Blog
By Rebecca Zazueta, Windsor Gardens Association
If you have been a community manager for a condominium association for any length of time, you have learned either by firing squad or through repetition what the preventative maintenance to-dos are for your community. Most of us have an annual schedule to ensure it all gets done throughout the year. And if we miss something, inevitably, we will find out the hard way and never let that one to-do slip through the cracks again.
Later in my career, I learned one of the most crucial tools in preventative maintenance is to involve the owners. Rather than safeguarding top-secret maintenance details, continuing to fail to meet unattainable expectations, and paying HOA invoices for preventable repairs and emergency calls, I decided to tell owners like it is and to reinforce that they have skin in the game, too. Condominium living is low maintenance, but it isn’t maintenance-free. Owners might not like the straight talk we provide, but it is a lot easier and more successful in the long run to manage a community with realistic maintenance expectations and to directly communicate, educate, and remind owners regularly.
Here are some examples of how to engage owners in preventative maintenance:
Heat Not Working Calls (hot water heat operated by association): Inform owners to check their unit’s thermostat and heat registers before the cold weather arrives to ensure the heat works normally. Also, be honest about the system design and its limitations. If the system is only designed to heat the unit to 70 degrees when the outdoor temperature is subzero, tell the owners and remind them annually. Both steps will alleviate emergency heat calls during severe weather conditions, and if there are repairs to do, you have a better chance of doing them proactively instead of reactively.
Drain Line Backups and Clogs: Educate owners not to use their garbage disposals if they are the consistent culprit of kitchen sink backups. Let’s face it, people put the craziest things in their garbage disposals, right? We can talk about misuse, hand out mesh drain covers, and encourage owners to throw their sink debris in the trash. Also, tell owners not to use hardware store chemicals to clear clogs in their drains because they corrode the pipes and can create bigger, more expensive issues for the HOA-maintained drain line.
Toilets and Supply Lines: Make an infographic and educate owners to only flush the 3 p’s: pee, poo, and paper. If your drain lines and plumbing are old, tell them to be kind to the drain line by reducing toilet paper use, flushing multiple times when sitting on the pot to provide a little extra water to help the waste get down the drain, and making sure the toilet paper is saturated before flushing to ensure that it breaks down properly.
Remind owners to inspect and replace their toilet supply lines every 5 to 7 years, especially if the toilet supply line has a plastic top that attaches to the tank. Braided stainless steel lines with a metal top are a much better option and will reduce the possibility of massive flooding caused by a bad toilet supply line.
Elevators Out of Service: Inform owners that many elevator challenges are preventable and caused by elevator doors being held open. If the door is held open by a hand or moving boxes are stacked to block the door sensor, the elevator will time out, and a service call is required to get the elevator back into service. In most elevators, owners can typically push the open-door button within the elevator cab, which will not result in the time-out occurring. Most importantly, owners need to know to stop blocking the door when it starts to beep and moves into nudging mode (when the door starts to “nudge” closed).
Breakdown Cardboard Boxes, Throw Away Plastic Film, and Properly Bag Trash: Prevent overflowing recycling dumpsters and overflow and contamination fees from the recycling hauler by informing owners to break down cardboard boxes, deliver excess moving boxes to an offsite recycling facility if the community dumpsters cannot handle the volume, and throw away or recycle the plastic film separately to avoid contamination. Trash chutes and dumpsters don’t get spills and smells if owners bag their trash properly, and rodent issues are minimized.
Rebecca Zazueta, PCAM has been in the HOA industry for 29 years. She is the General Manager of the Windsor Gardens Association in Denver, the largest condominium association in Colorado. Windsor Gardens is a 60-year-old amenities-based community for residents 55 and older, and Rebecca’s home away from home.
By Jacque Martin, Reserve Advisors
Adopted in 2021, the Energize Denver Building Performance Policy underscores the city’s commitment to reducing greenhouse gas emissions by 30% in the next 5 years. The policy applies to multifamily buildings over 5,000 square feet, with stricter compliance requirements for those 25,000 square feet or larger. Applicable buildings must meet specific performance targets by 2030, or else apply for a timeline extension through Energize Denver.
Since 2018, such buildings have been required to conduct annual energy benchmarking. Using the city’s historical benchmarking data, the policy has established a goal for multifamily buildings to reduce and maintain an Energy Use Intensity (EUI) of 44.2 by 2030.
EUI measures a building’s energy consumption relative to its size and is calculated through annual benchmarking. If a building's EUI is above 44.2, it’s time to take action. It is critical for those that are at or slightly above the stated goal to continue to monitor their EUI as they must continue maintain an EUI of 44.2 or below.
Regulation Updates
The energy benchmarking deadline is being extended in 2025 to begin April 1st with the deadline occurring by September 1st. Additionally, properties must include third-party verification on energy benchmark reports either in 2025 or 2026. This will ensure the benchmarking data is accurate and your property is pursuing the correct action to meet the 2030 EUI target.
