The 2003 legislative session which ended May 7, 2003 has been very active on issues affecting Colorado owner associations. The Legislature adopted, and the Governor approved, major changes on a construction defects law. As a result of the protections given to builders, a group of property owners has started the process to regain lost property owner rights through a proposed amendment (by citizen initiative) to the Colorado constitution. State lawmakers passed and the Governor is expected to approve a bill allowing the American Flag to be displayed in covenant controlled communities. A bill limiting covenants that restrict installation of drought tolerant vegetation is expected to be passed, and the Legislature adopted a resolution asking owner associations to amend their governing documents to aid in water conservation.
Protections Provided to Builders for Construction Defects.
After extensive lobbying by builders, the Legislature sent a conference committee version of HB03-1161 to the Governor. The Governor has signed this bill and it is now the law.
The new law has many changes and adds protections for builders. These protections include the following:
Builder's Repair Right. Builders (and some others) are provided a right to repair a defect before an owner or association can sue for construction defects.
Owner's Notice of Claim. As a part of the builder's right to repair, a detailed "notice of claim" procedure is now required of owners and associations before suit can be filed.
Damage Limitations. The items that owners and associations can recover as damages are now limited in over nine new ways.
First, recovery for "probable" construction damages has been eliminated.
Second, recovery is limited to "actual damages" which are defined as the lesser of fair market value of the property without the claimed defects, replacement cost of the property or reasonable cost to repair, whichever is less. Relocation costs and interest are allowed, and as to residential property, direct economic costs related to loss of use are allowed.
Third, treble damages and attorney fees under the Consumer Protection Act are capped and limited to $250,000.
Fourth, treble damages are now only allowed under the Consumer Protection Act if the settlement offered by the builder is less than 85% of the amount awarded, or if the reasonable cost to complete the offered settlement is less than 85% of the amount awarded.
Fifth, builders can only be liable for treble damages, within the cap, if they do not substantially comply with the terms of their settlement offer as accepted, or if the builder fails to respond to a notice of claim, and a violation of the Consumer Protection Act is proved.
Sixth, personal injury claims for non-economic loss related to construction defects are limited to $250,000.
Seventh, costs of lawsuits and reasonable attorney fees are only allowed as damages if provided for by contract or other applicable law.
Eighth, the above limits on defect claims have been expanded to all construction defect claims, including commercial and state and local government. These limitations do not apply only to residential claims.
Ninth, in every construction defect lawsuit, a list of defects must be provided.
Owners and associations with concerns about construction, re-construction, repairs or new improvements should carefully study this new law. It has changed the process and procedure for obtaining a remedy from builders and contractors. A copy of the bill is available for viewing at HB03-1161.
Ballot Initiative Sought to Protect Property Owner Rights.
Due to the loss of owner rights under this year's bill protecting builders from construction defect claims, a group of Colorado property owners and lobbyists are seeking a Colorado constitutional amendment to protect owner rights to sue for defects. If the initiative receives enough signatures of qualified citizens (over 69,000 are expected to be required), then this proposal would be on the ballot in 2004. Proponents are seeking to return property rights to Colorado property owners. The opposition has not yet begun efforts to defeat the proposed initiative. When they do, the effort will likely invoke advertising and other means to urge the initiative not be passed, due to the expense of insurance and cost to homebuyers.
Legislation to Allow Reasonable Display of the U.S. Flag.
Senate Bill 235 has been approved by the Legislature and has been sent to the Governor. This bill would allow reasonable display of one U.S. flag in covenant controlled communities. The allowed flag can be limited to one U.S. flag of a reasonable size. Flagpoles remain subject to applicable architectural covenants and guidelines. This bill is expected to be signed into law by the Governor in May or early June.
To be consistent with this bill, and to best meet the expectations of owners, owner associations should adopt rules on flag displays. The rules should allow at least one U.S. Flag of reasonable size to be displayed by attachment to the home or by attachment to an area to which an owner has rights of exclusive use. The size of the flag allowed can be set in the rules, as long as the size allowed is reasonable.
In addition to a rule on allowed display of one flag of a reasonable size, associations that have architectural review covenants should adopt rules or guidelines on flagpole installations. Rules on flag poles, if architectural covenants restrict those installations, can address height of the flag pole, size of the flag, placement, lighting and other components. A copy of the bill is available for viewing at SB-235.
Water Conservation – Through a Limitation on New Covenants That Would Restrict Xeriscaping.
State lawmakers have also given initial approval, by amendment of House Bill 03-1001, to a provision that would limit covenants that restrict xeriscaping. If approved as currently amended, new covenants, in an existing declaration or in a new declaration, would not be able to prohibit installation or use of drought tolerant landscaping (xeriscaping). Interestingly, this pending bill does not limit landscaping guidelines or the review process that architectural or landscaping committees perform. Yet, if the bill becomes law, and if the effect of guidelines or the review process is to preclude drought tolerant landscaping, then, the owner who made the application may claim the right to proceed without approval under this bill. A copy of the bill is available for viewing at HB03-1001.
Water Conservation – Legislature Requests Owner Association Amendments to Governing Documents.
Both the State House and the State Senate approved a non-binding resolution asking owner associations to evaluate and then amend their governing documents to aid in water conservation. The Legislature has asked owner associations to make water conservation amendments to their documents by May 26, 2003.
In House Joint Resolution 03-1015, the State Legislature asks owner associations to review their governing documents and evaluate the effects of their governing documents on landscaping and any other activities that place a burden on the state's water resources. The Legislature then asks owner associations to amend their governing documents to encourage and promote responsible water conservation measures, soil enhancement and xeriscaping. These actions are requested by the General Assembly of all Colorado owner associations, because state lawmakers determined that restrictive covenants that prohibit or limit xeriscaping, and that require turf grass are contrary to "the public good." The Legislature is encouraging owner associations and individual homeowners to save water through water saving techniques, landscaping plants, soil enhancements and plumbing and irrigation systems. A copy of the resolution is available for viewing at HJR03-1015.
In response to this resolution, Colorado owner associations should evaluate their governing documents and consider amendments that would aid in water conservation. These determinations and amendments have been requested by the Legislature to be completed by May 26, 2003. Owner association governing documents should be reviewed for provisions that do not aid in water conservation. Then, those provisions should be amended. If water conservation amendments are not sought or made, the Legislature may take an approach of requiring water conservation and voiding covenants or rules or guidelines that do not aid water conservation.
Summary
Association operations are increasingly under review by the Colorado State Legislature. The Legislature is expected to continue to consider and pass legislation that will affect owner associations. Fortunately, for Colorado owner associations, the Legislature adjourned May 7, 2003 and is not scheduled to reconvene until January of 2004.