In "Case" You Missed It— 2020-21 Real EstateCase Law Highlights, 1022 COBJ, Vol. 51, No. 1 Pg. 44
| Position | Vol. 51, 1 [Page 44] |
REAL ESTATE LAW
BY LINDSAY J. MILLER, NATHAN G. OSBORN, AND PAUL SACHS
This article summarizes recent noteworthy Colorado appellate opinions that affect real estate practice.
This article highlights Colorado real estate opinions published in 2020 and 2021. It considers notable decisions from Colorado's appellate courts on the authority of homeowners' association boards to act on behalf of owners in litigation, the interplay between the common law and the statutory after-acquired title doctrine in the context of implied easements, regulatory takings, the scope of collection remedies under CRCP 69(g), standing in relation to oil and gas interests, mineral interests, water rights, taxation and land use issues, and search and seizure of real property.
Homeowners' Association Rights
In 2021, the Court of Appeals published an opinion extending the authority of homeowners' associations to bring lawsuits on behalf of owners in breach of implied warranty and negligence lawsuits. Practitioners should note this ruling for its apparent expansion of rights and powers of common interest communities.
Brooktree Village Homeowners Ass'n, Inc. v. Brooktree Village, LLC concerned the Brooktree Village Townhomes (development), are sidential common interest community organized under the Colorado Common Interest Ownership Act (CCIOA).1 The development's original owner sought protection under the Bankruptcy Code after it had completed and sold several townhomes to residential purchasers but before it finished constructing the development. The project's lender took possession of the development and conveyed the common areas to Brooktree Village Homeowners Association, Inc. (Association), which had been formed by the original developer. Association owns and manages the development's common areas for the use and benefit of its members pursuant to the Declaration of Covenants, Conditions, Restrictions, and Easements of Brooktree Village Townhomes. Association members were the town home owners at the development.
A second developer, Brooktree Village, LLC (Developer), later purchased the remaining undeveloped portions of the development other than the common areas. Rivers Development, Inc. (Builder), a construction company affiliated with Developer, completed construction of the development, and Developer sold all the newly constructed townhomes to individual homeowners. After discovering construction defects throughout the development, Association sued Developer and Builder. Association sought damages for the cost of repairing both the construction defects in the common areas and damage to one of the town homes caused by construction defects in the common areas. Association asserted claims on behalf of itself and its members under CRS§38-33.3-302(l)(d). Following a trial, a jury found Developer and Builder liable for breach of implied warranty and negligence and awarded Association $1.85 million in damages. The trial court awarded the entire amount to Association on the breach of implied warranty claim.
On appeal, Developer and Builder argued it was error to allow Association to pursue implied warranty claims on behalf of Association members. They contended that because the direct purchasers bought their townhomes from Developer, not Builder, Builder lacked contractual privity with the direct purchasers. The Court of Appeals found, among other things, that under CCIOA a homeowners' association has standing to bring a breach of implied warranty claim on behalf of itself and its members to redress construction defects in the common areas of the community. It may also bring an action for breach of implied warranty to redress construction defects in individual units.
Here, Builder created Developer to market and sell the town homes that Builder constructed at the development, and both Builder and Developer signed the purchase agreements providing express warranties. Accordingly, Builder provided implied warranties to the direct purchasers. Further, the fact that Developer and Builder never owned the common areas and fewer than half of Association's members purchased town homes from Developer does not preclude Association's standing to pursue implied warranty claims for construction defects in common areas. Although Developer and Builder were not in privity with Association or with town home owners that did not purchase from them, the 23 direct purchasers from Builder and Developer have implied warranties of workmanship and habitability from them, and those purchasers have easement rights to use the common areas. Consequently, a defect in the common areas affects the rights of every owner in the Development, and Association could recover damages to repair such defects.
Developer and Builder also contended that the trial court erred by not reducing the jury's damage award by 10% to reflect Association's comparative negligence. However, the jury found that Association prevailed on its breach of implied warranty claim, to which comparative fault does not apply, so Association was entitled to a judgment in the full amount the jury awarded.
The judgment was affirmed.
What Constitutes a Regulatory Taking?
In Bridge Ainu Le'a, LLC v. Hawaii Land Use Commission, the U.S. Supreme Court offered some insight on regulatory takings.2 In this case, the Hawaii Land Use Commission (Commission) down zoned a large area of land from urban use to agricultural use. At the time, Bridge Aina Le'a had a sale of the land pending for $40.7 million. Removal of the urban designation ended t he buyer's ability to finance and purchase, and the sale fell through. Bridge Aina Le'a subsequently filed suit, and a jury found that die Commission's action was a compensable regulatory taking under the U.S. Constitution. The district court concluded that there was an adequate factual basis for the taking. But the Ninth Circuit considered the same facts under the same legal tests and concluded that no reasonable jury could find a taking.
Bridge Aina Le'a petitioned for a writ of certiorari. The issues presented included a request to clarify the rules for recovery for regulatory takings in light of confusion caused by Lucas v. South Carolina Coastal Council and Penn Central Transportation Co. v. City of New York.'6While the Court denied the petition, Justice Thomas's dissent included the following instructive thoughts on the state of the law in this area:
Our current regulatory takings jurisprudence leaves much to be desired. A regulation effects a taking, we have said, whenever it 'goes too far.'... As one might imagine, nobody—not States, not property owners, not courts, nor juries—has any idea how to apply this standardless standard.4
He concluded: "If there is no such tiling as a regulatory taking, we should say so. And if there is, we should make clear when one occurs."5
Practitioners should thus remain attuned for further developments in this area.
Implied Easements
In 2021, in Amada Family Limited Partnership v. Pomeroy, the Colorado Court of Appeals continued to weigh in on implied easement issues by clarifying the interplay between the common law after-acquired title doctrine and the related Colorado statute.[6]
In this case, the McGees owned Parcels A, B, C, and D. Amada Family Limited Partnership (Amada) purchased Parcels A and D from the McGees through a series of transactions. Because the land to the east of Parcels A and D is impassable, these parcels lack any feasible means of ingress and egress except across Parcels B and C, which are owned by the Pomeroys. In 2017, Amada built a spur road and began using it to access its parcels. The spur road connected to the existing access road on Parcel C and passed through an elkfence on Parcel C that was installed by the McGees' predecessor in interest. After Amada built the spur road, and without Amada's consent, the Pomeroys unilaterally constructed a gate across the spur road blocking access. The Pomeroys also locked a gate at the entrance to the old access road, which blocked Amada's access to Parcels A and D. In response, Amada filed an action for declaratory judgment and trespass. Amada claimed that it owned an express access and utility easement over Parcels B and C in favor of Parcel A, and an implied access and utility easement over Parcels B and C in favor of Parcel D to access the existing public road. The Pomeroys counter claimed for, among other tilings, a decree of an easement on...
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