagh Holmes & Hunt, LLC
In theory it sounds great: “Annual assessments may not be increased by more than the increase prescribed by the Consumer Price Index.” No unexpected assessment increases! No ability for a board of directors to arbitrarily choose to increase dues for some vanity project! What more could a homeowner ask for?
The reality, though, is that fixed annual assessment increases present far more issues than potential solutions. While a fixed annual assessment increase may cause a wide multitude of problems, those problems generally stem from one singular issue: an underfunded community. When a community becomes underfunded due to restrictions imposed by a fixed annual assessment increase, its obligations do not go away.
To best show potential downfalls and solutions for when a community becomes underfunded due to a fixed annual assessment increase, let’s look at an example which may be familiar to many communities throughout the Front Range.
There is a hypothetical community somewhere south of Denver, but north of Colorado Springs. It has a provision in its declaration which caps the annual assessment increase to no more than a 3% increase each year. This hypothetical community (“HOA”) consists of twenty townhomes and was founded in the late 1980s. It has not regularly increased its assessments since its creation.
In the past decade, the area in which this HOA exists was hit by multiple catastrophic hailstorms. Fortunately, the HOA has not been directly impacted by any of the hailstorms. However, this does not mean the HOA has escaped unscathed, as many of its neighbors have been hit and damaged by the hailstorms. As such, insurance premiums across the entire Front Range have substantially increased so that insurance carriers may meet their increased obligations due to the higher-than-average amount of significant hailstorms.
When the HOA received its insurance renewal notice this year, its insurance premiums had increased nearly 50%! In developing the proposed budget for the next year, the Board of Directors quickly concluded that there was no way the HOA would be able to meet all its obligations when, as per the Declaration’s assessment cap, it can only increase the annual dues of its members by 3% each year.
This HOA must come up with a creative solution in order to meet the obligations set forth in its Declaration, while also accommodating the challenge of insurance premium increases.
Often, communities in Colorado which have fixed annual assessments increases will also have provisions in the assessment section that states if more than the fixed increase is desired, such an increase may take effect if approved by a certain portion of the community. Unfortunately, this HOA lacks any language in its documents that permits its owners to approve an annual assessment more than 3%.
Without that authority, the HOA has a few choices of how it may proceed:
Having a reasonable and balanced budget is vital to a healthy common interest community. Although it is difficult to forecast factors such as significant insurance increases, one tool a community has to ensure an adequate budget for major expenditures while keeping an eye out for its owners’ pocketbooks is to make sure it has an up-to-date reserve study. Having an up-to-date reserve study allows a community to have a great understanding of what community elements may need replacement soon, or what may need replacing in ten or twenty years. This allows a community to adequately plan and save for large projects.
While fixed increase annual assessments may present challenges for your community, these challenges are not without solutions. Unfortunately, these solutions may not be straightforward or easy to implement. As such, if your community is currently facing any problems due to fixed increase annual assessments, you should contact your community association attorney.
Please note, this article, while attempting to be general in nature, is not reflective or indicative of any specific community and may not apply to your community.
Connor B. Wilden is an attorney at Orten Cavanagh Holmes & Hunt, LLC. He provides general counsel and transactional services to community associations throughout Colorado.
By Damien M Bielli, Vial Fotheringham, LLP
The Colorado Common Interest Ownership Act prohibits an association from selectively enforcing declarations, articles, and bylaws. The statute commands that, “[d]ecisions concerning the approval or denial of a unit owner's application for architectural or landscaping changes shall be made in accordance with standards and procedures set forth in the declaration or in duly adopted rules and regulations or bylaws of the association, and shall not be made arbitrarily or capriciously.” C.R.S. 38-33.3-302(3)(b).
Selective enforcement by an HOA is a failure to uniformly apply the HOA’s rules and regulations to all owners. This can occur in architectural requests, collection of unpaid assessments and most commonly in enforcing rules and regulations. Simply, the HOA is guilty of selective enforcement when it picks and chooses how enforcement is carried out and against whom the rules are enforced. This can occur intentionally or by oversight and is problematic when the Association faces judicial scrutiny.