Prior to 2024, the policy had two interim compliance dates, years 2025 and 2027. Energize Denver is currently reviewing changes to defer the first interim compliance year to 2026 and remove the 2027 interim compliance. The intent of these changes is to provide greater flexibility with developing a path towards compliance while also ensuring accountability or progress towards the long-term goals of Energize Denver. While long-term goals are consistent across all buildings, interim target goals are unique to each building and are established by the city. You can find your building’s interim EUI goal as well as your current EUI at lookup.energizedenver.org.
Major additional proposed changes to the current policies include lower penalty rates, a new option for custom target adjustments, and a more robust appeals process. The city expects to finalize and adopt the updated rules by the end of March 2025.
What’s Next?
While many modern buildings and recent conversions are more energy efficient than older buildings with dated infrastructure, they are not exempt from meeting the 2026 interim compliance goal and the 2030 target goal. If your EUI is above the target threshold, action is necessary to avoid non-compliance. The following steps can ensure your building is on the right path forward.
Step 1: Consider an energy audit
The most common audits are the ASHRAE Level I and Level II energy audits, both which focus on key building systems including HVAC, building envelopes, lighting, water heating efficiency, and more. A Level I audit is the least extensive, providing a walk-through assessment of the building and identifying potential energy-saving opportunities with general cost savings. A Level II audit is more comprehensive and identifies specific cost-effective energy-saving measures and associated ROIs.
These services provide qualitative and quantitative energy saving measures so building stakeholders can make the most informed decisions when evaluating which energy improvement to undertake. A building near the EUI threshold may find a level I audit sufficient. However, buildings that require significant improvements in EUI by 2030 will benefit most from a level II audit. The goal is to identify the most impactful areas for energy savings and long-term improvements.
Step 2: Develop an implementation plan
Boards should prioritize upgrades based on their ability to lower the building’s EUI score and meet both the 2026 interim goal and the 2030 compliance target. With an audit in hand, it is essential to include your reserve study consultant in future collaboration with your energy consultant as this team of professionals is critical to building a sound strategic plan.
Working with your reserve study provider, energy improvements can be coordinated with planned maintenance or system upgrades. This is a cost-effective way to improve your buildings’ overall energy performance. Your reserve study and subsequent updates can help identify areas where future upgrades should be considered and budgeted for through reserves.
For example, a building’s 15-year-old boiler may be functioning fine and have a remaining useful life of eight- to ten-years, but the energy audit may find that it is highly advantageous to replace the boiler with a modern, more efficient system in the next one- to two-years to meet energy compliance. In this case, the reserve study would evaluate the decision to move replacement timing up prior to end of the functional useful life. Thus, the building will meet energy compliance targets while also ensuring long-term financial stability for the property.
Step 3: Communication with Unit Owners
Keep unit owners informed and engaged throughout the process. Regular updates on energy performance, planned improvements, financial implications, and progress toward compliance goals will help maintain transparency and support for the project overall.
A Look Ahead
Although the 2026 and 2030 deadlines may seem far off, making energy-efficient upgrades requires time for planning, implementation, and financing. By taking action now, your community can spread costs over time, leverage its capital reserve study plan, benefit from current incentives, and see energy cost savings sooner rather than later. Most importantly, you’ll position your property for long-term value in an increasingly energy-conscious market. Stay up to date with the latest information by visiting energizedenver.org.
Authored by: Jacque Martin
Founded in 1991, Reserve Advisors specializes in capital planning solutions for community associations across the United States. The firm has partnered with over 19,000 community associations to help them understand the true cost of property ownership through its comprehensive reserve study, energy benchmarking, and energy auditing services.
By Marcus Wile, Orten Cavanagh Holmes & Hunt, LLC
The Americans with Disabilities Act (“ADA”) is a civil rights law enacted in 1990, and subsequently amended, with the aim to protect people with disabilities from discrimination. The ADA provides protections to disabled people in several domains including public accommodations, employment, transportation, communications, and government services. The domain of public accommodations is the area most potentially applicable to common interest communities in Colorado. As a threshold matter for discrimination under the ADA, a person must “(1) have a recognized impairment, (2) identify one or more appropriate major life activities, and (3) show the impairment substantially limits one or more of those activities.” Weil v. Carecore Nat., LLC, 833 F. Supp. 2d 1289, 1296 (D. Colorado 2011); 42 U.S.C. § 12102(1).
Public Accommodations
Title III of the ADA prohibits discrimination on the basis of disability in the activities of public accommodations. Pursuant to 42 USC § 12181(7), a place of public accommodation means a facility operated by a private entity whose operations affect commerce and fall within one of the twelve categories set forth in the regulation. Categories relevant here include: (1) places of lodging including inns, hotels, or motels, or facilities that offer similar amenities to the foregoing; (2) places of public gathering; (3) places of recreation; places of exercise. The categories listed in the regulation include representative examples of each that are meant to be illustrative, not exhaustive. Common interest communities are not generally considered places of “public accommodation” as facilities or amenities in the community that are generally restricted to residents and guests of residents and, therefore, are not subject to the provisions of the ADA. However, common interest communities can become subject to the ADA if the association opens its facilities to the public. Common examples of whencommunities may become subject to the ADA include:
If the community allows members of the public to use the pool or other recreational facilities by purchasing passes.
