By Timothy M. Moeller, Esq. and Bujar Ahmeti, Esq., Moeller Graf, P.C.
As the snow begins to melt and people trade their ski poles for sunblock, community associations across Colorado will begin to turn their attention to opening their swimming pools. While everyone loves to have fun in the sun, maintaining and operating a swimming pool may present legal challenges for community managers and boards of directors. While some issues are unique, there are some questions that arise fairly regularly. Below you will find what a typical conversation may look like.
A local swim league approached the association and asked if it could use the pool to host its swim meets. Are there any legal issues of which we should be aware?
Typically, community association pools are private, and as such, are not subject to Title III of the Americans with Disabilities Act (“ADA”). Allowing a local swim league (and its supporters) to use the association’s swimming pool may transform the swimming pool from a “recreational facility” to a place of “public accommodation.” As a result, the association would have to ensure the swimming pool was compliant with Title III of the ADA. This was confirmed by the Department of Justice in a published Q&A regarding ADA accessibility where the DOJ stated that if a swimming pool/club located in a residential community is made available to the public for rental or use, then it is covered under Title III of the ADA. A pool categorized as a “public accommodation” would have to meet the ADA Standard for Accessible Design, which provides:
We have concerns about keeping the pool sanitary for all of our residents if we allow children in diapers to use the pool. Can we implement a rule that prohibits any person under the age of 4 from using the pool?
Even rules with the best intentions can find disfavor with the law. The Fair Housing Amendments Act (“FHAA”) prohibits discrimination in housing on the basis of race, color, religion, sex, national origin, familial status and disability. Familial status is defined, in pertinent part, as “one or more individuals (who have not attained the age of 18 years) being domiciled with a parent or another person having legal custody of such individual or individuals.” Some ask, “How can we be discriminating against families with children if we will allow children who are at least 5 years of age to use the pool?” When reviewing a rule or regulation for a potential fair housing discrimination claim, a reviewing court will look to whether there is a less restrictive measure to accomplish the association’s objective. Here, instead of enacting a rule adopting a complete ban on children under a certain age for sanitary reasons, an association is better served to promulgate a rule requiring an incontinent person or child who is not fully toilet trained to wear appropriate swim diapers or other appropriate waterproof sealing undergarments when entering the pool.
A homeowner who is disabled attended the board meeting last week and requested the pool be modified by installing a chair lift so that the homeowner can use the swimming pool. Does the board have to allow installation of the chair lift, and if so, who pays for it?
Under the FHAA, a community association may not discriminate against anyone with a disability by treating said person less favorably than those that are not disabled. The association must permit disabled persons to make reasonable modifications to existing dwellings or common areas that are necessary to afford the disabled person full enjoyment of the dwelling. A “reasonable modification” is a structural change made to existing premises, occupied or to be occupied by a person with a disability, in order to afford such person full enjoyment of the premises. However, an association can place reasonable conditions on the modifications. These conditions include requiring the disabled person to: (1) provide a reasonable description of the modifications; (2) provide reasonable assurances that the work will be done in a workmanlike manner; (3) make the modifications in accordance with the association’s reasonable aesthetic requirements that do not increase the cost of the modifications; and (4) obtain any required building permits. Generally, the requestor is responsible for the cost of the reasonable modification.
As is the case with operating any common area within a community association, a community swimming pool requires more than just proper chlorine levels to properly function. Of course, a community association can mitigate any potential risks by ensuring compliance with its governing documents and any federal or state laws.
Timothy M. Moeller is a founding partner of Moeller Graf, P.C. and has practiced community association law exclusively since 1999.
Bujar Ahmeti is an associate attorney at Moeller Graf, P.C. whose practice is dedicated solely to addressing the needs of Colorado community associations.
By Casey Colvin, Heritage Roofing and Contracting, LLC
When the Colorado winter begins weakly whimpering its way toward us at a leisurely pace, there is no better time to consider those pesky preventative maintenance items we’ve put off to enjoy our prolonged fall Season. When looking at our community through the lens of maintaining a space shuttle it’s easy to over-inspect, over-repair and over-worry. When encountering this mindset, try to remember a little acronym we call “ARG!”
