Senate committee rejects Colorado SB 13-052

On 17 April 2013, the Colorado Senate's judiciary committee rejected SB 13-052, which would have severely limited legal protections for homeowner associations located near public transit.

As originally drafted, the bill would have defined any homeowner association within a half mile of a bus or light rail stop as a "Transit-Oriented Development." Such associations would lose the right to recover any damages in court for building code violations or other negligent construction, and the developers of such communities would gain absolute immunity from claims for environmental hazards or pollution. A last-minute amendment from the bill's sponsor would have limited the bill's scope to communities near light rail and removed provisions requiring private arbitration of disputes, but the three Democrats on the committee remained concerned about the lack of data supporting the bill and the risk that it would harm consumers. The committee's two Republicans voted in favor of the bill.

Jesse Witt of The Witt Law Firm testified on behalf of the Community Associations Institute in opposition to the bill. Mr Witt asserted that, although the proponents of the bill had argued that an insurance crisis was hindering the construction of new homes near public transit, SB 13-052 would do nothing to improve the insurance climate. Instead, the bill would reward the incompetent builders who cut corners, refuse to take care of their customers, and expect their insurance companies to "clean up the mess." These builders cause insurance premiums to rise for everyone, including the many quality builders in Colorado who take the time to do things right. Making homeowner associations increase their dues to fix negligent builders' mistakes was not, according to Mr Witt, the right policy for Colorado.

The stakeholders agreed to meet over the summer to discuss other options to encourage new construction and ensure the availability of affordable insurance without unfairly penalizing homeowners. Please check this site or contact The Witt Law Firm for updates on this process.

Colorado Supreme Court declares super lien other HOA laws unconstitutional

The Colorado Supreme Court ruled today that the statutes allowing homeowner associations (HOA’s) to charge their members monthly assessments and collect them by means of a “superlien” violate the state constitution. The ruling may have a dramatic effect on communities throughout the state.

The Colorado Common Interest Ownership Act (CCIOA) was enacted in 1990 after the state legislature determined that “the continuation of the economic prosperity of Colorado is dependent upon the strengthening of homeowner associations in common interest communities financially through . . . the creation of statutory assessment liens the granting of six months’ lien priority . . . and through enhancing the financial stability of associations by increasing the association’s powers to collect delinquent assessments.” Since then HOA’s have relied on CCIOA to collect monthly assessments from their members. If a member refused to pay the HOA could foreclose a lien on the property that took precedence over the homeowner’s mortgage. The court’s opinion in Fairview Orchards Owners League v. Pesci, 2013 CO 20A invalidates these laws as unconstitutional.

The case arose after the Fairview Orchards Owners League obtained a county court judgment against a homeowner who had stopped paying her monthly assessments. The district court affirmed but the homeowner appealed the ruling to the supreme court. She argued that HOA’s serve no rational purpose and that the laws supporting HOA’s should therefore be struck down. Surprisingly, the court agreed.

In its briefing, the HOA had argued that monthly assessments were necessary to fund community activities such as common area maintenance landscaping and snowplowing, but the justices disagreed. Writing for a unanimous court Justice Nancy Rice cited a 2010 Colorado State University study suggesting that the importance of these tasks had been overrated. “Most modern construction materials need little or no maintenance” she noted. “An HOA cannot therefore justify collection of dues based on the performance of unnecessary jobs such as painting or replacement of building components.” 

Justice Rice likewise rejected the HOA’s argument that its assessments were necessary to pay for landscaping. “The CSU study shows that most species of turf grass will naturally reach a height of two inches and then spread laterally to choke out invasive weeds so long as meddlesome HOA’s and vendors do not interfere with the grasses’ natural growth patterns.” She noted that the study had also found that these grasses had evolved the ability to retain extra chlorophyll during drought conditions which causes them to appear lush and green even when left unwatered. The HOA’s claim that it needed to charge its members for snowplowing also failed to persuade the court. Justice Rice again quoted from the CSU study which concluded “that the electromagnetic properties of asphalt are such that it will repel the ions that exist in the tiny ice crystals that make up snow. So long as the resulting electromagnetic field is not discharged by contact with snowplows or other metal objects the snow will quickly move away from the surfaces of roads.” Because of this Justice Rice concluded that snowplowing costs were not a valid purpose for collecting HOA assessments. “Contrary to popular belief” she stated “it seems that streets really do plow themselves.”

The court announced its opinion on Monday, 1 April 2013. Court rules allow the parties fourteen days to petition for rehearing.

Witt named to 2013 Super Lawyers

The Witt Law Firm is proud to announce that its principal, Jesse Howard Witt, has been recognized for the second straight year as a Rising Star in construction law by Colorado Super Lawyers.

Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The selection process is multi-phased and includes independent research, peer nominations, and peer evaluations. The objective is to create a credible, comprehensive and diverse listing of outstanding attorneys that can be used as a resource for attorneys and consumers searching for legal counsel. Since Super Lawyers is intended to be used as an aid in selecting a lawyer, it is limited to those who can be hired and retained by the public.

To be eligible for inclusion in Rising Stars, a candidate must be either 40 years old or younger or in practice for ten years or less. While up to five percent of the lawyers in the state are named to Super Lawyers, no more than two and a half percent are named to the Rising Stars list.

Colorado Supreme Court holds that LLC member is not liable for theft of construction funds

The Colorado Supreme Court ruled today that an LLC member's voluntary injection of capital into a failing construction company did not constitute funds disbursed to a contractor on a construction project for purposes of Colorado's trust fund statute. As such, the company did not need to hold the capital in trust for the benefit of its subcontractors, and the member's use of the capital to pay operating expenses did not support a civil theft claim.

The decision in Yale v. AC Excavating, Inc. reversed a 2010 opinion from the Colorado Court of Appeals, which had surprised many observers by concluding that the owner of a construction company could be liable for theft of money he had loaned to the company in an unsuccessful effort to keep the company from going out of business. The court of appeals had ruled that he was required to hold all funds in trust for an unpaid subcontractor, even though he had not contributed the funds for that purpose.

Although the supreme court's ruling in this case seems reasonable under the facts, contractors should remain cautious whenever they receive funds for use on a construction project from an owner or other party. Improper management of such funds can lead to personal liability, treble damages, and attorney fees. On public projects, penalty interest can also be imposed. To avoid such risks and ensure compliance with the such statutory requirements, contractors doing business in Colorado should consult promptly with a qualified construction law attorney.