|Colorado Legislative Action Committee (“CLAC”) is the legislative lobby arm for the two Community Association Institute Chapters in Colorado. CLAC has been involved in the analysis of HB22-1137, recent legislations that modified the Colorado Common Interest Ownership Act concerning collection of outstanding assessments, including foreclosures, covenant enforcement, and the handling of private issues during association meetings.|
Recently, on August 10, 2022, we attended a presentation on HB22-1137 put on by sponsors of the bill and a law firm, Armstrong Teasdale LLP, that assisted in the drafting of the bill. These sponsors and counsel shared, among other things, their interpretation on a few key, but ambiguous, provisions of HB22-1137, of which we believe CAI members should be aware. The following are important interpretations they shared:
1. Language in HB22-1137 At Issue: “A payment plan negotiated between the association or a holder or assignee of the association’s debt, whether the holder or assignee of the association’s debt is an entity or a natural person, and the unit owner pursuant to this section must permit the unit owner to pay off the deficiency in equal installments over a period of at least eighteen months” AND “Under the repayment plan, the unit owner may choose the amount to be paid each month, so long as each payment must be in an amount of at least twenty-five dollars until the balance of the amount owed is less than twenty-five dollars.”
Question Addressed by Sponsors and/or Counsel: Does this mean that a community association must allow an owner to have an 18-month payment plan of $25.00 per month and then pay a balloon payment for the remaining amount at the end of the 18-month installment period.
Interpretation by Sponsors and/or Counsel: No. According to counsel Doug Marsh, and supported by the bill supporters who were present, the interpretation set forth in the question would not result in “equal” monthly payments as required by the statute. The statute does not mention any balloon payment at the end of the 18-month period. Instead, the proper interpretation is that such a payment plan should be solely based on equal payments which bring the balance to zero ($0.00) at the end of the 18-month or other installment period. For example, if the balance owed by the owner is $1800, then the installment plan should be for 18 equal monthly payments of $100. The $25.00 language comes into play if the amount of the debt is such that the installments payments would be less than $25.00. Basically, the equal monthly installment payments must then be for at least $25.00 each, in the owner’s discretion. For example, if the debt owed is only $350, then the Owner could choose to pay $25.00 per month, which would result in a 14-month payment plan. The owner, though, could also choose to pay more over a shorter installment period. Keep in mind that the key to this interpretation is that HB22-1137 states, “to pay off the deficiency in equal installments over a period of at least eighteen.”
2. Language in HB22-1137: “If an association reasonably determines that a unit owner committed a violation of the declaration, bylaws, covenants, or other governing documents of the association, other than a violation that threatens the public safety or health, the association shall, through certified mail, return receipt requested, provide the unit owner written notice, in English and in any language that the unit owner has indicated a preference for correspondence and notices pursuant to subsection (1.7)(a)(i) of this section, of the violation informing the unit owner that the unit owner has thirty days to cure the violation or the association, after conducting an inspection and determining that the unit owner has not cured the violation, may fine the unit owner; however, the total amount of fines imposed for the violation may not exceed five hundred dollars.”
Question Addressed by Sponsors and/or Counsel: Does the $500 fine limit for covenant violations apply to violations that threaten the public safety or health (life/safety issues)?
Interpretation by Sponsors and/or Counsel: No. According to Mr. Marsh, and supported by sponsors present, the $500 fine limit does not apply to any violation that threaten the public safety or health or which have already caused harm to the public safety or health. He said that the language “other than a violation that threatens the public safety or health” applies to the language at the end stating, “however, the total amount of fines imposed for the violation may not exceed five hundred dollars.” HB22-1137 does not provide any limit for fines a community association may impose for covenant violations that threaten or have already harmed the public safety or health.
3. Language in HB22-1137: “With respect to any violation of the declaration, bylaws, covenants, or other governing documents of an association that the association reasonably determines threatens the public safety or health, the association shall provide the unit owner written notice, in English and in any language that the unit owner has indicated a preference for correspondence and notices pursuant to subsection (1.7)(a)(i) of this section, of the violation informing the unit owner that the unit owner has seventy-two hours to cure the violation or the association may fine the unit owner.”
Question Addressed by Sponsors and/or Counsel: Does the 72-hour notice period apply to a covenant violation which has already caused harm (a non-curable violation) or threatens to cause immediate harm to person or property (for example, an owner punches a board member or an owner dumps a hazardous chemical into a sewer drain in the community)?
Interpretation by Sponsors and/or Counsel: No. According to Mr. Marsh, and supported by sponsors present, a community association may immediately, without providing 72-hours notice to an owner requesting the owner cure the violation, seek injunctive relief from a court of law to address such covenant violations that have already caused harm or damage or threaten to cause immediate harm or damage. This statute does not take away a community association’s right to protect against immediate harm or seek immediate recourse to prevent further conduct which has already caused harm.
We acknowledge that these interpretations may conflict with the original interpretations of these provisions by many of our CAI members. We believe it is important to understand how the sponsors and counsel who assisted in the drafting of the bill actually interpret the language which they drafted and supported.
Mr. Marsh and several sponsors of HB22-1137 have acknowledged that the bill needs cleaning up and have expressed a desire to work with CLAC on a clean-up bill in the new session. CLAC is prepared to working thoroughly and diligently on such a clean-up bill this next session. We look forward to your assistance in this effort. CLAC would appreciate hearing from you as to any concerns, problems, opinions, or thoughts you or your associations may have regarding HB22-1137 and or any real-life experience concerning the implementation of HB22-1137. We would love to hear any true stories we may share with legislators concerning such implementation. Please also let us know if you are interested in testifying on CLAC’s behalf during the upcoming legislative session on any HB22-1137 clean-up bill or other community association-related legislation.
PLEASE NOTE THAT ON TUESDAY, NOVEMBER 8, 2022, FROM 11:00 A.M TO 1:00 P.M., CLAC WILL PRESENT A PANEL DISCUSSION ON HB22-1137 AND OUR EXPECTATIONS FOR THIS NEW LEGISLATIVE SESSION AT THE CAI SOUTHERN COLORADO CHAPTER LUNCH PROGRAM. THIS PRESENTATION WILL ALSO BE PROVIDED AS A LIVESTREAM OPTION (MORE INFORMATION WILL BE SENT TO RMC MEMBERS). FOR MORE INFORMATION ON THE IN-PERSON EVENT, PLEASE GO TOCAISOCO.ORG. WE LOOK FORWARD TO SEEING YOU THERE.
This article was sent to us from the Rocky Mountain Chapter Community Associations Institute.
Please contact us if you have questions about this summary or if you need representation with regard to association law.