Typically, the easiest way to prevent future problems is to review the current ones; walking through a community looking for debris fallen from roofs, rust around existing roof penetrations, stains from downspouts on concrete, and any landscaping that may be washing out or concrete that has heaved. These tell-tale signs are often the beginning of a larger problem and a great place to start the hunt for pre-emptive repair. Once you’ve compiled your list you can work from the top down.
Inspect those roofs! Now I don’t mean walk around and enjoy the view, rather hire a licensed roofing contractor to inspect and document any real issues that may be present in the future. Areas to pay particular attention to are communities with flat roofs and tile roofs. While shingles can often be maintained with minor sealant touch up, a new pipe boot, or a replacement shingle, tile roofs and flat roofing membranes come with maintenance items all their own. Especially on units where mechanical equipment has been serviced; ask your contractor to inspect for tile breakage or excessive wear on flat membranes as high traffic areas will present leaks first. Also, ask your contractor to document any flat roofing membrane that is shrinking from the walls and any areas where water may be pooling in excess. If these items are not corrected quickly, costly repairs are sure to follow.
Get those gutters cleaned, because there is nothing worse than an overflowing gutter creating a skating rink in your community. Short of encouraging the Avalanche to enjoy your new practice rink, there is a large liability in slips, trips, and falls. Pay special attention during the cleaning as areas with larger build-up of debris are likely great candidates for a gutter guard system. By installing the gutter guard, you can eliminate a substantial amount of year after year gutter maintenance costs and keep that water where it belongs.
Don’t forget the downspouts. These lateral drains are responsible for the lions-share of gutter overflows and are too often overlooked. Pay special attention to any downspout that drains into an underground pipe. If not properly cleaned and maintained they are prone to clogging, breakage, or blockage from vegetation growth. Be sure the contractor performing this repair takes the time to find the drain outlet, otherwise prepare for the flood!
By Justin Bayer, Caretaker Landscape and Tree Management
Spring is officially upon us, and that means it is time to get your landscape ready for the growing season and cleaned up from the fall and winter. April is arguably the most important time of the year for landscape in Colorado, and that is because there are many steps that need to be taken in order to set your community up for success.
Getting the proper start to your landscape maintenance is absolutely vital, and by following the tips and advice above you can ensure that your community will look healthy, green, and gorgeous all spring and summer!
Caretaker Landscape and Tree Management is a privately owned and operated company with locations in both Colorado and Arizona. Caretaker has been in business for over 30 years, and have built their reputation on customer service, exemplary communication, and through utilization of cutting-edge technology.
By Andrew Loyola, Denver Elevator Company
An overwhelming number of owners and managers I speak with are either dissatisfied with the performance of their elevators or frustrated with the lack of communication from their maintenance provider. “I never see my mechanic but I sure see the invoice”. “The inspector just came and all my tests are past due”
Here are some basic steps to follow to improve your elevator experience:
To prolong the life of your equipment, ensure your mechanic communicates well, checks in and out and keeps you informed, doesn’t miss maintenance visits, keeps car tops, pits and machine rooms clean and painted, timely performs annual safety tests and documents performance in the onsite MCP log.
If your building is over 25 years old and the elevator equipment is original, it’s a good idea to start planning and budgeting for an elevator modernization. How soon is an unknown? It really depends on the usage, type of equipment and how well it’s been maintained. The good news is, authorities having jurisdiction in your area will only mandate elevators be brought up to current code if you make a major alteration to the equipment, change in speed, capacity, controls just to name a few.
Also, the State of Colorado Conveyance Division and the Denver Fire Department are implementing a couple of code changes everyone needs to be aware of.
Andrew Loyola has over 30 years’ experience in the elevator industry and is President and Owner of Denver Elevator Company.
By Peter O’Brien, President Solutia Adjusters
In general, property claims should be filed when there is a benefit to the insured for filing a claim and should be avoided when there is little or no benefit to be gained. It is beneficial to the community to complete the steps below before filing a property damage claim, whether for a small water leak or a major hail event, since the repercussions of incorrectly filed claims can be significant for the long term financial solvency of the community:
Verify that there is actual damage and confirm the extent of anticipated damage: Too often claims are called in for the wrong thing and/or for damage that is much less severe than anticipated.
