Source: https://cbaclelegalconnection.com/tag/ccioa/
Timestamp: 2019-04-25 15:49:10+00:00

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The Colorado Court of Appeals issued its opinion in Arrabelle at Vail Square Residential Condominium Association, Inc. v. Arrabelle at Vail Square LLC on Thursday, August 25, 2016.
Development—Association—Colorado Common Interest Ownership Act—Small Planned Community—Reformation—Special Master.
The Arrabelle at Vail Square (Arrabelle) is a luxury development built and managed by Vail Resorts Development Company and Arrabelle at Vail Square LLC (Vail Resorts). Arrabelle includes multi-million dollar residential condominiums, a boutique hotel, restaurants, retail shops, an ice-skating rink, a spa, parking, and other amenities. At the time of development, Vail Resorts recorded a plat establishing seven separate real estate parcels collectively titled “Lot 1” and “Airspace Lots A-F” at Arrabelle. Vail Resorts then entered into a Reciprocal Easements and Covenants Agreement (RECA) governing those parcels and creating two lots—the Airspace Lot (which would be developed into condominiums) and the Project Lot (the remainder of the property). The RECA establishes benefits, burdens, and cost allocations between both lots, and it regulates the use and enjoyment of both lots. Immediately after recording the RECA, Vail Resorts recorded a condominium plat creating 67 condominiums in the Airspace Lot and a condominium declaration creating the Arabelle at Vail Square Condominium Association, Inc. (Association). Problems soon developed between Vail Resorts and the Association. The Association subsequently filed this action seeking a declaratory judgment allowing it to terminate the RECA or, alternatively, ruling that the RECA was in violation of the Colorado Common Interest Ownership Act (CCIOA), requiring reformation. Among other things, the trial court (1) ruled that Arrabelle is not a small planned community under C.R.S. § 38-33.3-116(2), because it was subject to development rights; (2) reformed the RECA to adjust the cost allocation ratio between the lots; and (3) had a special master draft an amendment to the RECA.
On appeal, Vail Resorts argued that the trial court erred in ruling that Arrabelle is not a “small planned community” under CCIOA § 38-33.3-116(2) because Vail Resorts reserved development rights under the RECA. By definition, the Arrabelle, which contains 67 units, is not a small planned community containing fewer than 20 units under CCIOA.
Vail Resorts also argued that the trial court erred in reforming the cost allocation and RECA and master association documents because those documents contain terms not required by CCIOA. Because the 59.7% cost allocation to the Association did not correspond to the formula established in RECA section 6(b), and because that allocation discriminated in favor of Vail Resorts’ Project Lot without properly disclosing that the allocation substantially benefited that lot, the trial court did not err in reforming RECA section 6(b) pursuant to the Association’s expert’s recommendation based on as-built drawings of the Arrabelle.
Vail Resorts also contended that additional court-ordered reformations to the RECA exceeded the authority of the court. Principles of equity support the trial court’s conclusion that reformations were necessary for the RECA to comply with CCIOA, and the trial court did not abuse its discretion in adopting the special master’s reformations. The court placed Vail Resorts and the Association in the position they would have been had Vail Resorts initially created a CCIOA-compliant common interest community.
Editor’s note: This is Part 2 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.
Construction defect claims; interlocutory review; relationship between revised Nonprofit Corporation Act and the Common Interest Ownership Act.
Colorado consumer protection act claims may be subject to mandatory arbitration, because the CCPA does not include a nonwaiver provision.
Village Homes, a residential developer, built homes subject to recorded covenants, and thereby created an association, Triple Crown. Triple Crown was set up as a nonprofit corporation under C.R.S. §§ 7-121-101, et seq. In the declaration of covenants, the developer included a dispute resolution procedure for claims arising from the design or construction of homes in the Triple Crown development. The declaration required that construction defect claims be arbitrated under American Arbitration Association rules.
In 2012, residents began a campaign to amend the declaration by repealing the arbitration clause. Unfortunately, it took more than sixty days to gather the votes to amend the covenants. After sixty days, 48% of the members had cast votes in favor of revocation. After another sixty days, the Association had obtained the required 67% of votes to effect the amendment. The Association recorded the amendment, and then brought this action against Village Homes, alleging negligent construction, Colorado Consumer Protection Act (CCPA) violations, and breach of fiduciary duties.
