The Colorado Common Interest Ownership Act
| Publication year | 1992 |
| Pages | 645 |
| Citation | Vol. 21 No. 4 Pg. 645 |
1992, April, Pg. 645. The Colorado Common Interest Ownership Act
The Colorado Common Interest Ownership Act ("CCIOA" or "Act"),(fn1) which will go into effect on July 1, 1992, is a comprehensive statute covering the creation and operation of common interest communities ("CICs"). Its goal is the effective and efficient operation of homeowner associations in those many areas in which associations are involved, such as assessment collection, insurance, rules and regulations, and the maintenance of common elements. The Act gives more specific delineation to the organizational structure of homeowner associations and better standardizes association operations. The Act also does much to address responsible and flexible development of condominiums, townhomes and planned unit developments ("PUDs").
CCIOA was based on the work product of the National Conference of Commissioners on Uniform State Laws and was modeled after the Uniform Common Interest Ownership Act ("Uniform Act"), which is a successor statute to the Uniform Condominium Act, Uniform Planned Community Act and Model Real Estate Cooperative Act. The official comments to the Uniform Act will help in interpreting the Colorado Act, although it was not adopted as part of the Colorado law. At least twenty-one states have enacted some version of the Uniform Act; thus, judicial decisions in these states can provide an additional source of guidance and interpretation of the Colorado statute.
The first three Articles of the Uniform Act were the basis for the Colorado Act. Article Four of the Uniform Act, which contained a number of consumer protection provisions, and Article Five of the Uniform Act, which established a regulatory agency, were not included in the new Colorado legislation.
Before CCIOA, the only guidance in Colorado in this complex area of legal relationships had been a smattering of court decisions and the Colorado Condominium Ownership Act,(fn2) which does little beyond making it possible to create an ownership interest in air space.(fn3) Prior Colorado statutory and case law did not resolve some of the most basic questions affecting this form of home ownership. For example, until recently a question existed concerning whether or not a recorded declaration could make a homeowner personally liable for association assessments.(fn4)
This article first discusses how the Act operates, the new terminology used under the Act, provisions unique to Colorado and the Act's application to new and existing CICs. Also, the article deals with the creation of new CICs, termination and merger, and association operations as effected by the new law. Finally, association collection powers under CCIOA and the election for pre-existing associations are analyzed.
The type of CIC, date of the CIC's creation (115 & 117),(fn5) number of units (116 & 119) and amount of annual assessments (116) determine which sections of CCIOA are applicable to the CIC. All small planned communities with less than ten units and new planned communities with annual assessments set in their declaration at less than $300 are specifically exempted from most of the Act's operation (116). Also, cooperatives and planned communities, all of whose units are restricted to nonresidential use, are not covered by the Act (116 & 121), although the declaration of such a planned community can bring it under the Act (121). All new condominiums are subject to the Act, regardless of the number of units, the amount of assessments or the commercial use of the units.
An effort has been made to have the Act operate in as many instances as constitutionally permissible. Concerns with the improper interference with existing property and contract rights results in some complexity in CCIOA's applicability. For example, the operation of the Act as to pre-existing associations is limited to events and circumstances occurring on or after its effective date of July 1, 1992 (117).
In the transition from current to new law, some new terms have been introduced and others have been redefined.
The Act defines "common interest communities" as real estate, the ownership of which requires a person, by virtue of a declaration recorded with respect to the property, to pay assessments and other items [103(8)]. Generally, condominiums, townhomes, PUDs and cooperatives are subject to the law.
Traditionally, Colorado law defined a condominium in terms of both ownership of common elements and the existence of horizontal boundaries to property, permitting ownership of air space.(fn6) Under CCIOA, the term "condominium" is defined strictly in terms of the method of ownership of the common elements of the CIC, regardless of the existence of horizontal boundaries or separate ownership of air space. This is consistent with the approach in most other states.
If ownership of the common elements is held in undivided interests among the unit owners, a condominium exists [103 (9)]. If the common elements are titled in the name of an association of unit owners, a "planned community" exists under the Act [103(22)]. In the vast majority of cases, a condominium under current Colorado law also is a condominium under the new Act. Townhomes and PUDs generally are "planned communities" under the Act. However, by virtue of the new law's reliance on the division of ownership of the common elements among the unit owners, even single family residences could form a "condominium" for purposes of CCIOA.
"Unit" is defined as a physical portion of the CIC designated for separate ownership or occupancy [103(30)]. CCIOA gives greater precision to what is physically included in and excluded from a "unit" (202). As a result, the allocation of maintenance and insurance responsibilities between the association and individual owners is more clearly delineated.
"Cooperatives" are defined in the Act as those CICs in which all real property, including the individual units, are owned by the association [103(10)]. Although this form of ownership has not been in common usage in Colorado, there are a few cooperatives in existence, and it is an area of continuing interest to developers. To avoid the use of cooperatives to circumvent the law, they were included in the Uniform Act and in the Colorado Act.
The definition of "declaration" under the Colorado law is expanded to include plats and maps, so that provisions of those documents will have the same force and effect as if included in what has been traditionally called the declaration [103(13)].
The above terms are used generally throughout the Act. Other specific definitions, in addition to the above, are integral to the Act's operations, and practitioners should carefully review them.
CCIOA reflects a number of significant changes and refinements from the Uniform Act. Some were modeled after changes made in other states which adopted the Uniform Act, particularly Washington and Connecticut.
The insurance provisions of CCIOA were based on an entire rewrite of that section of the Uniform Act, using current insurance terminology (313). Of particular significance in this area is the requirement of fidelity bonds for those handling association funds. Also, greater flexibility is given associations in the area of casualty insurance claims adjustment.
The Colorado Act leaves the areas of covenant enforcement and architectural control largely up to the association documents [205(1)]. This is an intentional departure from the Uniform Act because these matters are believed to be properly handled on an individual basis.
The provisions allowing existing associations to elect treatment under the Act are unique to Colorado (118). They are modeled after statutory procedures in Colorado providing for election by pre-existing corporations to be covered under the 1967 Nonprofit Corporation Act.(fn7) In addition, CCIOA permits pre-existing associations to amend their governing documents to elect treatment under CCIOA (120). These provisions allow for more flexibility than currently exists for addressing inadequate or poorly drafted declarations.
Other Colorado departures from the Uniform Act are aimed at CICs with inadequate or poorly drafted documents, filling in gaps in such documentation. For example, the provision on recovery of attorney fees, which is essential to effective assessment collection efforts, has been expanded (123). Attorney fees are granted to the party prevailing on each claim in litigation. This mutuality of remedy, not contained in the Uniform Act, should avoid possible constitutional problems, such as those which were found to exist with the previous forcible entry and detainer statute in Colorado (which granted attorney fees only to the landlord).(fn8) Collection costs prior to the initiation of a lawsuit are specifically made recoverable.
Limited protection from the waiver of assessment lien priority given CICs is the most controversial provision in CCIOA. The Uniform Act creates a nonwaivable statutory lien for assessments, granting six months of assessment priority over a first deed of trust (316). The Colorado statute further caps the amount of the lien priority [316(2)(b)(I)] and refines the calculation of the lien to make it clear which six months of assessments are covered [316(1) & (2)(b)]. Further, title companies, lenders and purchasers are given greater certainty and protection by strengthening the requirement that, on request, associations provide binding statements of amounts due...
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