Confirm the date that the loss took place: Calling in a claim for the wrong date of loss can cause problems, including filing a claim with the wrong insurance company.
Verify there is coverage for the loss or damage: Exclusions and coverage limitations exist in every insurance policy that could limit or exclude certain types or aspects of loss.
Form a reasonable expectation of outcome: Before filing a claim it is best to have at least a reasonable expectation of the size of the loss and what benefit the community can expect after application of the deductible and any applicable policy limitations or exclusions.
Meet the policy deadlines and timelines: There are requirements in most policies that claims be filed as soon as it is reasonably known that a claim is necessary. Once damage is known, it is important to move quickly through the decision-making process and file the claim on time.
If you are unsure about a particular situation or have questions about claim best practices for Community Associations, please let us know.
Peter O’Brien a founding partner of Solutia Adjusters. He managed large and complex claims for over nine years and provides proactive training and claims resolution solutions for communities and commercial property owners.
By Ryan Gager, Hearn & Fleener, LLC
The new year is upon us and it remains to be seen if 2018 will bring more changes to construction defect litigation. After years of both sides battling, 2017 saw two major decisions in the construction defect industry. First, was the introduction of House Bill 1279, a step towards construction defect litigation reform. Whether it was a step in the right direction or a step backwards probably depends on who you ask. The bill was touted as a bipartisan effort toward addressing the housing squeeze in Colorado. Construction defect has long been a hot topic in Colorado as developers and builders cite how easy it is for homeowner associations to sue, along with the high cost of insurance as the reasons there are very few condominiums being developed throughout the state. Homeowner associations and those representing them argue that it is their only recourse when a building isn’t built correctly.
HB 1279 requires that a unit owners’ association obtain approval through a vote of unit owners before filing a construction defect claim. The bill requires an association to notify all unit owners and the developer or builder of a potential construction defect action, call a meeting where both the HOA and developer or builder have an opportunity to present arguments and potentially remedy the defect, and obtain a majority vote of approval from the unit owners to pursue a lawsuit before bringing that lawsuit against a developer or builder.
If you are a homeowner in a community that always wanted to be more involved or know what was going on, this bill ensures that. All owners will be notified of a potential claim, and all will have a voice in a community-wide vote. Majority approval of the owner vote does not include nonresponsive owners and the court will determine whether diligent efforts were made to contact the owner, whether mail was undeliverable, whether the owner is occupying the unit, and if other contact information such as email or a phone number were used. All of this means that unit owners should keep all records and contact information up-to-date with their HOA, to ensure they can be part of the vote.
The other significant development in construction defect litigation last year, was the Colorado Supreme Court’s decision in Vallagio at Inverness Residential Condo. Ass’n, Inc. v. Metro. Homes, Inc. The issue was whether a condominium developer can place a provision in the project’s governing documents, a provision that requires that any dispute with the developer be summitted to binding arbitration and prohibits the condo unit owners from amending the document to remove that provision. The state Supreme Court ruled that the homeowner association was wrong to sue the builder after disregarding bylaws, including the provision, that require binding arbitration to settle claims of construction defects.
The building industry favors binding arbitration as a more streamlined way of dealing with allegations of defects. However, HOAs and those representing them argue that this decision gives too much power to developers and builders. It remains to be seen if developers and builders will now use this decision to place provisions in governing documents of all developments.
Whether these decisions are considered victories for developers and builders or not, developers and builders still need to continue to implement successful strategies to mitigate risks of construction defect litigation. These include third-party inspections, insurance programs, familiarity with state code and standard requirements, disclosures to homebuyers and turnover procedures to associations.
The one thing we do know is, based on the decisions and outcomes of 2017, we are a long way from a definitive solution to construction defect in Colorado.
Ryan Gager is the Director of Marketing at Hearn & Fleener, LLC, a construction defect firm serving all of Colorado.
