BACKGROUND

The Arapahoe County Small Claims Court recently ruled in favor of an association in a lawsuit, tried by Orten & Hindman, brought against the association by an owner. The association in this case had attempted to enforce its covenants against the owner for various violations, including the installation of a double gate without approval. The association held a hearing and determined that the owner was in violation and assessed a $25 fine against the owner.

The owner had also installed a hot tub in his back yard. The association reported the installation of the hot tub to the city, concerned that the installation was done without a permit and did not comply with code.

LAWSUIT

Following the imposition of the fine against the owner, the owner filed a small claims lawsuit against the association. The owner alleged a host of violations by the association arising from the association’s efforts to enforce its covenants against the owner for the gate violation and for costs the owner incurred to correct the hot tub installation. The owner also contended that the association violated his rights under the Fair Debt Collection Practices Act and the covenants by attempting to assess fines against him for his covenant violations. He also alleged that the association engaged in selective enforcement by failing to enforce the covenants against his neighbors for violations similar to his. The association’s witnesses were able to establish that the association was either unaware of the other violations or that the violations had existed for a sufficient period of time so that enforcement was prohibited by Colorado’s one year statute of limitations regarding enforcement of building restrictions. In representing himself, the owner submitted over 650 exhibits to the court.

COURT DECISION

The court dismissed the owner’s Fair Debt Collection Practices Act claims. The court also ruled that neither the owner nor the court has the authority to force the association to enforce the covenants to the letter of the law and that the association’s exercise of business judgment allows for reasonable interpretation and application of the covenants, even if it results in perceived inconsistencies in covenant enforcement.

The court also found that the owner failed to prove that the association knew or should have known of other covenant violations at other properties prior to the running of the one year statute of limitations. In addition, the court held that the association’s actions in reporting the owner to the city for his failure to obtain a building permit for his hot tub was not done to cause harm, and that the owner had an obligation to follow the law, regardless of the association’s intent in notifying the city.

The court did allow the owner to keep his hot tub and double gate, however, because no lawsuit was filed to enforce those building restrictions within one year.

Because the association prevailed in the vast majority of the owner’s claims against it, the court found that the association was the prevailing party, and as such, was entitled to its reasonable attorney fees under the Colorado Common Interest Ownership Act.

PRACTICE POINTER

Because this is a small claims court case, it has limited precedential value for associations. However, it supports the view of many judges that associations do have some latitude in enforcing covenants and that the court should defer to an association’s reasonable, good faith interpretation and enforcement of its covenants. The case also reinforces an association’s ability to utilize external means to assist in its enforcement of covenants, including local codes or ordinances.
[PRINTER FRIENDLY VERSION]