If the community allows schools, clubs or other organizations to use community facilities on a regular basis or leases the premises to them.
If the community maintains a rental office on the property that is open to the general public.
In the vast majority of typical cases, however, those facilities are not open to the public. Thus, the ADA would not apply. On the other hand, these facilities may be considered and treated as “public accommodations” and subject to the ADA if they are open and available to the “public” – i.e., individuals who are not residents, guests or invitees of residents living in the community. Each of the examples above would likely subject the Association to the mandates of the ADA, including modifying all such areas open to the public to comply with applicable ADA requirements and standards for accessible design.
Whether the Association uses the term “pool passes,” “pool licenses,” or “pool memberships” is immaterial.
The Americans with Disabilities Act Title III Technical Assistance Manual issued by the U.S. Department of Justice states that areas within a private residential community “qualify as places of public accommodation [and] are covered by the ADA if use of the areas is not limited exclusively to owners, residents and their guests”.
The Technical Assistance Manual illustrates this point by giving specific examples of facilities that are considered public accommodations, including the following:
ILLUSTRATION 1: A private residential apartment complex includes a swimming pool for use by apartment tenants and their guests. The complex also sells pool “memberships” generally to the public. The pool qualifies as a place of public accommodation.
ILLUSTRATION 2: A residential condominium association maintains a longstanding policy of restricting use of its party room to owners, residents, and their guests.
Consistent with that policy, it refuses to rent the room to local businesses and community organizations as a meeting place for educational seminars. The party room is not a place of public accommodation. The examples given are not exhaustive, and use of the term “memberships” when referring to the pool is inconsequential. Rather, the test to determine if ADA applies is whether access to the pool is limited exclusively to owners, residents and their guests. If not, the ADA will likely apply. The same general analysis would apply for non-physical spaces such as a community’s website.
Generally, if a facility or amenity is considered a “public accommodation,” it must be brought into compliance with the ADA’s accessibility standards and requirements. There are limited exceptions for buildings and/or facilities constructed before January 26, 1993. However, the ADA still requires the community to remove physical barriers where “readily achievable” for older facilities (i.e., those built before January 26, 1993). “Readily achievable” is defined under the ADA as “easily accomplishable and able to be carried out without much difficulty or expense.” Failure to remove barriers “where readily achievable” constitutes discrimination under the ADA.
While the ADA may not apply to your community, the Fair Housing Act (“FHA”) still may. If you have questions regarding your community’s obligations to permit reasonable accommodations or modifications, please consult your community’s attorney for specific guidance. Marcus Wile is an attorney with Orten Cavanagh Holmes & Hunt, LLC where he focuses on all manner of litigation matters in addition to general counsel representation of common interest communities. Marcus is a frequent speaker at educational events for community association boards of directors and managers and is a member of the CAI-RMC Editorial Committee.
By Joe Smith, Burg Simpson Eldredge Hersh Jardine, P.C.
Among the most feared phrases to be uttered in a common interest community is “construction defect.” A construction defect is generally defined as a condition resulting from a flaw in design, workmanship, or materials that reduces the value of a structure or threatens the safety of its occupants. Once identified, construction defects have to be taken seriously and without delay. Although “construction professionals” (as defined Colorado’s Construction Defect Action Reform Act) are afforded at least two opportunities to resolve potential CD claims before an Association can file a CD lawsuit, every Association that finds itself with defects should assume that litigation is likely to occur.
Potential Benefits of CD Litigation
The greatest potential benefit to an Association and unit owners in successfully pursuing CD Litigation is the recovery of funds by negotiation, settlement, trial, or arbitration that allow the Association to permanently repair the defects at issue at the expense of those who are responsible for them, rather than depleting reserves or specially assessing the unit owners. By being able to make these repairs, the Association avoids the downsides identified below.
Additionally, if the Association prevails in the CD Litigation a court or arbitrator may order the construction professionals to reimburse the Association for its litigation expenses (e.g., the cost of expert witness investigation, reporting, and testimony; filing fees; and deposition costs that have to be paid as they become due). The court or arbitrator may also order the construction professionals to pay the Association’ attorney fees. Awarded litigation costs and attorney fees are in addition to repair costs and any other legal damages the Association recovers.
Potential Downsides to CD Litigation
There are several potential downsides to an Association not pursuing CD Litigation when preliminary investigation identifies construction defects that will require significant repairs. Among the most significant downsides are:
How Does an Association Determine if CD Litigation is Warranted?
Whether or not construction defects exist in a community is usually beyond the knowledge of a community manager, Board members, and unit owners. Fortunately, a number of Colorado forensic engineers and architects, repair contractors, and CD attorneys specialize in working with Associations to help identify defects in common elements and determine if CD litigation may be necessary.