Selective enforcement is like selective hearing. As a husband and father, I have been accused of selective hearing. Some may believe this is intentional. More often than not it is merely a failure to pay attention. In the same way, selective enforcement is viewed by many as an intentional act of the association. This leads to animosity between owners and board members and can lead to claims of discrimination. Most significantly, it is an affirmative defense to enforcement actions against owners. Most of the time, however, selective enforcement arises from benign causes and is preventable.
Many selective enforcement concerns can be alleviated by instituting and following comprehensive and specific policies. These policies should be clear and concise and provide a timeline of enforcement from inception to conclusion which can be followed by owners and board members. Strict adherence to policies removes subjective decision making which may be viewed as “selective” and ensures that each violation follows the same path to conclusion.
In evaluating an owner’s claim of selective enforcement, courts in Colorado will evaluate the enforcement process of the association as well as its history of enforcement:
“It appears from the log of the Plaintiff that it has consistently looked into possible violations as set forth in Plaintiff's Exhibit 27. As an example, it appears that a total of 125 violations were issued in the 13 months period between April 2007 and May 2008. There were also 57 [Design Review Requests] processed between January 2006 and May 2008. That does not require that every violation be sustained or even pursued upon proper investigation but it does indicate that there is no selective enforcement going on here.”
Weatherspoon v. Provincetowne Master Owners Association 2010 WL 3522559.
It is important that the association keep detailed records of its enforcement actions not only to provide supporting documentation for individual violations, but also as evidence of its uniform enforcement throughout the community.
Equally important to a uniform and neutral enforcement policy is uniformity and consistency in reporting violations. Associations that rely on management to observe and report violations can look to the management contract for frequency and depth of inspections. This reduces the likelihood that an owner will be successful on a claim for selective enforcement. Associations that are self-managed should adopt guidelines for inspections and reporting violations. The guidelines should identify the depth and frequency of inspections in order to remove any subjectivity. This reduces inconsistency in the inspection and reporting process and serves to further neutralize allegations of selective enforcement.
Finally, associations who have been more relaxed in enforcing the Declaration may find themselves in a precarious position once the Board decides to pursue violations. One Colorado Court stated:
“In Colorado, a homeowners' association is estopped from enforcing a covenant against a particular owner where (1) the association had full knowledge of the facts, (2) unreasonably delayed in asserting an available remedy and (3) there is intervening reliance to the detriment of the lot owner. Woodmoor Improvement Assoc. v. Brenner, 919 P.2d 928, 931 (Colo. App. 1996); Holiday, Acres Property Owners Assoc., Inc. v. Wise, 998 P.2d 1106 (Colo. App. 2000) (homeowners association estopped from enforcing a covenant upon a lot owner). See Cole v. Colorado Springs, Co., 381 P.2d 13 (Colo. 1963) (corporation waived right to enforce a restriction when in the past it acquiesced and refrained from enforcing it against others).”
Schneider v. Eglantine Condominium Association Inc. 2009 WL 2626287 (Colo.Dist.Ct.) (Trial Order).
While the Court concluded that the association waived its right to enforce the documents in this particular case, the decision was based upon the association choosing when to enforce its governing documents.
While some Board members may be sympathetic to certain homeowners or consider certain violations as more or less significant, the association, through its board, has a duty to uniformly and consistently apply the rules and regulations to every owner. Failure to do so will likely result in frustration of enforcement efforts and financial consequences.
Damien M Bielli, is a Partner with Vial Fotheringham LLP. Damien has an extensive background in Homeowners’ Association Law, Non-Profit Corporate Governance, trial advocacy, insurance defense, professional liability, coverage disputes, employment law, construction, commercial litigation, and contracts.
By Ashley Nichols, CAI-RMC Editorial Committee Chair
The recent Marshall fire that ravaged Boulder County destroyed nearly 1,000 homes. In the face of the most destructive fire in Colorado history, many of those affected are now dealing with what to do in the aftermath. Rebuilding their homes (and their lives after loss) takes a community. It also isn’t something that will, or can, happen overnight. One of the questions that we are already facing is that of what happens to assessments for those owners in affected community associations that lost their homes, or where common area amenities were destroyed. And it’s a tough one – but it is important to remember that owners’ assessments go to pay for common expenses of an association, which continue even during the rebuilding process.
