Chapter 12 - § 12.9 • RESTRICTIONS ON USE AND ALIENATION

• Jurisdiction: Colorado

§ 12.9 • RESTRICTIONS ON USE AND ALIENATION

The issues concerning restrictions on alienation and on the use of units and the common elements are many and complex. They are discussed elsewhere.³⁵⁰ The COA says little about use restrictions, leaving the issue to the declaration and bylaws. The declaration must include any restrictions on use, occupancy, or alienation of units.³⁵¹ Initially, that appears to prohibit either the bylaws or house rules from being employed to limit the use, occupancy, or alienation of units and thus, restrictions — for example, limitation on nonresidential use or leasing of units, restraints on occupancy of units by guests or a maximum number of inhabitants, or rights of first refusal in the association — would then have to be placed in the declaration. However, the Act also says that unless set forth in the declaration,³⁵² the bylaws must contain or provide for statements on (1) any restrictions on and requirements about the use and maintenance of units that are designed to prevent unreasonable interference with the use of their units and the common elements by the unit owners;³⁵³ and (2) any restrictions on and requirements concerning the sale or lease of a unit, including rights of first refusal on the sale and any other restraints on the free alienability of a unit.³⁵⁴ In general, the provision concerning the declaration appears broader as it simply refers to "any restrictions" on use. There are, however, distinctions between the statute on declaration contents and the ones on bylaw contents. First, the latter do not apply to non-residential condominiums, condominiums of 10 or fewer units, or those established by a declaration recorded before January 1, 1976.³⁵⁵ Secondly, one of the bylaw provisions addresses restrictions on use "designed to prevent unreasonable interference" with the use of units.³⁵⁶

An even more confusing overlap exists between the declaration statute and one of the bylaw statutes. The latter requires the bylaws to provide for restrictions on and requirements "concerning the sale or lease of a unit including rights of first refusal on sale and any other restraints on . . . free alienability"³⁵⁷ whereas the former requires the declaration to state any restrictions on the "alienation of the condominium units."³⁵⁸ The sole distinction appears to be that the latter does not apply to nonresidential condominiums, condominiums of 10 or fewer units, or those established by a declaration recorded before January 1, 1976. Thus, it would seem that restrictions on alienation in a commercial or industrial condominium may only be placed in the declaration.

The COA also requires the bylaws to contain the method for adopting and amending administrative rules and regulations — often known as "house rules" — that govern the operation and use of the common elements.³⁵⁹

There are CCIOA statutes concerning rules and restrictions that apply to pre-existing condominiums for events and circumstances occurring on or after January 1, 2006. The first statute³⁶⁰ requires the association to adopt policies, procedures, and rules and regulations concerning enforcement of covenants and rules, including notice and hearing procedures and any schedule of fines.³⁶¹ The second statute³⁶² is very specific and mandates that decisions to...