Chapter 12 - § 12.11 • TERMINATION

• Jurisdiction: Colorado

§ 12.11 • TERMINATION

Termination of a condominium is quite rare, and the COA says nothing about it other than stating that to the extent that a declaration contains a provision for the appointment of an attorney-in-fact to deal with the property on its destruction or obsolescence, it will be considered a covenant running with the land binding on all condominium owners and their successors in interest.³⁷⁹ Typically, the declaration will provide that a stated percentage of the members of the association may decide whether to terminate the condominium or to rebuild after destruction.³⁸⁰

There are two Colorado appellate cases in which termination clauses were at issue. Brown v. McDavid,³⁸¹ concerned a residential subdivision governed by a covenant document that permitted the covenants to terminate with the written consent of the owners of 66 percent of the parcels. After the covenants were terminated, some parcel owners argued it was inequitable to allow termination and thereby abandon the development plan on which purchasers had relied in buying their lots. The court responded that, generally, it is well established in law that a covenant running with the land may be terminated, when it permits termination, on consent of a specified percentage of owners. The court treated the issue as one of freedom to contract and said that when the parties elect to provide for covenants that may be terminated on certain conditions, the court must presume that the contingency is reflected in the consideration paid. All parties knew the covenants could be terminated and that knowledge became part of the basis of their bargain.

Nonetheless, courts will not treat termination lightly. In Shi Time Square Condominium Ass'n v. Shi Time Square Enterprises,³⁸² the declaration provided that "The conditions, restrictions and covenants . . . shall terminate automatically when . . . the Association shall legally dissolve . . . ." The secretary of state initiated administrative dissolution proceedings against the association after it failed to file a corporate report, and then administratively dissolved the association. The association later sought and obtained reinstatement of its corporate status from the secretary of state. The court noted that the phrase "legally dissolve" was not defined in the document. The association argued that because, when the language was drafted, "dissolution" was not used to describe an administrative sanction, the parties could neither have contemplated...