Chapter 5 - § 5.11 • LITIGATION AND LIABILITY

• Jurisdiction: Colorado

§ 5.11 • LITIGATION AND LIABILITY

The CCIOA does not require specific declaration authorization for association standing to institute litigation.²⁰⁸ It allows the association to institute, defend, or intervene in litigation or administrative proceedings in its own name on behalf of two or more unit owners on "matters affecting the common interest community."²⁰⁹ But the fact that an association has standing under the statute to represent owners does not establish the adequacy of the association's representation as a matter of law. Individual unit owners may still be indispensable parties who must be joined in an action.²¹⁰ The only limitation on an action by an association on behalf of unit owners is the phrase: matters "affecting the common interest community." That language, however, confers standing on associations to pursue damage claims on behalf of two or more unit owners regarding matters affecting their individual units.²¹¹

One frequent type of litigation in which associations engage is construction defect actions against the declarant and the declarant's contractors or subcontractors. Construction defect actions are specifically addressed by the CCIOA. It applies when the governing board institutes any construction defect action.²¹² The board must then mail or deliver written notice of the anticipated commencement of the action to each unit owner.²¹³ The unit owners then have an opportunity to vote on whether the action will go forward.

The CCIOA also provides that when any "special declarant right"²¹⁴ is transferred, lack of privity will not deprive a unit owner of standing to bring an action to enforce an obligation of the transferor.²¹⁵

Unit owners — other than the declarant — are not liable for any action based on the declarant's acts or omissions connected to any part of the community the declarant had the responsibility to maintain, and they also may not be made defendants in an action alleging an act or omission by the association.²¹⁶ However, this does not automatically establish the adequacy of representation by the association of the owners as a matter of law.²¹⁷ When the act or omission occurred during any period of declarant control and the association gives the declarant reasonable notice and an opportunity to defend against the action, the declarant is liable to any unit owner for all tort losses not covered by insurance suffered by that unit owner.²¹⁸ The CCIOA also says that a unit owner is not prevented from maintaining an action because he or she is a unit owner or a member or officer of the association. That is evidently intended to address unit owner actions against the association,²¹⁹ and respond to decisions holding that a member of an association could not bring a negligence action against it because the association's negligence should be imputed to its members, or else the owner would in effect be suing himself or herself.²²⁰

When a unit owner is alleged to have violated the CCIOA, the declaration, bylaws, articles of incorporation, or the association's rules and regulations and a court finds that the unit owner did not commit the alleged violation, it must award the unit owner reasonable attorney fees and costs incurred in asserting or defending the claim,²²¹ but the court may not award costs or attorney fees to the association, and the association is prohibited from allocating any of the association's costs or attorney fees incurred in asserting or defending the claim to the unit owner's account with the association.²²² Under the CCIOA, a unit owner may not be deemed to have confessed judgment to attorney fees or collection costs.²²³

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Notes:

^[208] Heritage Vill. Owners Ass'n v. Golden Heritage Investors, Ltd., 89 P.3d 513...