Initially, the CD attorney usually retains a forensic engineer or architect and/or specialty repair contractor to perform visual observations of the exterior of the community and possibly a small number of unit interiors. These experts look for and document visible defects, damage, or distress. With that information in hand, as well as the Association’s Declaration and any amendments, the CD attorney can advise the community manager and Board about the types and scope of defects, the impact of applicable time limits on the CD claims, statutory processes that must be complied with before initiating CD Litigation, and any additional pre-litigation processes the Declaration may require the Association to follow. As part of this discussion, the CD attorney should tell the community manager and Board whether retaining the attorney to handle all applicable pre-litigation requirements and, if necessary, file a CD lawsuit is warranted. Ultimately, the decision rests with the Board, which should ask the CD attorney any and all questions that come to mind about the pros and cons of pursuing a CD lawsuit.
Building a common interest community is a complex undertaking that requires meticulous planning followed by strict observance of construction best practices. Serious construction defects can – and often do – occur. An Association that discovers construction defects should consult with CD Litigation experts as early as possible to assist an Association in weighing the potential benefits and downsides of CD Litigation and, ultimately, to hold the declarant, builder, and/or other parties liable for repair cost and other damages.
About the Author: Joe Smith is a senior attorney in the Construction Defect Group at Burg Simpson Eldredge Hersh and Jardine. Joe is also a licensed architect and has represented Colorado homeowner associations and homeowners since 1999.
By Tim Moeller & Britton Weimer, Moeller Graf, P.C.
The business-judgment rule is an important legal doctrine in Colorado that applies to directors of common interest communities. Most often, the business-judgment rule is used as a defense to complaints pertaining to discretionary board decisions. The business-judgment rule requires courts to defer to corporate deliberations and avoid second-guessing the good-faith decisions of directors.
Legal Overview
The business-judgment rule “bars judicial inquiry into actions of corporate directors taken in good faith and in the exercise of honest judgment in furtherance of a lawful and legitimate furtherance of corporate purposes.” Hirsch v. Jones Intercable, Inc., 984 P.2d 629, 637 (Colo. 1999). The rule recognizes the practical reality that courts “are ill equipped and infrequently called on to evaluate what are and must be essentially business judgments.” Id. at 638.
“Courts presume that a corporation’s directors possess the expertise and knowledge to make business decisions.” Walker v. Women’s Professional Rodeo Ass’n, 498 P.3d 648, 658 (Colo. App. 2021). However, the rule does not confer blanket immunity – it does not protect directors who engage in “fraud, self-dealing, unconscionability, and similar conduct” that is “incompatible with good faith and the exercise of honest judgment.” Id.
Generally, directors are afforded wide discretion in making decisions for the association, and if a director acts in good faith, such actions should not form a basis for imposing liability on that director. However, the business-judgment rule does not extend to transactions where the director has a conflict of interest, such as the director’s use of corporate funds for personal benefit.
The business-judgment rule extends to nonprofit organizations. "In the absence of some clearly arbitrary and unreasonable invasion of a member's rights, courts will not review the internal operation and affairs of voluntary organizations." Jorgensen Realty, Inc. v. Box, 701 P.2d 1256, 1258 (Colo. App. 1985). “Courts are reluctant to intervene, except on the most limited grounds, in the internal affairs of voluntary associations." Bloom v. Nat’l Collegiate Athletic Ass’n, 93 P.3d 621, 624 (Colo. App. 2004).
Community associations are especially well positioned to invoke the rule, because of the discretionary nature of many board decisions. “Unlike other types of contracts that require specific acts at specific times by contracting parties, covenant enforcement may require the exercise of discretion as to both the timing and the manner of enforcement.” Colorado Homes v. Loerch-Wilson,43 P.3d 718, 723 (Colo. App. 2001). Indeed, in Colorado Homes, the Court recognized that the business-judgment rule may apply to claims against community-association directors for breach of contract and breach of fiduciary duty.
Thus, for community association boards, the business-judgment rule provides a vital defense to many claims for negligence, breach of contract and breach of fiduciary duty when performing board obligations. However, it rarely provides a defense to intentional torts such as fraud, to claims for conflicts of interest, or to actions that exceed the board’s authority under Colorado law or the governing documents.
Practical Tips
For HOA directors, the business-judgment rule provides some degree of comfort. If they can demonstrate that disputed actions were done in good faith and consistent with the governing documents and Colorado law, they will normally have a solid defense to a negligence action.
As is so often the case in preventing litigation, one key is to carefully document the material decisions, when they happen, before any lawsuits are filed. While it is often unfair, judges and juries may think that, if it wasn’t put in writing at the time, then “it probably didn’t happen.”
The board will have additional protection when it consults experts on specialized matters beyond the knowledge of the board, such as engineering, legal, investment, and accounting decisions. When the directors follow an expert’s advice, it is difficult for third parties to later second-guess the decision and show bad faith. Written opinions by experts are especially helpful.
Finally, as a risk-management backstop in case the court finds the business-judgment defense inapplicable, it is always prudent to have Directors & Officers and Commercial General Liability insurance, to help cover lawsuits that make it through the business-judgment shield.
Tim Moeller has been practicing community association law for 25 years. He and David Graf started Moeller Graf, P.C. in 2005. The firm solely represents Colorado community associations.
Britton Weimer is an experienced litigation, transactional and insurance attorney representing community associations with Moeller Graf in Englewood Colorado.