Associations are non-profit corporations with Boards that have a fiduciary duty to protect, preserve, and enhance the property values in the community. Part of the duty is to ensure that the governing documents for the Association are followed, and in the case where disaster affects a community, such as with the Marshall fire, while it may be hard to see right now through the tragedy, continuing to ensure that assessments are paid will help communities rebuild.
While not the same type of tragedy, in 2020 (and ongoing) the COVID pandemic posed a similar question of how to deal with assessments for impacted owners due to something out of their control. Incomes of many homeowners in communities were likely significantly reduced and/or eliminated. And the best advice during that time remains the same here, for owners who lost homes and/or parts of their communities due to the fire – to be compassionate. Each community board will have to make difficult decisions based on the different circumstances of each of their owners, which means considering the hardships that their residents may be experiencing and be willing to work with residents to ensure that homeowners and their associations are both able to meet their needs to support their families and communities.
The Rocky Mountain Chapter of Community Association Institute is here to support our communities during this difficult time as well. Donations from business partners, management companies, and homeowner leaders totaling over $7,500 have been received and distributed to partners in order to help those affected by the fire. We will continue to use the resources that we can to help these communities rebuild, better and stronger.
By Deborah Wilson, Springman, Braden, Wilson & Pontius
In addition to the myriad of COVID-19-related moratoria and executive orders since March of 2020, the Colorado legislature also implemented a number of new laws affecting the Landlord/Tenant relationship in 2021. Most of those changes are related to residential leases so it is important that those living and renting units in covenant-controlled communities know and understand these new changes, and for Community Association Boards to understand what restrictions they may impose on homeowners who rent out their units. A Board must also manage its expectations of how quickly a Landlord/Homeowner is able to resolve lease or rule violations by a Tenant within the community in today’s legal climate.
HB 21-1121: House Bill 21-1121 became effective 6/25/21. Among other things, (1) the bill restricts a residential Landlord’s right to raise the rent more than once in a 12-month period after the first year, regardless of the term of the lease, (2) the bill prohibits a sheriff from executing on a residential writ of restitution for at least 10 days after the judgment for possession enters, and (3) if no written agreement exists between the residential landlord and the tenant, the landlord must give at least 60 days written notice of rent increase and may not serve a Non-Renewal Notice of oral lease where the primary purpose is to increase the tenant’s rent more than once a year. As a practical matter, Community Association Boards should require all Landlords to have and provide a copy of a written lease agreement and understand that a Homeowner as Landlord may face delays in the eviction process under this new law.
SB 21-173: This 15-page bill became effective 10/1/21 and makes sweeping changes to the laws governing residential leases in Colorado, particularly in the area of late fees, the wording of residential leases, and the eviction process. With regard to the residential eviction process, a residential tenant now has up until entry of judgment for possession to pay all amounts stated on the demand (including any HOA fines listed) plus any subsequently accrued rent to the Landlord or to the Court. The Court shall set the trial for a date 7-10 days after the answer is filed; however, except in cases arising from substantial violation of lease/law, the court may delay the trial date where good cause exists, or a delay is justified. As a practical matter, Landlords often face long delays in the eviction process right now. The law governing the warranty of habitability have been expanded to increase defenses for tenants, which in turn create legal problems for Community Associations who should increase response time for repairs and treatment for infestation of pests and rodents in the community common areas. The bill imposes new substantial damages upon a Landlord who removes/excludes a tenant from a residential home without resorting to court process, except where abandonment is clear.
HB 20-1332: House Bill 20-1332 became effective 1/1/21. It adds discrimination based on source of income as a type of unfair housing practice. A residential Landlord may not refuse to rent or show a rental unit, or accept an offer to rent, or make a unit unavailable because of someone’s “source of income.” The Landlord may not advertise in a discriminatory way and must now accept public housing INCLUDING SECTION 8 VOUCHERS if the applicant otherwise qualifies, so long as the initial payment to Landlord is made timely. There are two exceptions in the bill: (1) Landlord who owns or manages 3 or fewer residential units is exempt for the entire bill and (2) a Landlord who owns 5 or fewer rental units is required to comply with this bill, except that the small Landlord is not required to accept Section 8 vouchers for any single-family rental units they may own. Community Association Boards should not prohibit Homeowners from renting to Section 8 tenants or otherwise discriminate based on the tenant’s source of income.
