Chapter 3 - § 3.6 • TRANSFER OF SPECIAL DECLARANT RIGHTS

• Jurisdiction: Colorado

§ 3.6 • TRANSFER OF SPECIAL DECLARANT RIGHTS

§ 3.6.1—Generally

The CCIOA limits the circumstances under which special declarant rights may be transferred, but nothing in the statute on transfers subjects any successor to a special declarant right to any claims against or other obligations of a transferor declarant, other than claims and obligations arising under the CCIOA or the declaration.¹³⁴

On the question of transfer of special declarant rights, the CCIOA largely tracks the Uniform Act. Comments to the Act explain the purpose of the statute. The statute concerns the extent to which obligations and liabilities imposed on declarants are transferred to third parties by a transfer of the declarant's interest in the community. Two issues are addressed in the statute: (1) What obligations and liabilities to existing and future unit owners should a declarant retain after transfer of interests?; and (2) What obligations and liabilities should be imposed on the successor in interest?¹³⁵ A comment to the Uniform Act says that the statute strikes a balance between the need to protect the interests of unit owners and of innocent successors to a declarant's rights, particularly those like mortgagees whose only interest is to protect their debt security.¹³⁶ The general scheme of the statute imposes continuing obligations and liabilities on a declarant for promises, acts, or omissions undertaken during the period that he or she was in control, while relieving the declarant who transfers all or part of his or her special declarant rights of responsibilities for the promises, acts, or omissions of a successor over whom the transferring declarant has no control. The statute also absolves a non-affiliated transferee of responsibility for the promises, acts, or omissions of a transferor declarant over which that transferee had no control.

Initially, the CCIOA provides that any special declarant right created or reserved under the CCIOA may only be transferred by an instrument that evidences the transfer and that is recorded in every county in which any portion of the common interest community is located.¹³⁷ The instrument of transfer is ineffective unless executed by the transferee.

The liability of a transferor on transfer of any special declarant right is specified in the CCIOA.¹³⁸ Transferors are not relieved of any obligation or liability that arose before the transfer, and lack of privity does not deprive any unit owner of standing to bring an action to enforce any obligation of transferors.¹³⁹ When a successor to any special declarant right is an affiliate of a declarant, the transferor is jointly and severally liable with the successor for liabilities and obligations of the successor that relate to the community.¹⁴⁰ When transferors retain any special declarant rights, but transfer other special declarant rights to a successor who is not an affiliate of the declarant, the transferor is liable for any obligations or liabilities imposed on a declarant by the CCIOA or by the declaration relating to the retained special declarant rights and arising after the transfer.¹⁴¹ Transferors have no liability for any act or omission or any breach of a contractual or warranty obligation¹⁴² that arises from exercise of a special declarant right by a successor declarant who is not an affiliate of the transferor.¹⁴³

If there is a foreclosure of a security interest, a sale by a trustee under an agreement creating a security interest, a tax sale, a judicial sale, or a sale under bankruptcy or receivership proceedings of any units owned by a declarant or real estate in a common interest community subject to development rights, anyone who acquires title to all the property being foreclosed or sold succeeds to only those special declarant rights related to that property held by that declarant specified in a written instrument prepared, executed, and recorded by that person at or about the same time as the judgment or instrument or by which that person obtained title to all of the property being foreclosed or sold, unless the mortgage instrument, deed of trust, or other agreement creating a security interest provides...