By Matthew Pearson, Wes Wollenweber, Lisa Greenberg, Gravely Pearson Wollenweber Freedman, LLC
As many managers and certain board members know, condo and townhome associations are often involved in difficult disputes with their insurance carriers over significant property damage resulting from catastrophic weather events. These disputes unfortunately can result in lengthy court battles, many of which are in federal court. Catastrophic weather is truly on the rise in Colorado. Consequently, these disputes are not going away. The disputes are often incredibly similar: a condo community suffers damage from a major storm, such as hail and/or high winds, and contractors or public adjustors provide estimates of the damage to property owners in response to the low estimates prepared by the insurance companies or their representatives. To combat this problem, managers should know that Colorado has a relatively new but powerful statute that punishes insurers for unreasonably denying and/or delaying payment on valid claims (Insurance Bad Faith). Because this statute exposes an insurer who violates it to significant financial exposure, insurance companies are fighting these lawsuits vigorously.
Certain trends are resulting from these legal battles. Among these emerging trends are insurance companies’ reliance on two policy provisions. These provisions are in nearly every commercial policy that covers a multifamily community, and insurance companies are claiming in litigation that homeowner associations are violating these provisions. The first provision requires policyholders to “promptly” notify their insurance company in the event of a loss. The second provision, commonly referred to as a fraud clause, arguably prohibits misrepresentations during the claims process.
Under the prompt notice provision, insurance companies try to defeat a breach of contract claim (based on denial or underpayment of a claim) by arguing that the policyholder failed to promptly notify them of the loss and therefore somehow caused the insurer some type of harm. Insurance companies are making the argument that multifamily community policyholders are obligated to take steps to inspect for weather damage as part of ordinary maintenance and that the failure to do so violates this provision. While it is not known yet how our courts will ultimately view this argument, it is important to be aware of this litigation trend.
While most, if not all, insurance policies do not require routine inspection for weather related damage, periodic photographs or video inspections, especially if used to compare to previous photo and video inspections, can help identify exactly when the damage occurred, preventing any prompt notice arguments. The lack of routine inspections can sometimes result in a community discovering weather related property damage months after the actual weather event occurred because the damage is not obvious and did not cause any leaks. Insurance companies are arguing that the lack of such routine inspections is somehow a breach by policyholders even though the insurance policies require no such routine inspection. It remains to be seen how federal and state judges will view this argument.
Under the fraud provision, insurance companies are working hard to establish what they call “reverse bad faith” by arguing that associations and their vendors are misrepresenting key facts or intentionally inflating estimates during the claims process. Insurance companies are developing these arguments to potentially recover insurance proceeds they have already paid under the pertinent policy. One of the reoccurring legal theories insurance companies have put forth involve allegations that the association’s roofing contractor has padded its estimate and, thus, padded the association’s claim.
In addition, as many community managers and board members know, because of the nature of these claim disputes, more and more communities are turning to Public Adjustors to serve as their advocates in the claims process. Certain insurance companies are fighting hard to paint a picture that Public Adjustors are conspiring with roofing contractors, and even the association’s community managers to inflate the value of the insurance claim. The insurance companies even cite to community management contracts that allow managers to earn a fee for assisting with the association’s claim as evidence of fraud or at least an incentive to inflate damage estimates.
Based on these trends, Associations, as policyholders, should be diligent to periodically document the condition of their community by photos or video. In the event of a loss, notify the insurance company as soon as possible and make sure that one person is designated to communicate with the insurance company or their adjuster. If the community needs to hire a contractor or public adjuster to assist them with the claim, make sure they are qualified and have experience evaluating and repairing damage. Insurance claims are often frustrating and time consuming. However, the Colorado law is in place to help policyholders obtain what they bargain for in paying premiums: fixing their property damage.
By Ashley M. Nichols, Cornerstone Law Firm, P.C.
Believe it or not, the electric car has a long and storied history dating back to the 19th century when inventors across the globe started tinkering with building cars which would run on electric power. In 1891, William Morrison of Des Moines, Iowa built the first successful electric automobile in the United States.