Any attorney that represents homeowner associations will tell you that the Colorado legislature has unleashed a massive assault on associations over the last several years with respect to regulating the collection of delinquent assessments. However, no other area of collections has been affected to quite the same extent as the foreclosure of association liens. There have been wide-sweeping revisions and new impediments to foreclosure never before seen in Colorado.
In 2022, the legislature passed the Homeowners’ Association Board Accountability and Transparency bill that was introduced as HB22-1137. HB22-1137 curtailed actions by associations in the collection of debt. The term of the payment plan required to be offered to a delinquent owner increased from six (6) months to eighteen (18) months, while reducing the maximum interest rate to 8%. Owners were also permitted to pay as little as $25 per month for the first 17 months, with a balloon payment in month 18. The extended payment arrangements allowed owners to remain delinquent for a protracted amount of time while unreasonably delaying an association’s ability to take legal action, including foreclosure, to collect the past due balance.
In addition to requiring notices to owners be sent via certified mail, return receipt requested, HB22-1137 also instituted a questionable requirement to post the letter on the owner’s property. 2022 was also the year that associations became required to provide notices in any language requested by the owner, in addition to English, as well as to a third party if one was designated by the owner.
HB22-1137 also changed the ‘application of payments’ provision to require all payments to first be applied to assessments before applying any overage to other charges. Before this change, associations historically applied payments first to legal fees and other charges before applying monies to assessments. This change to the application of payments dove-tailed with HB22-1137’s provision that precluded an association from foreclosing on balances that consisted only of fines and/or attorney fees regardless of the balance owed, further tying the hands of an association to utilize foreclosure as an effective collection tool. Additionally, HB22-1137 limited the parties that could purchase a foreclosed property. Essentially, any person affiliated with or related to the Board, management company, and attorney representing the association was precluded. Lastly, HB22-1137 created a cause of action for an owner against the association with a five-year statute of limitations for the violation of any foreclosure laws. The determination of a violation permitted an award of up to twenty-five thousand dollars in damages, plus costs and reasonable attorney fees. Talk about a chilling effect on the foreclosure of association liens.
Over the next two years associations struggled to bring their processes into compliance with the requirements of HB22-1137, only to have the legislature turned the industry on its head with new collection and foreclosure procedures enacted into law in 2024. These new laws, effective August 2024, have drastically altered the landscape of HOA foreclosures.
The primary bills in 2024 that affected collections and foreclosure are HB24-1233 and HB24-1337. HB24-1233 required associations to amend their collection policies, once again, in order to proceed with any action to collect delinquent balances. HB24-1233 also changed the methods of notifying owners of past due balances to exclude posting of the notice, but adding a new requirement to contact owners by two of the following means: telephone, text, or email, in addition to the certified mail requirement. Interestingly, HB24-1233 recognized and excepted owners of time share units from the provisions of 1233, as well as removed the requirement to comply with HB22-1137, provided the owner does not occupy the unit on a full-time basis.
HB24-1337 implemented many changes to the Colorado Revised Statutes, specifically to Sections 123, 209.5, 316, and 316.3 of the Colorado Common Interest Ownership Act (“CCIOA”). HB24-1337 also made drastic revisions to Article 38, Section 302 related to redemption procedures, but only with respect to homeowner association judicial foreclosure sales. Additionally, HB24-1337 expanded on the group of persons prohibited from purchasing foreclosed property by adding community association management companies to the list.
Effective August 7, 2024, Associations were prohibited from commencing a judicial foreclosure to collect assessments unless specific criteria were met. The criteria include compliance with each of the requirements set forth in Section 209.5, including sending the required collection notices (at a minimum, a written offer to enter into a payment plan) with notification to the owner in the manner provided therein, as well as a board vote to refer the account to an attorney. Neither HB22-1137 or HB24-1337 made any revisions to the requirement that the balance must equal or exceed six months of assessments or that the Board must vote individually to foreclosure on each unit.
Section 316 of CCIOA now provides additional prerequisites to foreclosure actions. Before commencing a judicial foreclosure, a homeowner association must first obtain a personal judgment (i.e., a money judgment) against the owner. Exceptions to this requirement are the death or incapacity of the owner, an active bankruptcy case, or if the owner has successfully avoided service for six months. The aforementioned provision to obtain a money judgment does not apply if the unit to be foreclosed is not an owner’s principal residence or if the unit is corporate owned, unless the unit is used for workforce housing.
Section 316, as amended by HB24-1337, also mandates additional notices that must be provided at least thirty (30) days prior to initiating a foreclosure. One must notify an owner of the right to participate in mediation. If the owner fails to respond, the association may move forward with foreclosure. The other notice must be provided to all lienholders identified on the property record of the pending foreclosure. The notice to lienholders must include the amount owed to the association. Both notices must be provided in writing and electronically. Unfortunately, at this time, Colorado law does not require lienholders to provide email addresses for electronic notification.
