Chapter 10 - § 10.1 • GENERAL PRINCIPLES

• Jurisdiction: Colorado

§ 10.1 • GENERAL PRINCIPLES

§ 10.1.1—Types of Restrictions

Covenants, restrictions, rules, and regulations in common interest communities are often referred to generically as "use restrictions." That is not accurate. In its most limited sense the term "use restriction" should only be applied to a restriction that, like a zoning designation, limits continuing uses to which a unit may be put. Thus, a restriction that limits a unit to residential occupancy, prohibits keeping pets, or restricts the age of inhabitants would generally be considered a use restriction.¹ Other rules govern behavior in units, for example restrictions on noise or smoking. Many restrictions regulate behavior on the common elements, for instance smoking in hallways and lobbies, riding bicycles in a parking garage, or washing cars in a parking lot.

There are also rules that affect the sale or leasing of units. Restrictions on sales — a right of first refusal granted to the association or other owners or the right of the association to deny sale to a particular purchaser — are actually restraints on alienation. A prohibition on leasing may be considered both a restraint on a specific type of alienation and a use restriction in that it permanently prevents a unit from being used as investment property. Other rules on leasing are more narrow: requirements that the lessor provide the association with a copy of any lease, or that the association be paid a "security" deposit.

Architectural or environmental restrictions govern the appearance of, or construction on, individually owned property and are similar to building codes that specify construction materials, yard setbacks, or building heights. In a common interest community, the restrictions are often far more extensive than would ordinarily be found in a building code since many communities attempt to maintain a uniform appearance. Restrictions may prescribe the exterior colors that may be used or roofing materials. They may even require new construction to conform to the "style" of the community: colonial, southwestern, or art deco. While these may be referred to as "use restrictions," they are, in fact, not encompassed within a narrow definition of the term. Also, they may not be restrictions on a unit. For example, in a condominium there may be limitations on the placement of hardware, signs, or artwork on exterior doors or adjacent walls. These are not restrictions on the units because in a condominium, exterior doors and walls are almost always common elements in which the most proximate unit owner has no more ownership interest than any other unit owner.² So the association — or the declaration — is not restricting the unit; it is prohibiting someone from making changes to property that belongs to someone else.

These various categories are not utterly discrete. There is overlap. There are gray areas. However, the categories should be kept in mind and can prove useful when questions of the reasonableness or enforceability of a restriction arise. All other legal principles of common interest community law aside, a court is not likely to need much persuasion about the association's ability to regulate what a unit owner can do to property he or she does not own, but the same court will generally expect some reasonable basis for imposing the same restriction on an individually owned unit.

§ 10.1.2—Determining Which Document Should Contain a Restriction

Under the CCIOA, the declaration must contain any restrictions on use, occupancy, and alienation of units, as well as on the amount for which a unit may be sold.³ While the Act does not say so explicitly, the clear implication is that use, occupancy, or alienation may not be restricted unless the regulation appears in the declaration. The meaning of "occupancy" and "alienation" is fairly clear, although the definition of alienation is made even clearer in the comparable Uniform Act provision, which says that it includes any restrictions on leasing that exceed those that governing boards may impose.⁴ The meaning of the phrase "restrictions on use" is less evident. Neither the CCIOA nor the Uniform Act defines "use restriction," although a comment to the Uniform Act says that the word "use" focuses on the purposes to which space is devoted.⁵

While the CCIOA grants the association the power to regulate the use of the common elements without specific authorization in the declaration,⁶ the statute on the bylaws does not refer to restrictions on the use of common elements or anything else, although it does allow the bylaws to provide for any matters the association deems necessary and appropriate.⁷ However, as a comment to the Uniform Act points out, bylaws are not required to be recorded, and so they generally only include matters relating to internal association operations and "housekeeping" items.⁸ The comment also observes that the Act requires specific matters to be in the recorded declaration, not the bylaws, unless the bylaws are to be recorded as an exhibit to the declaration.

