Chapter 9 - § 9.3 • ASSESSMENTS
| Jurisdiction | Colorado |
§ 9.3.1—Levying Assessments
Initially, until the association makes a common expense assessment, the declarant must pay all common expenses.32 The CCIOA does not define "assessment."33 One definition of the term is "a share of the funds which are required for the payment of common expenses, which from time to time is assessed against the unit owner."34 It is a levy against the unit owners to collect from each his or her proportionate share of the funds needed to pay those common expenses.35 Under the CCIOA, common expenses are expenditures made or liabilities incurred by or on behalf of the association, together with any allocations to reserves.36 In general, all common expenses must be assessed against all the units in accordance with allocations set forth in the declaration.37 The declaration must state the formulas used to establish allocations of interests,38 and must allocate to each unit in a condominium a fraction or percentage of undivided interests in the common expenses of the association,39 and to each unit in a cooperative or planned community a fraction or percentage of the common expenses of the association.40 There are five exceptions41 to the general requirement:
1) The declaration may require that any common expense associated with maintenance, repair, or replacement of limited common element will be assessed against the units to which that limited common element is assigned, equally or in any other proportion the declaration provides.42
2) The declaration may require that any common expense or portion of it that benefits fewer than all of the units must be assessed exclusively against the units benefitted.43
3) The declaration may require that the costs of insurance will be assessed in proportion to risk, and the costs of utilities will be assessed in proportion to usage.44
4) If any common expense is caused by the misconduct of a particular unit owner, the association may assess that expense exclusively against that owner's unit.45
5) The declaration may provide for assessments, including but not limited to assessments on retail sales and services not to exceed 6 percent of the amount charged for the retail sale or service, and real estate transfers not to exceed 3 percent of the real estate sales price or its equivalent.46
Once the association has made any assessment, subsequent assessments must be made at least annually and must be based on a budget adopted no less frequently than annually by the association.47 In practice, the amount of an assessment is determined annually when the budget is adopted, but unit owners pay the assessment monthly or quarterly. Sometimes when the total assessment is rather small, it is paid annually. Each unit owner is liable for assessments made against his or her unit while he or she owns that unit,48 and is not exempted from liability for payment of the assessments by waiving use or enjoyment of any of the common elements, by abandoning the unit against which the assessments are made,49 or because of a procedural flaw in the budget adoption process.50 However, another party apparently may be contractually obligated to pay the owner's assessments.51
Where, as under the CCIOA, unit owners may not refuse to pay assessments, courts have declared there is no "self-help" remedy.52 Therefore, unit owners may not withhold any portion of their assessments because they claim their association failed to perform some duty or responsibility, nor may they assert that failure to perform as a defense to an action for non-payment.53 Disagreements concerning how the governing board uses association funds — no matter how significant — are not considered a legitimate reason to refuse to pay a valid assessment.54 In fact, the duty to pay assessments is generally considered not to be contingent on any association obligation to repair or maintain the common ele-ments.55 A disputed governing board election was found in one case to be no defense to an action to recover assessments.56 Another court said an owner could not withhold assessment payments for an alleged failure to maintain the common elements, even if that failure might have caused damage to the unit owner's property.57 One unit owner was even required to pay an assessment for a judgment resulting from arguably unauthorized acts by officers and directors of the association.58 Finally, the way in which a unit owner acquires title to the unit generally does not affect the obligation to pay assessments.59
A controversy of long-standing in community association law has been whether developers — declarants — can exempt themselves from the obligation to pay assessments for common expenses.60 Under the CCIOA, the short answer is, no, they cannot. All unit owners are liable for assessments made against their units while they own them,61 and a declarant is by definition a unit owner.62 Additionally, the CCIOA says that in condominiums and planned communities, the declarant is an owner of any unit created by declaration until that unit is conveyed to another. The CCIOA also says that in a cooperative, the declarant is treated as the owner of any unit to which allocated interests have been allocated until that unit has been conveyed to another, who may or may not be a declarant.63 Further, the declaration must state the formulas used to establish allocations of interests, including the common expenses liability, and those allocations may not discriminate in favor of units owned by the declarant or an affiliate of the declarant.64 The CCIOA also prohibits its provisions from being varied by agreement or any rights conferred by it from being waived and specifically forbids a declarant from acting under a power of attorney or from using any other device to evade the limitations or prohibitions of the CCIOA or the declaration.65 Finally, under the CCIOA, a declarant should not be able to restrict the power of the association in the declaration to levy or collect assessments on the declarant's units because the declaration is prohibited from imposing "limitations on the power of the association to deal with the declarant that are more restrictive than the limitations imposed on the power of the association to deal with other persons."66
In jurisdictions that lack statutes providing for or permitting exemptions for developers from common expense assessments, courts have held they are liable for assessments on the units they own,67 even for an assessment used to bring suit against the declarant.68 Indeed, some courts have held that it is a breach of fiduciary duty to excuse a declarant from paying assessments or failing to collect them where there is no basis for it.69
Occasionally, common expense liabilities are reallocated, and in that case the assessments and any installment of them not yet due must be recalculated in accordance with the reallocated common expense liabilities.70
For obvious reasons, information about assessments is critically important to unit owners and to those holding a security interest on a unit.71 Therefore, the CCIOA has two statutes requiring associations to provide information about assessments. First, within 90 days after assuming control from the declarant (and within 90 days after the end of each fiscal year thereafter), an association must make a list, by unit type, of its current assessments, including both regular and special assessments, available to unit owners on reasonable notice.72 Additionally, an association must furnish to a unit owner or to a holder of a security interest a written statement that sets forth the amount of unpaid assessments currently levied against the owner's unit on written request to the association's registered agent.73 The statement of assessments must be furnished within 14 calendar days after receipt of the request. The statement is binding on the association, the governing board, and every unit owner. If the statement is not furnished to the party requesting it, then the association has no right to assert a lien on the unit for unpaid assessments that were due as of the date of the request. Because the consequences of failing to furnish the statement are considerable, the time frame is limited, and the recipient of the request must be the registered agent, the agent must be reliable and efficient. One commentary suggests that an individual at the association's management company should serve as the registered agent.74
§ 9.3.2—Regular Assessments
The CCIOA only makes one mention of "regular assessments." Within 90 days after assuming control from the declarant, and within 90 days after the end of each fiscal year thereafter, the association must make a list, by unit type, of the association's current assessments, including both regular and special assessments, available to unit owners on reasonable notice.75 But the CCIOA does not define "regular assessment." Regular assessments are those collected on a periodic basis, usually monthly, sometimes quarterly, and occasionally — but rarely — annually.76 The purpose of the regular assessment is to pay the expenses for operating the association and maintaining the common elements. It may also be used for minor improvements. When associations have reserve accounts, contributions to them will usually come out of regular assessments. The CCIOA does not limit the amount of regular assessments or the amount by which they may be increased over a previous year. Other states,77 however, and some association documents do impose limitations.
§ 9.3.3—Special Assessments
The CCIOA does not specifically empower associations to levy special assessments; in fact, it only mentions them once.78 It does provide associations with the authority to collect assessments for common expenses,79 and it defines "common expenses" broadly.80 Thus, the right to levy special assessments seems clearly implied in the Act.
The difference between regular and special assessments is that special assessments generally have a specific...
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