HOMEOWNERS’ ASSOCIATIONS ABILITY TO SUE DEVELOPERS LIMITED BY REFORM LEGISLATION 16:20, July 14, 2017

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HOMEOWNERS’ ASSOCIATIONS ABILITY TO SUE DEVELOPERS LIMITED BY REFORM LEGISLATION

HOMEOWNERS’ ASSOCIATIONS ABILITY TO SUE DEVELOPERS LIMITED BY REFORM LEGISLATION
When a developer’s control over a condominium project passes to the homeowners’ association (“HOA”), the HOA may sue the developer for construction defects (real or perceived). There is an industry of lawyers that take on these cases. Due to the risk of construction defect litigation condominium development, especially in the Denver area, has dried up. While there is no readily available comparable information on condominium development in the mountains, it is more likely than not that condominium development in the mountains has also been negatively impacted. The result has been more construction of for-rent apartments and less construction of condominiums intended for ownership.

The Colorado legislature recently enacted HB 1279 (a copy of which is attached), which is effective July 1, 2017.  HB 1279’s proponents believe it will re-energize condominium development.  HB 1279 establishes steps legally required before an HOA can sue a developer. First, all owners must be given notice that the HOA board is even considering such a lawsuit, and the notice requirements are quite substantial. Second, the HOA board must meet with the developer, and each side can present relevant facts and arguments. The bill’s proponents believe that this may lead to a settlement rather than litigation. Third, a majority of the ownership interests in the common elements of the project (which may be different than majority of the owners) must approve the litigation. Units owned by the developer or parties related to the developer cannot vote. The entire process must be completed within 90 days after the owners are first notified that the HOA board is considering such a lawsuit.
The foregoing is an over-simplification, and the attached copy of HB 1279 should be studied carefully.

For more information or questions about this new legislation or any other matters affecting homeowners’ associations, please contact Ron Garfield moc.t1547770602hcehd1547770602leifr1547770602ag@dl1547770602eifra1547770602g1547770602 or Chris LaCroix moc.t1547770602hcehd1547770602leifr1547770602ag@xi1547770602orcal1547770602c1547770602 (Aspen), David H. McConaughy moc.t1547770602hcehd1547770602leifr1547770602ag@yh1547770602guano1547770602ccmd1547770602 (Glenwood), Tracy L. Kinsella moc.t1547770602hcehd1547770602leifr1547770602ag@al1547770602lesni1547770602kt1547770602 or Kursten Canada moc.t1547770602hcehd1547770602leifr1547770602ag@ad1547770602anack1547770602 (Avon).

House Bill 17-1297