"Rules and regulations" can apparently be placed in any documents because the CCIOA defines the term "rules and regulations" to mean any instruments, whatever they are called, that are adopted by the association for regulation and management of the common interest community.⁹

Other than the requirement that restrictions on the use, occupancy, or alienation of units must be in the declaration, the CCIOA does not specify the documents in which restrictions must appear. For example, the CCIOA specifically allows architectural or landscaping standards to be set forth in the declaration, duly adopted rules and regulations, or the bylaws.¹⁰ Typically, restrictions on the use of common elements are found in the "house rules," an unrecorded document approved by the association governing board.

§ 10.1.3—Enforcement of Restrictions¹¹

Generally, associations have a duty to enforce compliance with the rules and regulations they promulgate.¹² The CCIOA has a number of statutes that affect enforcement of restrictions. The rule against perpetuities does not apply to defeat any provisions of a declaration, bylaws, or rules and regulations.¹³ If there is a conflict between the declaration and bylaws, the declaration prevails,¹⁴ and presumably it also prevails over any rules and regulations that do not appear in it. If the validity of any declaration amendment adopted by the association is challenged, the action must be brought within one year after the amendment is recorded.¹⁵

The CCIOA says that every contract or duty governed by it imposes an obligation of good faith in its enforcement,¹⁶ and that a court may refuse to enforce an unconscionable contract or agreement.¹⁷ A general statute, not part of the CCIOA, requires that building restrictions and all restrictions on use or occupancy of real property be strictly construed.¹⁸ To promote "responsible governance," the CCIOA requires associations to adopt policies, procedures, and rules and regulations regarding enforcement of covenants and rules,¹⁹ and procedures for adoption and amendment of policies, procedures, and rules.²⁰

Practice Pointer
When advising associations that govern residential communities on procedures for enforcing covenants and rules, remember that the unit owners are neighbors who must live together in fairly close proximity. The goal of rule enforcement is to maintain a congenial community. If violations can be resolved informally, that is often best. Public "charges" and formal hearings can be embarrassing and leave unit owners embittered. Sometimes unit owners simply do not know or understand all the rules. Unit owners who know the rules and are aware they are in violation may respond grudgingly to friendly, personal contact but "dig in their heels" when confronted with a "lawyer letter" or a formal notice of violation. However, informal preliminary procedures should still be documented in the association's records.

The CCIOA authorizes an association to assess fines for violations of the declaration, bylaws, and rules and regulations²¹ and, generally, to enforce any fines with its statutory lien on the owner's unit.²² However, an association may not fine a unit owner unless it has adopted and follows a written policy governing imposition of fines, and that policy includes a fair and impartial factfinding process.²³

In the case of applications to make architectural or landscaping changes, the CCIOA requires that decisions to approve or deny them cannot be arbitrary or capricious and must be made in accordance with standards and procedures in the declaration, bylaws, or in duly adopted rules and regulations.²⁴ An action to enforce the terms of any building restriction in the declaration, bylaws, articles, or rules and regulations or to compel removal of a building or improvement that violates the terms of any building restriction must be commenced within one year from the date from which the plaintiff knew, or in the exercise of reasonable diligence should have known, of the violation.²⁵

Most common interest community legislation explicitly authorizes civil litigation to enforce that legislation as well as the applicable documents. For example, the Uniform Act provides that if the declarant or anyone subject to the Act fails to comply with it or the declaration or bylaws, any person or class of persons adversely affected has a claim for appropriate relief.²⁶ Colorado did not adopt that section of the Uniform Act. Evidently the legislature believed that the right to bring an action to enforce the CCIOA or the documents was inherent,²⁷ because it did enact a statute providing for reasonable attorney fees, costs, and costs of collection to be awarded to the prevailing party in any civil action to enforce or defend the provisions of the CCIOA, the declaration, bylaws, articles, or rules and regulations.²⁸ It also adopted language in the Uniform Act that says any right or obligation declared by the CCIOA is...