Real Estate Law, April2021 COBJ, Vol. 50, No. 4 Pg. 36

PositionVol. 50, 4 [Page 36]

50 Colo.Law. 36


No. Vol. 50, No. 4 [Page 36]

Colorado Lawyer

April, 2021

In “Case” You Missed It

Recent Real Estate Case Law Highlights


This article highlights significant recent real estate cases affecting Colorado practitioners.

This article highlights significant real estate cases decided in 2019 and 2020. The major themes and landmark rulings for this time period fall into four categories: (1) homeowners' association (HOA) rights and easements, (2) the standard of care in construction matters and CRCP 55, (3) what constitutes a "lien" and what makes a lien or document "spurious," and (4) taxation/ land use analysis.

HOA Rights and Easements

The Court of Appeals published several noteworthy opinions examining HOA and easement issues.

Construing Declarations

FD Interests, LLC v. Fairways at Buffalo Run[1] was an appeal from the Adams County District Court of a dispute centered around the interpretation and reformation of a residential development's common interest community declaration.

In 2005, a developer purchased 12.5 acres of real property adjacent to the Buffalo Run Golf Course in Commerce City (the Property) through FD Interests, LLC (FDI) and Fairways Land, LLC for a residential development of patio homes. The developer carried out the project through several entities: FDI; Fairways Builders, Inc. (Builders); Buffalo Run Fairways, LLC (BRF); and Fairways Homes, LLC (Homes) (collectively, the Developer Entities). In January 2006, Builders recorded the "Amended and Restated Declaration of Covenants, Conditions and Restrictions for Fairways at Buffalo Run Homeowners Association, Inc." (the CCR), which created the HOA for the common interest community, "The Fairways at Buffalo Run." As required by CRS § 38-33.3-205(l)(h), the CCR set a deadline for development activity, which provided that development rights would expire if there was a gap of more than five years between construction projects.

Development of the Property began after the CCR was recorded, but construction stalled during the Great Recession. On December 31, 2009, the Developer Entities recorded their most recent supplemental declaration, thereby starting the five-year clock on the development deadline. When the Developer Entities were ready to resume construction, the time limit to develop the Property had expired. After development began again in January 2016, the HOA blocked the developers from entering the Property. The Developer Entities sued the HOA, seeking, among other things, a declaratory judgment that FDI and Homes owned the undeveloped portion of the property. The HOA and the unit owners, who were HOA members, filed counterclaims for a declaratory judgment determining ownership of the undeveloped portion of the Property and reformation of the CCR and other documents governing the common interest community.

The trial court found that the "parties d[id] not dispute the fact that the [CCR] was intended to govern the common interest community now known as The Fairways at Buffalo Run" and concluded that the Property was subject to the CCR.2 But after identifying inconsistencies in the Property's chain of tide, the court reformed the CCR by adding BRF to the CCR's signature line, because despite its sole ownership of the Property at the time, it had not executed the CCR. The court reasoned that this reformation would cure the title defects.

The Court of Appeals framed two issues for resolution: (1) whether the CCR encompassed the entire Property from the outset or excluded the undeveloped portions of the Property from the community until they were specifically annexed into the development through recordation of supplemental plats and declarations, and (2) whether errors in the chain of title for the Property and the units built on it warranted reformation of the CCR.

On appeal, the Developer Entities argued that the trial court (1) incorrectly interpreted the CCR because the undeveloped portions of the property were never annexed into the common interest community and were not encumbered by the CCR; (2) lacked the power to reform the CCR to add BRF as a signer of the same; and (3) erred by ordering conveyance of the subdivision roads to the HOA by FDI.

This case is noteworthy because the Court of Appeals held in pertinent part that the trial court accurately determined the CCR encompassed the entire property when the community was established, and this resolved the HOA's title concerns. Thus, it was unnecessary for the trial court, in equity, to reform the CCR. However, "because the trial court's erroneous exercise of its equitable powers did not affect any party's substantial rights... this error was harmless.. "3

The Court affirmed the judgment and remanded the case to address the HOA's request for attorney fees and costs.