SB 20-108: Senate Bill 20-108became effective 1/1/21 and creates a private right of action for violation of civil rights against a Residential Landlord who discriminates based on an Applicant’s or Tenant’s actual or perceived immigration status. Housing providers may not inquire about, request, or disclose information regarding immigration status, may not harass or intimidate a tenant because of immigration status, and may not refuse to rent to them if they otherwise qualify. Community Associations may not prohibit a Homeowner from renting to tenants who are not lawfully present in the U.S. or require a homeowner to demand social security numbers for their tenants.
In addition to compliance with the above new laws, Landlords and Community Associations should be aware of existing Colorado laws on Application fees, rent receipts, gas appliances, carbon monoxide detectors, habitability, Fair Housing, screening restrictions as well as governmental restrictions based on protected classes, assistance animals, restrictions on occupancy standards and unrelated tenants. Landlords leasing to tenants governed by Community Associations should always incorporate by reference the Community governing documents into their leases, require tenants to read and abide by Community Rules and Regulations, and be subject to any damages or fines assessed by the Association for failure to comply.
Deborah Wilson is an attorney and managing shareholder at Springman, Braden, Wilson & Pontius, PC. Springman, Braden, Wilson & Pontius has been assisting Community Association Boards, Landlords and Property Managers for over 30 years in their collections, evictions, Fair Housing, and general counsel needs.
By Penny Manship, Burg Simpson Eldredge Hersh Jardine, P.C.
Within days of the tragic partial collapse of the 12-story beachfront condominium at Champlain Tower South in Surfside, Florida, on June 24, 2021, the leadership of Community Associations Institute (CAI) met and began outreach to other organizations with a goal of providing policy recommendations to ensure such a catastrophe never happens again.
In October 2021, CAI published the Condominium Safety Public Policy Report: Reserve Studies and Funding, Maintenance, and Structural Integrity (Report). The Report was the result of more than three-months of investigation by three task forces and over 600 volunteers, engaged in meetings, conversations, surveys, research, interviews, and identification of clear recommendations. It provides policy positions adopted and approved by CAI regarding “Reserve Study and Funding” and “Building Maintenance and Structural Integrity.”
Reserve Study and Funding Policy Positions:
CAI recommends state laws that mandate reserve studies and funding for all community associations. The Report contains recommendations for public policies to be adopted into state laws, including but not limited to:
While the Report acknowledges that it is unknown if updated standards in this area would have prevented the collapse at Champlain Towers South, the authors noted that “80% of community managers, board members, and contractors in community associations surveyed across the U.S. felt it was critical that their association have adequate reserves in the event of a major infrastructure failure or construction need.” Clearly, education regarding the purpose of reserve studies and funding is necessary because, while they are important planning tools for budgeting for replacement and repairs based upon normal life cycles, they are not intended to deal with existing building conditions or defective original construction.
The Report also contains a Summary of State Reserve Fund Laws as of October 2021. The table below summarizes those states with mandatory existing reserve study and operating funds requirements.
Mandatory Requirement
States Where Adopted
Reserve studies for condominium associations
California, Colorado, Delaware, Hawaii, Nevada, Oregon, Utah, Virginia, Washington State
Reserve studies for developers
California, Delaware, Florida, Nevada, and Oregon
Reserve funding for condominium associations
Connecticut, Delaware, Florida, Hawaii, Illinois, Massachusetts, Michigan, Minnesota, Nevada, Ohio, and Oregon
Reserve funding for developers
Arizona, Delaware, Florida, Nevada, Oregon, and Wisconsin
Building Maintenance and Structural Integrity Policy Positions:
CAI recommends laws that impose additional requirements upon developers at turnover and prior thereto, including but not limited to:
With respect to this last requirement, the Report sets forth CAI’s recommendations for “[m]andatory building inspections of the major structural elements owned or maintained by the community association for all multi-family buildings of concrete, load bearing masonry, steel, or hybrid structural systems such as heavy timber including podium decks.” The inspection recommendations, which apply to new construction and existing buildings, set forth the following timelines and scopes:
The Report also recommends legislation that empowers a community association’s governing board to impose a special assessment or borrow funds necessary for “emergent life safety repairs” without a vote of the membership, regardless of any provisions in the governing documents to the contrary.
