Responsible Governance Policies for Homeowner and Condominium Associations are a “Must” for the New Year: Are Your Governing Documents Up to Date?

Continuing in its quest to promote the responsible governance of owners' associations, the Colorado Legislature has enacted requirements for most associations to adopt policies, procedures, and rules and regulations, concerning conflicts of interest involving board members.  House Bill 11-112 4 became effective April 13, 2011. 

House Bill 11-1124 amended C.R.S. §38-33.3-209.5 and requires the policies, procedures, and rules and regulations concerning conflicts of interest involving board members to include, at a minimum, a definition or description of the circumstances under which a conflict of interest exists, procedures to follow if a conflict of interest exists, including how, and to whom, the conflict of interest must be disclosed, and whether a board member must recuse himself or herself from discussing or voting on the issue.  The bill also requires that associations provide for the periodic review of the conflict of interest policies, procedures and rules and regulations.

This legislation follows a series of other governance policies that should be in effect governing collection of unpaid assessments, the conduct of meetings, notice and hearing procedures for enforcement proceedings, a schedule of fines, inspection of association records, investment of reserve funds, disputes between owners and the association, and reserve studies.

In addition to mandatory governance policies, associations should consider adopting other discretionary policies, such as standards and procedures in reviewing and approving architectural remodel and construction requests, procedures for submitting claims to the association's insurance carrier and the treatment of deductibles, signage issues, xeriscaping guidelines, and emergency vehicle parking procedures. 

Many associations find it helpful to create a website allowing third-party and owner access to declarations, bylaws, operating agreements, rules and regulations, party wall agreements, minutes of most recent annual owners' meeting and minutes of any directors' or managers' meetings, most recent financial documents including an annual balance sheet, annual income and expenditures statement, and the annual budget.  Doing so allows buyers, sellers and owners to easily comply with the disclosure requirements under the Colorado Real Estate Commission standard forms for the purchase and sale of residential properties. 

Associations with no more than ten units, that are not subject to reserved developments rights and were created before July 1, 1992, are exempt from the responsible governance policies unless the association declaration is amended to elect treatment under the Colorado Common Interest Ownership Act ("CCIOA"). 

Accordingly, all associations should review their governing documents and consult with counsel regarding compliance with the many mandatory provisions of CCIOA for responsible governance policies.

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If you have any questions about this Client Advisory, your lease obligations or any other real estate issue, please contact your Sherman & Howard attorney or one of the attorneys in our Real Estate Group.

Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and the Firm.

© 2012 Sherman & Howard L.L.C.                                                     January 19, 2012