However, with the introduction of Henry Ford’s gasoline powered Model T in 1908 and the invention of the first practical electrical automobile starter in 1912 (which made gasoline powered vehicles more alluring because it eliminated the hand crank starter), the vision of the electric car began its demise. However, throughout the late 20th century and certainly in the 21st, we have seen advances in the electric vehicle, leading to greater horsepower, the ability to drive longer distances, and lower costs allowing more access to the market.
The growing interest in these vehicles should not come as a surprise if you’ve driven on the roads in Colorado. In September of 2017, the Denver Post reported that there were more than 10,000 EVs on Colorado roads compared to less than 100 in 2011. Colorado boasts the sixth highest EV market share in the nation and the fourth-fastest growing EV market, according to the report.
Colorado passed legislation in 2013 regarding community associations and electric vehicle charging stations, declaring that the “widespread use of plug-in electric vehicles can dramatically improve energy efficiency and air quality for all Coloradans, and should be encouraged wherever possible.”
So, why are we talking about this in 2018? While Colorado was one of the early adopters of legislation promoting the use of electric vehicles, associations should not consider it “old hat.” It’s certainly a trend affecting condos and HOAs across the nation in 2018. We are in a time where more and more individuals own or are looking to purchase electric vehicles. Because of this, associations, which may not have had to deal with this issue regularly since 2013, may have to entertain more requests for accommodation for owners’ electric vehicles. So, what exactly is the law in Colorado and how can you make sure that your association is compliant?
In Colorado, community associations are required to permit owners to install Level 1 and Level 2 electric vehicle charging stations on their lots and on limited common elements designated for an individual owner’s use.
Level 1 Charging:
The law does not require that associations incur expenses related to the installation or use of the stations. Because of the growing number of consumers purchasing electric vehicles (in large part to state and federal tax credits), community associations should consider adopting a policy regarding electric vehicle charging stations. Provisions which can be included in the policy are:
The bill also created the electric vehicle grant fund, which is used to provide grants to install recharging stations. Therefore, communities that want to participate in the progressiveness of today’s electric vehicle are encouraged to apply for grants to assist with funding electric vehicle charging stations on common elements as an added amenity for owners.
The primary purpose of the law in Colorado was to “ensure that common interest communities provide their residents with at least a meaningful opportunity to take advantage of the availability of plug-in electric vehicles rather than create artificial restrictions on the adoption of this promising technology.” And that is also certainly one of CAI’s initiatives. According to CAI,
by 2040, community associations will represent over 50% of the housing stock in the United States. By the same year, it is anticipated that electric vehicles will represent 35% of new car sales. To help promote these principles in your community or for questions about the potential impact of electric vehicles in your association or for your members, contact your legal counsel.
Ashley Nichols is the principal and founder of Cornerstone Law Firm, P.C. She has been in the community association industry for ten years, providing associations with debt recovery solutions for their communities. Cornerstone Law Firm represents Colorado communities in all areas of common interest community law. You may find out more at www.yourcornerstoneteam.com.
By Lindsay Smith, Winzenburg, Leff, Purvis & Payne LLP
This article is written by an attorney, but is not intended to be legal advice. It is general in nature. This article is intended to provide you with a broad understanding of the declaration amendment process and highlight some common problematic provisions so you can better discuss with community members, but it is not an in depth analysis. Every situation differs, and you should consult with your association’s attorney before undertaking a declaration amendment.
The declaration creates the community. C.R.S. § 38-33.3-103(13). It is common for attorneys and developers to work closely together to ensure that the declaration that is created properly reflects the community that is created, but this doesn’t happen in every instance. Sometimes, a declarant “saves money” by copying from another community’s declaration. Other times, miscommunications between attorney and client result in a declaration that reflects what the attorney understood to be the declarant’s intent, which actually has nothing to do with the declarant’s intent.
The difficulty in creating a declaration that properly governs a particular community can be exacerbated by the passage of time. Communities created before the adoption of the Colorado Common Interest Ownership Act (“CCIOA”) are not required to have the same declaration provisions as communities formed on or after July 1, 1992. These older declarations may have definitions that aren’t aligned with CCIOA, missing assessment and maintenance provisions, or provisions that are now contrary to public policy. While many of these provisions are superseded by CCIOA, their presence in your declaration can make governance and management an expensive headache. When your declaration does not allow the association to properly govern or function without constant legal opinions, you need an amendment.