Village Homes moved to dismiss for lack of jurisdiction, based on the arbitration clause in the declaration. It argued that the amendment repealing the arbitration provision was ineffective because the Association failed to amend Article 14 within the time limits in the Nonprofit Corporations Act, specifically C.R.S. § 7-127-107(2), which deals with time limits for actions taken without a meeting. The trial court granted the motion, dismissed the case, and ordered the case to arbitration. This order is affirmed on appeal. The court holds that when an association amends its declaration without a meeting under the CCIOA, the association, if it is a nonprofit corporation, must comply with the 60-day time limit provided in section 7-127-107.
The association then argues that CCIOA § 38-33.3-302(2) invalidated Article 14. The trial court rejected this argument. The court agreed with the trial court, finding that the CCIOA section forbids only restrictions unique to the declarant. Article 14 controlled disputes between all parties.
The trial court rejected the association’s argument that its CCPA claims should not be subject to mandatory arbitration, because CCPA provisions by statute “shall be available in a civil action.” The court holds that such a right can be waived, and that Article 14 of the Triple Crown declaration was such a waiver.
Liability for homeowner association assessments; annexation; developer side agreement.
This is an interesting situation involving a developer, a side agreement with another landowner to exempt that owner’s land from subdivision covenants, and the annexation provisions of the CCIOA. As a prequel, the following general principles stated in the dissent by Judge Terry set the stage.
“Provisions of this article may not be varied by agreement. . . . A declarant may not . . . use any . . . device to evade the limitations or prohibitions of this article or the declaration.” C.R.S. § 38-33.3-104. . . .
Members are not “entitled to set up agreements reached with the developer as defenses to the obligation to pay assessments . . . . [T]he developer does not have the power to waive the assessment obligations imposed on property within the common-interest community.” Restatement (Third) of Property: Servitudes, 6.5, cmt. e (2000).
Nice notions, but the developer here found the approval process for a second filing of his development sometimes required some last-minute adjustments. He had a side agreement with Kelley, an owner of a minority of land to be included in a second filing of a large development, to keep the “Kelley Lots” from control of any covenants or new HOAs. At the late stages of approval of the new filing, however, the developer included Kelley’s land in the filing – Kelley signed the plat – and sold the lots in bulk to Ryland.
Ryland, going along with the deal, sold the Kelley lots immediately back to developer, and the developer then deeded the land to Kelley. Kelley sold the lots to another builder, who sold homes to consumers. Several years go by, during which the consumers enjoy neighborhood improvements, and then the HOA takes action to collect assessments – including back fees totaling $70,000. The homeowners had constructive notice of the plat and the declaration from exceptions to their deed warranties. In defense, the homeowners and Kelley argued that their lots had not been appropriately “annexed” into the association. The decision goes through the statutes, and two judges reverse the trial court and hold that the requirements for annexation had not been met.
The reasoning of the majority goes like this. To exercise a development right under CCIOA, a developer must comply with the plat and map requirements of C.R.S. § 38-33.3-209 and the recording requirements of C.R.S. § 38-33.3-217(3). The homeowner defendants argue that to exercise a reserved development right, CCIOA requires the recording of an amendment to the declaration that must contain certain information and be properly indexed. The court agrees that the recording of an Official Development Plan and the declaration was not sufficient to meet these requirements. The original declaration cannot logically be considered an amendment to itself such that it could annex the Kelley Lots. Moreover, nothing was denominated as an amendment, nothing assigned identifying numbers to newly created units, there was no reallocation of interests among all units, and no common elements were described. Nothing on the Filing 2 plat map subjected the described property to the Declaration.
CCIOA fans and developers’ counsel will want to dive into this discussion — and avoid those shortcuts.
On February 3, 2014, Rep. Jeanne Labuda and Sen. David Balmer introduced HB 14-1254 – Concerning a Requirement to Disclose Fees Charged to a Unit Owners’ Association by a Community Association Manager. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.
The bill requires a licensed community association manager who performs services for a homeowners’ association (HOA) through employees or subcontractors to fully disclose to the HOA, during contract negotiations and annually thereafter, all fees and charges that the manager will bill to the HOA for services performed by those employees or subcontractors.
The bill passed out of the House on February 26. On March 21, the Senate adopted the bill on 2nd Reading with amendments.
Since this summary, the bill passed 3rd Reading in the Senate.

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