The Colorado Supreme Court has granted certiorari on whether the Court of Appeals:

1.erred by concluding that a common interest community's declaration encumbered the entire undeveloped property at the time of filing, even though the record owner of the undeveloped property was not the party who signed or recorded the declaration;

2. properly determined that a non-owner's signature on the declaration was legally sufficient to encumber the Property, where all of the Developer Entities controlled by the same individual were acting in concert and intended to subject the entire Property to the declaration; and

3. erred in concluding that the district court's equitable reformation of the declaration was unnecessary and erroneous.4

Easement Requirements

Turning from association covenants to association easements, Kroesen v. Shenandoah Homeowners Ass'n5 examined what it takes to meet the requirements of both common law and the Colorado Common Interest Ownership Act (CCIOA)6 to create an easement.

In Kroesen, a developer divided a property into two subdivisions, Shenandoah (created in 1989) and Highlands (created in 1994), by recording declarations for each. The developer also recorded plats that depicted two roads, Blue Ridge Road and Colonial Road, portions of which follow the boundary between the two subdivisions. The plats also created an alleged easement (Subject Easement) that purportedly allowed owners in the Highlands to access their properties over the roads. The amendments to the Shenandoah plat that took place before 1994 referred to the Subject Easement in general terms such as an "access road easement."7 None of the pre-1994plats describe "adjacent subdivisions" with specificity.8

The developer established a homeowners' association for each subdivision. The developer later filed another plat that created new tracts within Highlands, including Tracts A and B. A subsequent owner of Tracts A and B recorded a plat consolidating them into Tract AB. Tract AB is adjacent to Shenandoah and abuts Blue Ridge Road.

Before Tracts A and B were consolidated, the Shenandoah HOA board of directors approved an easement over Blue Ridge Road to benefit Tract A, but no recorded document reflects the board's approval of the Subject Easement. The HOA members did not ratify the board's approval of the easement or otherwise authorize an easement to benefit Tract AB.

The Kroesens purchased Tract AB from the former owner in 1999 and signed a contract to sell it in 2015. Before the closing, however, the president of the Shenandoah HOA board of directors told the Kroesens' real estate agent that the owners of Tract AB had no right to use either road to access the property. The purchasers refused to close on the property after learning of the easement issue.

The Kroesens brought claims against the Shenandoah HOA and its board of directors' president (collectively, defendants) for (1) a declaratory judgment that the owners of Tract AB have an easement over the roads, (2) a permanent injunction enjoining the Shenandoah HOA from interfering with their access to Tract AB over the roads, (3) an award of their expenses and lost profits for intentional interference with their purchase contract, and (4) damages for slander of title from the HOA statement that there was no easement.

The district court granted summary judgment for the Kroesens on their declaratory judgment claim. After a bench trial, the court awarded the Kroesens damages on the intentional interference with contract claim to compensate them for their inability to sell the property pending litigation, but it did not award them lost profits. The court resolved the slander of title claim against the Kroesens because they had not proved the element of malice. The permanent injunction was dismissed.

On appeal, defendants argued that under common law principles, the plats amending the declaration for Shenandoah Subdivision did not contain sufficient specificity to create an easement over the roads benefiting Tract AB. The amendments to the declaration for Shenandoah Subdivision describe the nature of the easement with reasonable certainty. The plats also provide reasonable certainty as to the identity of the servient estate, Shenandoah Subdivision, where the roads are located. The Court of Appeals determined that although the description in the plats amending the declaration for the Shenandoah Subdivision of "'adjacent subdivisions, and future subdivisions' is a thin description of a dominant estate,"9 the language is sufficient given the circumstances surrounding the easement's creation, the purpose for which the easement was created, and the record notice in Shenandoah Subdivision's chain of title describing the easement, which places good faith purchasers of tracts in Shenandoah Subdivision on notice of the easement. Therefore, under the common law test for creating...

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