Common Problematic Provisions
We see a lot of common problems in declarations. Some provisions that may need to be amended out, either by a limited amendment or by an amended and restated declaration, follow.
The Amendment Process
CCIOA governs declaration amendments in section 38-33.3-217. “Section 217” provides the process by which an amendment can be made, exceptions to that process, lender approval guidelines, and the judicial approval process. Your legal counsel should review your existing declaration to ensure that any unusual amendment provisions are appropriately addressed.
Section 217(1) creates the maximum threshold for most document amendments. Declarations – especially for older communities – frequently require approval by members representing 75% or more of the community. These provisions effectively precluded amendment in many communities, so the legislature took action in 2005 to amend the law. Now under Section 217(1), any amendment percentage greater than 67% is declared void as contrary to public policy. The amendment percentage can be as low as a simple majority of all votes in the association, but it cannot be higher – except when it is.
Sections 217(4) and 217(4.5) allow for higher percentage thresholds for amendments that create or increase special declarant rights, increase the number of units, change the boundaries of any unit, change the allocated interests of any unit, or change the uses to which any unit is restricted. Section 217(4) applies to pre-CCIOA communities; section 217(4.5), governing use restrictions, does not (don’t worry, it gets more complicated soon). These types of amendments require a minimum of 67% of the votes in the association, but are governed by any higher percentage specified in the declaration. Thus, a community could be forced to obtain unanimous consent for a change in how common expenses are allocated, if the original document required unanimous consent for such an amendment. The community would have to obtain unanimous consent to decrease this amendment threshold for future amendments as well.
If the association does not reach whatever percentage threshold is required by CCIOA and/or the declaration itself, all hope is not lost. Section 217(7) sets forth a process by which an association can obtain judicial approval of an amendment where the failure to reach the voting threshold is due to non-response (as opposed to substantial opposition). To ensure your community can proceed with judicial approval, make sure that you discuss the amendment at a meeting of the association, send out at least two notices of the amendment, and obtain at least half of the votes you would need to approve the amendment outright. Consult with your association’s attorney to make sure the meeting notice is appropriate for the proposed amendment, as document amendments have been a favorite topic of the Colorado appellate courts in recent years.
If you are proceeding with judicial approval, section 217(1) does not apply to the amendment. Appellate courts have not clarified whether this inapplicability is simply recognition that the court is approving an amendment rather than the homeowners, or whether this inapplicability means that the 67% threshold established by that section is ignored when calculating whether you obtained at least half of the votes you would need to approve the amendment outright. The cautious approach is to proceed under section 217(7) with whatever higher percentage is contained in the Declaration.
In addition, courts are not entitled to approve amendments that change the allocated interests, except to the extent that they change the portion of the allocated interests that is the common expense liability. You cannot obtain judicial approval of an amendment that changes the ownership interests in the common elements in a condominium, or the votes in the association in any community.
Declaration amendments, contrary to a statement made to me by an owner at a document amendment meeting, are not easy. You need to engage with legal counsel early to determine the appropriateness and viability of an amendment and create a roadmap to get from where you are to where you need to be. Do not try a declaration amendment on your own, but don’t be afraid of the hard work associated with an amendment. They may take years in some circumstances, but the benefit to the community is long term.
Lindsay Smith is a community association attorney with Winzenburg, Leff, Purvis & Payne LLP. Her practice focuses on general community association matters such as document amendments, governance, and document interpretation.
As general counsel to community associations throughout Colorado, my job is, first and foremost, to provide legal guidance to the Boards of Directors who represent and act on behalf of my clients. Often, my clients have their managers act as my main point of contact. This can increase efficiency and decrease unnecessary legal fees, but can create conflicts when the managers take actions they shouldn’t be taking – or fail to take actions they should take. This article addresses common errors that I see from the general counsel perspective, and offers tips intended to protect both my clients, and their managers, from conflict and liability.
