The Colorado State Legislature has been very active on issues affecting Colorado owner associations over the past two months. The Legislature has adopted a resolution asking owner associations to amend their governing documents to aid in water conservation. The Legislature also has two different versions of one bill pending on construction defects. State lawmakers are considering a bill to allow the American Flag to be displayed in covenant controlled communities. A bill limiting covenants that restrict installation of drought tolerant vegetation is pending, while a bill that would have limited covenants that require irrigation was defeated. The following article discusses in greater detail the content and status of these bills.
 
Water Conservation/Legislature Requests Owner Associations Amendments
Both the State House and the State Senate have approved a non-binding resolution, asking owner Associations to evaluate and amend their governing documents that would aid in water conservation 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. Additionally, in the resolution, the Legislature 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.
 
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 (90 days after the date of adoption of the resolution). As owner associations plan for activation of landscaping irrigation systems, governing documents should be reviewed for provisions that do not aid in water conservation and amendment of those provisions should be sought. If water conservation amendments are not made, the Legislature may take an approach of requiring water conservation and voiding covenants, or rules or guidelines that do not aid water conservation.
 
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. This bill must be further approved by the State House of Representatives, and by the State Senate and the Governor. 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 Committee’s 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.

Construction Defect Legislation
There are currently two versions of one bill pending on this subject, one version approved by the State House of Representatives and the other approved by the State Senate. The House may either accept the Senate version, or reject it. If the House accepts the Senate version, that version will then be sent to the Governor, who is expected to sign the bill into law. If the House rejects the Senate version, the bill is sent to a conference committee (comprised of both House and Senate members). The conference committee would then prepare a conference bill, which would be submitted to both chambers in place of the two existing different versions.
 
Construction defect bills have been before the Legislature over the past six years, and many Legislators have become aware of the defects that some homeowners have. Legislators are also aware of some of the large settlements and trial awards on construction defects. Those settlements and trial awards (and many other factors) have lead to large insurance rate increases for builders, contractors and subcontractors, and have kept the attention of Legislators for the sixth year.
 
In the House version of HB 03-1161 (referred to at the Legislature as the Re-engrossed version), the following changes would be made:
 
1.  A right to repair is established, allowing a “construction professional” the right to repair defects before an owner or an owners association can sue. The process is complicated and there are adverse consequences to owners or the owner association along the way.
 
2. Treble damages could only be awarded against a builder if fraud is proved beyond a reasonable doubt.
 
3.  Damages would be limited to actual damages, without any award for probable damages.
 
4.  Actual damages would also be limited to zero if the property has increased in value since the initial closing.
 
5.  Builders would be allowed to have owners waive defect claims and owner warranty rights in their sales contracts, if the waiver is “clear and conspicuous.”
 
6.  Long term warranties, like the ten year structural warranty given by some builders, would be reduced to a six year warranty at best, and would have that six year time frame further reduced because of a requirement that warranty claims be made in two years from the date of discovery.
 
The Senate version of HB 03-1161 (referred to at the Legislature as the Re-revised version) would make just two primary changes. The Senate version would:
 
1.  Create a right to repair, allowing a builder or contractor the right to repair defects before an owner or an owners association can sue. The right of repair in the Senate version is not complicated and does not have adverse consequences to owners or the owner association along the way.
 
2.  Builders would be protected from treble damages, with a cap placed on treble damages of $250,000. This cap would also include any attorney fees awarded under the Colorado Consumer Protection Act.
 
House Bill 03-1161 is sponsored by State Representative Gregg Rippy (R-Glenwood Springs). Representative Rippy is in the process of determining which of the two versions he is supporting. His decision will likely determine if the House concurs in the Senate version or rejects it. At the time this was written, his decision is pending.
 
Display of the American Flag Proposed to be Permitted in Covenant Controlled Communities
The State Senate has given initial approval, by amendment of Senate Bill 03-235, of a statute that would allow display of the American Flag in covenant controlled communities. Owner associations would be authorized, by the pending bill, to adopt rules on the size, number, placement, manner of display and lighting. Owner associations would also be expressly allowed to regulate the location, size and height of flagpoles. This bill must be further approved by the State Senate, by the State House of Representatives, and by the Governor. If approved as currently amended, flag displays will be permitted on single family homes in covenant controlled communities. Flag displays would also be permitted on a condominium or townhome owner’s property.
 
Other Bills and More Information
The Legislature is scheduled to adjourn in early May. Until adjournment, other bills may be introduced, or the bills discussed above may be amended. For more information on any new bills, or the bills discussed in this article, contact our office by phone, fax or email or visit the State of Colorado's website.