Section 123 of CCIOA was amended by HB24-1337 to limit attorney fee awards to “…reasonable attorney fees incurred as a result of the failure to pay…” Section 123 further specified that attorney fees are limited to five thousand dollars or fifty percent of the assessments and money owed to the association, unless the court finds that the owner was “…financially, physically, and reasonably able to comply with the declaration, bylaws, articles, or rules and regulations but willfully failed to comply.” Section 123 provides that the court shall consider all relevant factors and enumerate specific criteria, such as the amount of the unpaid assessments, whether the case was contested, and other factors.
Finally, HB24-1337 overhauled the redemption procedure in judicial foreclosure sales when the lien being foreclosed is on a unit in a common interest community. HB24-1337 created six categories of “Alternate Lienors.” These are statutorily created categories of persons/entities that do not actually have a lien on the property that are permitted to effectively purchase the property following the sale. The time for redemption for these Alternate Lienholders has been so heavily extended that the end result may be to deter junior lienholders rightfully permitted to redeem from doing so. Due to the extended timelines, ownership of the property will now remain in limbo for six months or more, increasing the amount of the delinquency that the foreclosure sought to collect.
It is rumored that the 2025 legislative session will continue to curtail the ability of homeowner associations to collect assessments and further limit the foreclosure of association liens. If this trend endures, owners that do pay the assessments will continue to shoulder the burden for non-paying owners and may force associations to reduce services.
Kate began her career as a paralegal in a collection law firm and has more than ten years of experience in collection litigation as an attorney and a paralegal. After graduating from law school, she put her knack for teaching to use as a law librarian and adjunct professor. Being able to explain the legal process to clients and consumers has made her an effective advocate and negotiator. Kate now focuses solely on foreclosure litigation and has a high success rate of resolution.
By Wes P. Wollenweber, Resolve ADR Group
As someone who has litigated community association legal disputes for many years, and now mediates those conflicts, I have a strong bias in favor of alternative dispute resolution (ADR) for these cases. As to why, disputes over property rights, property values, and people's homes tend to be among the most emotionally charged cases I have handled in my career. As a result, people in the dispute spend thousands of dollars in litigation where they often regret going to the mat. All too often, those who win a covenant or other common HOA disputes lose financially in the end. HOA litigation creates financial burden to the members of a community, causes significant interruptions in peoples' lives, including those community managers that are dragged into the litigation, and poses financial risk when the outcome is weighed against the money spent. With that, ADR provides opportunities to control both the outcome and cost of a dispute. There are pros and cons to ADR but for community association disputes, the advantages are significant.
Types of ADR for Associations
The two common forms of ADR that pertain to community disputes are mediation and arbitration. As many know, mediation is a confidential settlement process where a neutral third party facilitates settlement negotiations between the parties to the conflict. More and more, courts are requiring mandatory mediation in all types of civil litigation cases. So, in a community legal dispute, the chances of being forced to mediate the case are high. Is that a good thing? When a case is mediated and the parties do not settle, then no one feels like it is a good thing because of the perception that money has been wasted on the mediator for a case that may go all the way to trial. However, good mediators help the parties understand the strengths, weaknesses, and points of risk in their cases. So, there is always an advantage to mediation, even when the case does not settle: it helps the parties evaluate their situations going forward and the parties get heard.
The second common ADR format is binding arbitration, where the parties choose an arbitrator to serve as a private judge. Arbitration is very similar to going to court, except the parties in a dispute do not pay the judge. In arbitration, you pay for the arbitrator's time and possibly for the administration of the private dispute. Some arbitrators provide non-administered arbitrations to keep the cost down. Many community construction defect cases go to arbitration. The process is faster than court, or should be, and while it can be more expensive, arbitration often increases the chances of a faster outcome and more certainty of getting some or all of what you hope for. In addition to these formats, facilitation and med-arb exist for associations. Facilitation is a process sometimes used to help boards with deadlocked decisions. Med-arb is a hybrid of mediation and arbitration, and while controversial, can work well for smaller HOA disputes.
ADR Today
In the 2024 legislation session, Colorado passed HB 1337. Among a variety of statutory changes to the association collection process, this bill amended § 316 of CCIOA and requires an association to attempt mediation with a homeowner before filing a judicial foreclosure claim in a lawsuit. These changes allow an association to judicially foreclose if the delinquent homeowner does not agree to mediation or fails to cooperate in selecting a mediator. This legislative action signifies our legislature's view that mediation is important in association disputes. Similar bills could follow.
As to whether mediation or arbitration makes sense, HOA general counsel and community managers all know that litigation can greatly impact a community's budget. Worse, letting a judge or jury decide a case is a major roll of the dice. When determining whether litigation will be worth it, a crucial consideration is whether either party to a dispute can recover their attorneys' fees. Compared to all other types of litigation, HOA cases are the riskiest in terms of judges awarding attorneys' fees. Judges do not always award a prevailing party all its attorneys' fees. It is hard to be made whole in these cases. Mediation is a great way to avoid the risk of those upside-down expenses and fashioning your remedy without that risk. When cases are settled in mediation, the parties are done spending money on attorneys' fees and control their financial bottom line.