Managers as Agents
Community association managers often walk a fine line between encouraging Board action and taking action for a Board. When a Board is non-responsive and time is of the essence, a manager may take action for the Board, knowing that the Board will agree to that action at a later date.
Don’t do that.
A community association manager is typically an agent of the corporation. As a corporate agent, the manager will have broad authority to entertain negotiations with third parties, and often has “apparent authority” to bind the corporation to a contract or other course of action.
Sometimes, a community association manager will exercise his or her apparent authority in an inappropriate context. For example, the manager will select a contractor rather than wait for the Board to vet bids, or will approve a payment proposal offered by a delinquent owner. When a community association manager steps into the Board’s shoes without legal authority to do so, third parties who rely on the manager’s actions are usually permitted to enforce the agreement made by the manager. While the third party will be entitled to the benefit of the bargain made, the manager might not be as fortunate. Because the manager has taken action on behalf of the corporation without legal authority, the manager may face personal liability from the corporation for the contract. Put simply, if a manager contracts for an association without legal authority, the manager might have to pay for whatever was in that contract.
This is a general statement and will necessarily be impacted by the language of a management agreement. While all contracts differ, it is crucial to recognize the scope of management authority and to avoid making assumptions regarding a Board’s potential decision. Additionally, Colorado law requires that certain decisions only be made by the Board (e,g. foreclosure). Make sure that you know what you are permitted to do on behalf of your client, and what you are not permitted to do. When in doubt, ask, and get it in writing.
Managers as the Board
A community’s governing documents will often permit the association to charge a negligent or improperly-acting homeowner with the costs associated with that owner’s bad acts. Communities subject to the Colorado Common Interest Ownership Act can assess unit owners for common expenses caused by their misconduct without additional authorization in the Declaration.
These provisions beg the questions – what is negligence? What is misconduct? And should the manager be the person who makes that determination?
Negligence is the failure to act in accordance with a legal duty, in a manner that causes harm to another person. The legal duty, in the community association context, may be a failure to maintain the interior of a condominium unit, a failure to report damages caused by exterior sources, or a similar failure to act as a reasonable person would in a similar situation. Misconduct is more affirmative in nature, and would include deliberate harm to common elements or gross negligence, such as drunkenly destroying a railing or cutting down a tree.
In light of these definitions, when a Board needs to determine whether a homeowner’s negligence or misconduct has caused $25,000.00 in damages to the common elements, a manager should step back and make sure that whatever determination is made, it is made by the Board. In the event the homeowner challenges the determination that he or she is responsible for the damage to the common elements, and the challenge rises to the level of a lawsuit, the manager and the association will almost certainly find themselves with a conflict. To avoid this, and preserve your client relationships, stay in your lane and make sure your Boards are making the fact-based decisions.
Managers as Psychic
Your clients may rely on you more than you know. If your management agreement provides that you are the association’s agent, you might have more responsibility than even you know! A recent case out of Texas held a property management company jointly and severally liable with the community association for failure to make repairs to a retaining wall as recommended by a reserve study. The court found that the management company’s contract imposed upon it duties to maintain the common elements. While the association did not expressly delegate the obligation to maintain the common elements to the management company, the management company assumed a duty to properly maintain the common elements by making this obligation part of the contract.
The court found that the management company and the association were liable for the failure to repair common elements, even after the membership refused to approve a special assessment intended to fund the repairs.
Additionally, a recent case out of Maryland held that owners had a negligence claim against the board for failure to properly bring a construction defect lawsuit against the developer in a timely manner. While the case did not address the manager’s liability, there could be liability based on a contract with the association. When managing relatively young communities, carefully consider whether there are defects in the developer’s construction, and consult with professionals (and the Board) to protect yourself, and your communities.
The lessons in these cases are twofold: managers need to carefully consider the content of management agreements, and associations need to be diligent and proactive in investigating repairs for possible construction defects as well as funding repairs and associated reserves.
While not all liability can be avoided, it can be mitigated – for both the manager and the association – by ensuring that all parties are on the same page with respect to what actions are appropriately handled by management, and what actions are not to be delegated by the Board.
CONTACT US(303) 585-0367
Click here for email
Did you see us on HOA Line 9?Need more resources?