Opinion ID: 2585492
Heading Depth: 2
Heading Rank: 2

Heading: The Implied Power of Homeowners Associations to Impose Mandatory Dues on Lot Owners for the Maintenance of Common Areas

Text: The Association additionally argues that, even in the absence of an express covenant imposing mandatory assessments, it has the implied power to collect assessments from its members. To this end, the Association brought a counterclaim against West for breach of an implied contract obligating him to pay a proportionate share for repair, upkeep, and maintenance of the common area. The Association now argues that, based on West's breach of the implied contract, it is entitled as a matter of law to collect the unpaid assessments from Respondent. We agree. Our review of case law from other states, the Restatement of Property (Servitudes), and the declarations for Evergreen Highlands in effect when West purchased his property, as supported by our understanding of the purpose of the Colorado Common Interest Ownership Act (CCIOA), [6] convinces us that such an implied power exists in these circumstances. We therefore hold that Evergreen Highlands is a common interest community by implication, and that the Association has the implied power to levy assessments against lot owners to provide for maintenance of and improvements to common areas of the subdivision. This being a question of first impression in Colorado, we first examine case law from other jurisdictions and find it largely in concurrence with our holding. When faced with this issue, a substantial number of states have arrived at the conclusion that homeowner associations have the implied power to levy dues or assessments even in the absence of express authority. See, e.g., Spinnler Point Colony Ass'n, Inc. v. Nash, 689 A.2d 1026, 1028-29 (Pa.Commw.Ct.1997) (holding that where ownership in a residential community allows owners to utilize common areas, there is an implied agreement to accept the proportionate costs for maintaining and repairing these facilities.); Meadow Run & Mountain Lake Park Ass'n v. Berkel, 409 Pa.Super. 637, 598 A.2d 1024, 1026 (1991) (same); Seaview Ass'n of Fire Island, N.Y., Inc. v. Williams, 69 N.Y.2d 987, 517 N.Y.S.2d 709, 510 N.E.2d 793, 794 (1987) (holding that when lot purchaser has knowledge that homeowners association provides facilities and services to community residents, purchase creates an implied-in-fact contract to pay a proportionate share of those facilities and services); Perry v. Bridgetown Cmty. Ass'n, Inc., 486 So.2d 1230, 1234 (Miss.1986) (A landowner who willfully purchases property subject to control of the association and derives benefits from membership in the association implies his consent to be charged assessments and dues common to all other members.). But see Popponesset Beach Ass'n, Inc. v. Marchillo, 39 Mass.App.Ct. 586, 658 N.E.2d 983, 987-88 (1996) (holding that where lot owner had no notice in his chain of title of assessments and had not used the common areas, there existed no implied-in-fact contract to pay past and future assessments). [7] Reflecting this considerable body of law, the newest version of the Restatement of Property (Servitudes) provides that a common-interest community has the power to raise the funds reasonably necessary to carry out its functions by levying assessments against the individually owned property in the community.... Restatement (Third) of Property: Servitudes § 6.5(1)(a) (2000). In addition, as explained in a comment to that section, the power to levy assessments will be implied if not expressly granted by the declaration or by statute. Id. at § 6.5 cmt. b; see also Wayne S. Hyatt, Condominium and Homeowner Association Practice: Community Association Law 36 (1981) (The assessment is not equivalent to membership dues or some other discretionary charge.... As long as legitimate expenses are incurred, the individual member must bear his or her share.). We find the Restatement and case law from other states persuasive in analyzing the issue before us today. In addition, these authorities are in harmony with the legislative purpose motivating the enactment of CCIOA. See, e.g., § 38-33.3-102(1)(b), 10 C.R.S. (2002) (That the continuation of the economic prosperity of Colorado is dependent upon the strengthening of homeowner associations ... through enhancing the financial stability of associations by increasing the association's powers to collect delinquent assessments); § 38-33.3-102(1)(d) (That it is the policy of this state to promote effective and efficient property management through defined operational requirements that preserve flexibility for such homeowner associations). Respondent, however, argues that the implied power to mandate assessments can only be imputed to common interest communities, which both CCIOA and the Restatement define as residential communities in which there exists a mandatory obligation or servitude imposed on individual owners to pay for common elements of the community. [8] Respondent therefore contends that because the original covenants did not impose such a servitude, Evergreen Highlands is not a common interest community, and accordingly cannot have the implied power to levy assessments against its members pursuant to these authorities. Respondent's argument, however, relies on the assumption that the servitude or obligation to pay which would have defined Evergreen Highlands as a common interest community was required to have been made express in the covenants or in his deed. This assumption is incorrect. CCIOA provides only that the obligation must arise from the declarations, which are defined as any recorded instruments however denominated, that create a common interest community, including any amendments to those instruments and also including, but not limited to, plats and maps. § 38-33.3-103(13), 10 C.R.S. (2002); see also Restatement (Third) of Property: Servitudes § 6.2(5)(2000) (`Declaration' means the recorded document or documents containing the servitudes that create and govern the common-interest community.). The declarations in effect for Evergreen Highlands in 1986 incorporated all documents recorded up to that date, and included not only: (1) the covenants, but also; (2) the 1972 plat, which noted that the park area would be conveyed to the homeowners association; (3) the 1973 Articles of Incorporation for the Association stating that the Association's purposes were to own, acquire, build, operate, and maintain the common area and facilities, to pay taxes on same, and to determine annual membership or use fees; and (4) the 1976 deed whereby the developer quit-claimed his ownership in the park area to the Association. At the time Respondent purchased his lot in 1986, the Evergreen Highlands' declarations made clear that a homeowners association existed, it owned and maintained the park area, and it had the power to impose annual membership or use fees on lot owners. These declarations were sufficient to create a common interest community by implication. As explained by the Restatement: An implied obligation may ... be found where the declaration expressly creates an association for the purpose of managing common property or enforcing use restrictions and design controls, but fails to include a mechanism for providing the funds necessary to carry out its functions. When such an implied obligation is established, the lots are a common-interest community within the meaning of this Chapter. Restatement (Third) of Property: Servitudes § 6.2 cmt. a (2000); see also id. at illus. 2 (citing an example virtually identical to that of Evergreen Highlands and finding it a common interest community by judicial decree). We accordingly adopt the position taken by the Restatement and many other states, and hold that the declarations for Evergreen Highlands were sufficient to create a common interest community by implication. The Association therefore has the implicit power to levy assessments against lot owners for the purpose of maintaining the common area of the subdivision. Respondent, as a lot owner, has an implied duty to pay his proportionate share of the cost of maintaining and operating the common area. We therefore remand the case to the court of appeals with orders to return it to the trial court to calculate Petitioner's damages in a manner consistent with this opinion.