The parties in an HOA dispute, such as owners, board members, community managers, need to be heard. More importantly, they often must live together long after the dust settles. Mediation gives them a voice, explores their real interest in the dispute, and can bring about a resolution that builds a permanent solution among neighbors. Mediation negates risk and empowers the parties to figure out their own solution and not gamble on a judicial outcome. Arbitration can save major time, and even expense if done right. As our world changes, ADR is a great leveler - keeping the parties in control of their pocket book and outcome.
Wes Wollenweber is a 26-year trial attorney, as well as a credentialed mediator, and arbitrator. He is the founder of ReSolve ADR Group in Lakewood. After 26 years of litigating complex HOA disputes, employment cases, construction, real estate, and other similar maters, Wes focuses his ADR practice in these areas.
By Jeff Kerrane, Kerrane Storz, P.C.
An HOA receives an engineer’s report warning that a retaining wall on the property is on the brink of failure. The board, focused on other issues and keeping dues low, decides to put the report on the back burner. After all, the wall looks fine from a distance, right? Fast forward a few months, and a heavy rainstorm triggers a collapse, flooding several units. The HOA now faces costly damage claims, lawsuits, and increased insurance premiums. The expert report, neglected due to budget concerns, becomes a major liability.
The Role of Third-Party Reports and Recommendations
Expert reports and recommendations may come from a variety of sources, including engineers, architects, community association managers, accountants, attorneys, and even committees and board members. These recommendations can address a wide variety of issues, including maintenance, fiscal management, legal issues, or safety concerns.
Expert reports can be valuable tools for HOA boards, offering professional insights and helping them make informed decisions. However, these reports also introduce potential liabilities if not handled with due diligence.
Legal Liability of HOAs and Board Members
The Colorado Common Interest Ownership Act (CCIOA) offers legal protections for HOA board members. Under C.R.S. § 38-33.3-303(2)(b), board members are generally not liable for decisions made in good faith, with due care, and within their authority—unless the actions are willfully negligent. This “Business Judgment Rule” safeguards decisions made by the board, provided those decisions are made on an informed basis, in good faith, with due care, and within the scope of their authority. To invoke the protections of the business judgment rule, board members must inform themselves of all material information reasonably available to them before making a business decision and act with due care. If the board ignores an expert report without a reasonable basis, it could be argued that they did not act with due care, potentially exposing both the HOA and individual board members to liability.
Conflicting Expert Recommendations
Even the most diligent board can face trouble when it receives conflicting advice from its experts. For example, an HOA’s roof maintenance contractor advises the board that unless an expensive repair is performed, a portion of the roof could collapse. The board hires a structural engineer to investigate, and the structural engineer tells the board there is no significant structural problem, and that only an inexpensive repair is necessary.
If the board decides to make only the inexpensive repair, could the board be subject to liability if the roof collapses? In this case, a court would consider whether the board’s decision was reasonable under the circumstances, fully informed, and in good faith. To avoid second-guessing, the HOA may consider seeking clarification or a third opinion from a neutral expert.
Proper Implementation of Expert Recommendations
Another potential area of liability arises when an HOA relies on a third-party recommendation but implements it poorly or incorrectly. Even though the recommendation comes from a qualified expert, the HOA still bears responsibility to ensure that the work is done correctly.
For example, an HOA receiving a recommendation to replace roofing, might hire an unqualified contractor to do the work. If the contractor installs the new roof improperly, leading to further damage, the HOA could face liability due to its failure to ensure proper oversight and execution of the third-party recommendation.
To avoid poor implementation, HOA boards should ensure that contractors are qualified and reputable and should require periodic inspections during the project. If possible, they should hire an experienced project manager or owner’s representative to oversee the work and ensure it meets the expert's recommendations.
The Impact of Colorado's Two-Year Statute of Limitations
Neglecting expert recommendations can also trigger issues with Colorado’s Two-year statute of limitations for construction-related claims.
Under Colorado law, construction defect claims generally must be brought within two years of the date the physical manifestation of the defect is discovered or should have been discovered. If the HOA board delays acting on expert recommendations or does not address potential issues promptly, they may inadvertently jeopardize their ability to seek legal recourse within the allowed timeframe.
For instance, if the board ignores an engineer’s recommended foundation repairs, and the foundation fails years later, the HOA may miss the opportunity to file a claim for damages. This could leave the HOA with no legal remedy, further compounding the financial burden.
Insurance Considerations
HOAs should also consider their insurance coverage. Many HOAs carry liability insurance to protect against claims related to property damage, personal injury, or negligence. It is important for HOA boards to review their insurance policies regularly to ensure that they are adequately covered in case a third-party recommendation is not implemented correctly or if something goes wrong.
In some cases, the HOA’s insurance policy may also include coverage for errors and omissions, which could protect board members in the event that a decision based on a third-party report leads to a lawsuit.
Conclusion
In Colorado, as in other states, homeowners’ associations have a fiduciary duty to protect and manage their communities responsibly. To mitigate risk, HOA boards should thoroughly review and act upon expert advice with due diligence. By taking expert advice seriously, HOA boards can not only avoid immediate financial pitfalls but also safeguard the community's future.
