Ccioa: Basic Concepts of Balance
| Publication year | 1992 |
| Pages | 721 |
| Citation | Vol. 21 No. 4 Pg. 721 |
1992, April, Pg. 721. CCIOA: Basic Concepts of Balance
The new Colorado Common Interest Ownership Act ("CCIOA")(fn1) is a long statute, almost overwhelming in size. Nevertheless, the topics it covers and most of its policy solutions are familiar to real estate practitioners. Although CCIOA is written mostly within familiar conceptual frameworks, it shifts a few of the burdens and presumptions from the current law or practice.
This article provides a basic introduction(fn2) to the conceptual landscape---how CCIOA "thinks"---by looking at CCIOA's closed world and some basic principles it employs to provide balance among competing interests.
CCIOA's world is made up solely of common interest communities ("CICs"). The "community" is real estate that is described in a recorded declaration(fn3) and which has property in each of two categories: (1) separately owned or occupied and (2) owned or occupied in common, either directly or through an association.(fn4) The persons ("unit owners") who own(fn5) the separate property ("units") must, because of such ownership, share financial responsibility for the property that is owned in common ("common elements").(fn6) CCIOA requires that the unit owners execute their responsibilities for the common elements through a corporation of which they are the sole members ("association").
CCIOA classifies all CICs into one of three mutually exclusive subsets: condominium, cooperative or planned community.(fn7) Each subset is defined by the single criterion of who owns the two categories of property. In a condominium, the unit owners directly own both the units and the common elements.(fn8) In a cooperative, the association owns both the units and the common elements.(fn9) All other combinations of ownership fall into the planned community category.(fn10) CCIOA regards the three forms of CICs as being related enough to treat similarly.(fn11)
CCIOA presumes to regulate the balance in the relationships among a core group of players---developers, unit owners, associations and lenders---for the common good of all.(fn12) It does not trust that a fair balance will be achieved without legislative intervention. Thus, CCIOA does not exist primarily to create flexible new legal mechanisms. Although CCIOA may have that effect in some situations, in others it will create new rigidity.(fn13) The sections below show that achieving balance, with an occasional rigidity, is the heart of this new law.
CCIOA offers developers some new flexibility.(fn14) For example, CCIOA permits developers some innovation in how they expand their projects (although sophisticated project documents have employed innovative expansion devices for years under existing law). CCIOA also gives developers---perhaps for the first time---an ability to contract the size of a project without facing foreclosure.
Nevertheless, CCIOA appears to assume that balance must be achieved mostly by curbing the power of developers. CCIOA primarily protects associations and unit owners in the following ways:
1. It makes the declarant liable for all expenses related to real estate that is subject to development rights in the declaration.(fn15) Development rights include the right to (1) add or withdraw real estate, (2) create or subdivide units and (3) create common elements or limited common elements.(fn16)
2. After the "period of declarant control," CCIOA gives the association the right to cancel, on ninety days' notice and without penalty, all contracts and leases made with the declarant or its affiliate.(fn17) This right to cancel contracts between the declarant' and the association is available without regard to the purpose of the contract or the fairness of its terms.(fn18)
3. CCIOA establishes a higher standard of care for those executive board members and officers who are appointed by the declarant. Their standard is that of a fiduciary, in contrast to the normal standard of care---to avoid "wanton and willful acts or omissions"---which is imposed on independent officers and board members.(fn19)
CCIOA allows the marketplace to establish the balance between lenders and developers. However, between lenders and the association, it appears that CCIOA...
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