CAI’s Federal Legislative Action Committee also addressed in the Report “Federal Solutions and Policy Priorities.” The priorities discussed include easing financial burdens on local governments, engaging federal housing agencies regarding loan products, and easing financial impacts on homeowners through changes to income tax codes.
CAI’s Best Practice recommendations are also included in the Report with respect to reserve studies and funding and building maintenance.
We should all recognize that this is only the beginning of what is sure to be a long process of changes on the federal, state, local and community levels. Community managers, board members, and homeowners must continue to be involved in educating themselves on how proposed legislation, regulations, and changes to governing documents will impact their communities and keep them safe.
Penny Manship is an attorney at Burg Simpson Eldredge Hersh Jardine, P.C. She has over 20 years of experience representing homeowners associations and homeowners in construction defect litigation. She is a member of the CAI-RMC Mountain Conference Committee.
By Kerry H. Wallace, Goodman & Wallace, P.C.
Often in planned communities and rural areas owners purchase adjacent lots which remain undeveloped. The purpose typically is to protect privacy and views for the developed adjacent lot. Merging the lots into one or adding landscaping and improvements can require the community to address development standards and plat amendment legal requirements. Recent legislative changes relative to taxation of adjacent undeveloped lots likely will lead to many communities needing to insure that correct legal processes are adhered too and that the communities’ governing documents are up to speed.
Tax Implications
The Gallagher Amendment, adopted in 1982, requires the legislature to annually adjust the tax rate for residential real property but set a fixed assessment rate for "all other taxable property" at twenty-nine percent. Because of this requirement, the General Assembly has continually lowered the assessment rate for residential real property, the result being a significantly lower assessment rate for “residential real property.” For example, during the years 2013 to 2015, the assessment rate for residential real property was 7.96 percent. In contrast, the tax rate for vacant land remained at twenty-nine percent. With such a large discrepancy, landowners often seek classification of adjacent undeveloped land as residential land under Section 39-1-102(14.4)(a), C.R.S. (2019) which expressly contemplated the classification of multiple parcels as residential land. In those situations in order to qualify, per the law applicable until now, any undeveloped parcels were required to be: (1) contiguous with residential land; (2) used as a unit with residential land; and (3) under common ownership with residential land.
In 2020 the Colorado Supreme Court decided Mook v. Summit County Board of County Commissioners, 457 P.3d 568 (Colo. 2020), which addressed the standards used to determine if an undeveloped parcel can be considered residential for tax purposes. The holding lead to an amendment of the portion of the statute that defines Residential Land, with the following being a new key aspect of that defined term: “A parcel of land without a residential improvement located thereon, if the parcel is contiguous to a parcel of residential land that has identical ownership based on the record title and contains a related improvement that is essential to the use of the residential improvement located on the identically owned contiguous residential land. “Related improvement” means a driveway, parking space, or improvement other than a building, or that portion of a building designed for use predominantly as a place of residency by a person, a family, or families.”
Community Considerations and Approaches
Depending on how the enforcing governmental agencies apply the new statutory definitions relative to Residential Land, communities may see an increase in requests to merge lots and/or add “Related Improvements”to a contiguous undeveloped lot in order to acquire or maintain the residential classification for tax purposes. Communities can allow for smooth governance on such matters by adopting policies and procedures relative to merging lots, amending building envelopes and constructing improvements on adjacent lots. In the event of a required amendment to a final plat or plat map, it is important to insure that the requirements of the Colorado Common Interest Act at C.R.S. 38-33.3-217 (1) are met, which requires the approval of 67% of the owners to amend a plat (this is lowered to 50% if the Declaration for the community provides for that lower percentage). This means that any plat amendment should receive association approval through the Board, 67% approval by the owners as well as meeting all governmental requirements. A plat amendment that does not meet these requirements is arguably void.
KERRY H. WALLACE is a Partner in the law firm Goodman and Wallace, P.C. located in Edwards – 15 miles west of Vail. Kerry’s practice focuses upon resort based common interest communities including governance guidance and compliance with the ever-changing common interest community legal landscape. Kerry served on the Eagle County Planning and Zoning Committee from 2003-2007, is a current Business Partner of CAI-RMC and has been a speaker and panel member at numerous CAI Colorado - Rocky Mountain conferences.