Jeff Kerrane is a shareholder with the construction defect law firm Kerrane Storz, P.C. and can be contacted at 720-898-9680 or jkerrane@kerranestorz.com.
By Tony Smith, SJJ Law
Accessory Dwelling Units (ADUs), affectionately known as granny flats, in-law suites, or backyard cottages, are the talk of Colorado – because, really, who wouldn't want their backyard to double as a thriving metropolis?
As the state wrestles with an affordable housing crisis, ADUs are strutting onto the scene like knights in shining (albeit slightly cramped) armor, promising to expand housing options. However, recent legislative changes aimed at making ADUs more common are causing quite a stir, especially among homeowners associations (HOAs), which generally prefer to keep their neighborhoods as uniform as a closet full of freshly pressed khakis.
What Are ADUs, and Why Are They Important?
ADUs are secondary housing units that cozy up to the original home. They come in various forms, from detached structures to surprisingly stylish converted garages or basement apartments. ADUs serve up a smorgasbord of benefits – they allow homeowners to earn rental income and keep family members close (regardless of whether you may want them there).
Recognizing these perks, Colorado passed new laws to make ADU construction easier. These laws sweep aside certain local zoning restrictions that previously treated ADUs like second class citizens, thereby signaling the state's commitment to tackling housing shortages, one backyard at a time.
Key Provisions of the New ADU Laws
Thanks to the new laws, which go into effect June 30, 2025, municipalities and counties must now roll out the welcome mat for ADUs in most residential zones. While local governments can still insist on aesthetic niceties and parking requirements, outright bans are as outdated as disco. Moreover, the legislation turns the permit approval process from a nail-biting saga into a more reasonable one-act play and chops excessive fees, which were previously about as welcome as a surprise tax audit.
How Do These Changes Affect HOAs?
The new law applies to HOA communities consisting of “Single-Unit Detached Dwellings,” which is defined as “a detached building with a single dwelling on a single lot.” So, it does not apply to condominium buildings or townhome communities with party walls.
Traditionally, many HOAs in Colorado have taken a hard stance against ADUs, citing potential risks like heightened traffic, parking Armageddon, and the terrifying threat of fluctuating property values. Yet now, the new laws render ineffectual provisions in the HOA governing documents and rules that looks ADUs in the eye and say "not in my backyard!" These changes, however, are not universal throughout Colorado and instead apply only in “subject jurisdictions” as defined in HB24-1152.
Most notably, these laws yank some of the power from HOAs to veto ADUs. This change has raised eyebrows and voices among HOA communities, as it could potentially disrupt the uniformity these associations aim to preserve.
For HOAs subject to the new ADU law, this means breaking out their governing documents (perhaps dusting off some cobwebs) and making sure they align with state law. While HOAs can still insist on rules that are reasonable, like ensuring new structures don't resemble UFO landing pads, they can no longer simply deny requests to build ADUs.
Challenges and Opportunities for HOAs
The legislative shake-up brings both headaches and hallelujahs for HOAs. On one hand, balancing homeowners' desires for ADUs with neighborhood harmony might feel like juggling flaming torches while riding a unicycle. On the other, seeing ADUs as partners in solving the housing crisis could polish a community's image.
To ride this wave, HOAs subject to the law should consider drafting policies that are the Goldilocks of guidelines – neither too strict nor too lenient, but just right. This entails setting parameters for ADU placements, insisting that they resemble the existing homes, and managing the nitty-gritty of shared utilities. Open communication with homeowners about these rules is crucial—after all, no one likes feeling like they're playing a game where someone changed the rules and didn't tell them.
HOAs would be wise to consult legal counsel to retouch their documents to avoid potential clashes with newly minted state laws. Boards should be ready for an avalanche of inquiries regarding homeowners' newfound ADU rights and be poised with answers that don’t start with "um."
Colorado’s new ADU laws are shaking up housing policy like a snow globe, promoting flexibility and inclusivity in zoning that scoffs at boundaries. For HOAs subject to the new laws, these shifts serve up a cocktail of challenges with a side of opportunities, both of which must be gulped down to adapt and evolve. Proactively tackling the law's implications enables HOAs to maintain community standards while jumping on the state’s bandwagon toward alleviating housing woes.
As these regulations set root, ongoing tête-à-tête among HOAs, homeowners, and local authorities will be crucial for a smooth transition, like a well-oiled machine or a perfectly executed dance routine. With careful planning and a sprinkle of cooperation, HOAs can effectively integrate ADUs into their communities while keeping their respective essences (whatever those might be) that make them desirable places to live.
Tony Smith is one of the founding partners of SJJ Law and the chair of its Community Association practice group. Tony and SJJ Law are proud to provide a wide range of legal services to HOA clients throughout Colorado.
Whether you are an experienced manager or a brand-new board member, navigating the ever-growing world of HOAs can be challenging. It is a challenge because each year there are new laws and regulations to follow, updated budgets to stay on top of, and codes to be aware of.
However, did you know that there are many resources available to you? Here is a list of websites and online resources (and one in-person suggestion) to take advantage of when you need the information at your fingertips.
More information can be found here - https://dre.colorado.gov/hoa-center
