sbsa 2016 spring showcase presentation

TheTatteredPatchworkofLocal

Ordinances

CAIRockyMountainChapter2016SpringShowcase

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PRESENTERS

EdFronapfel,MSCE,PEOwner

HeidiStorz,Esq.Partner

MariPerczak,Esq.Shareholder

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INTROSLIDE

PRESENTER

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Denver

Aurora

ColoradoSprings

CommerceCity

Lakewood

Littleton LoneTree

Parker

MapSource:http://mapsof.net/uploads/static-maps/colorado_county_map.png

WheatRidge

LovelandFortCollins

Westminster

LocalCDOrdinancesHaveCroppedUpAllAlongtheFrontRange(2014)

Arvada

Arvada

ForcedArbitration

WithBuilder-SelectedArbitrationService??

NotEvenInDeclaration– RequiresHomeownerstoGotoRecordedPlattoFigureThisOut

Aurora

ForcedRepairsbyBuilder• HomeownerorHOAhasnorighttorejectabuilder’sproposeddeficientorunsaferepair

ForcedArbitration

TakesControlOutofBoard’sHands• Requireshomeownervote formattersthattheBODshouldhandle

RequiresHOAstoMakeDisclosureofUnknown Information• Beforemakinganoticeofclaim,HOAsmustdisclosethecostofrepairs;theeffectuponmarketabilityofunits;andotherinformation

ColoradoSprings

RequiredDisclosuresofUnknownInformation• RequiresHOAstodiscloseinformationthat isnotreadilyavailablepriortofullyinvestigateitsconstruction defectclaims

ForcedRepairs• Builderisunilaterallyentitledtomakeallrepairs– includinghazardousorinappropriateones

TakesControlOutofBoard’sHands• RequireshomeownervoteformattersthattheBODshouldhandle

CommerceCity

ForcedRepairsbyBuilder• HomeownerorHOAhasnorighttorejectabuilder’sproposeddeficientorunsaferepair

ForcedArbitration• Usingbuilder-selectedarbitrationservicesandbuilder-selectedarbitrationrules

TakesControlOutofBoard’sHands• Requireshomeownervote formattersthattheBODshouldhandle

RequiresHOAstoMakeDisclosureofUnknown Information• Beforemakinganoticeofclaim,HOAsmustdisclosethecostofrepairs;theeffectuponmarketabilityofunits;andotherinformation

Denver

EliminatesImpliedWarrantyofHabitability

Releasesbuildersfromtherequirementtoconstruct incompliancewithmanufacturers’instructions

TakesControlOutofBoard’sHands• Requireshomeownervote formattersthattheBODshouldhandle

RequiresHOAstoMakeDisclosureofUnknown Information• Beforemakinganoticeofclaim,HOAsmustdisclosethecostofrepairs;theeffectuponmarketabilityofunits;andotherinformationthattheHOAlikelydoesnotknowatthattime

FortCollins

MakesitaCriminalActtoAttempttoModifyanHOA’sDeclarationRegardingArbitration

TakesControlOutofBoard’sHands• RequireshomeownervoteformattersthattheBODshouldhandle

RequiresHOAstoMakeDisclosureofUnknownInformation• Beforemakinganoticeofclaim,HOAsmustdisclosethecostofrepairs;theeffectuponmarketabilityofunits;andotherinformationthattheHOAlikelydoesnotknowatthattime

Lakewood

ForcedArbitration

ForcedRepairsbyBuilder• HomeownerorHOAhasnorighttorejectabuilder’sproposeddeficientorunsaferepair

TakesControlOutofBoard’sHands• Requireshomeownervote formattersthattheBODshouldhandle

RequiresHOAstoMakeDisclosureofUnknown Information• Beforemakinganoticeofclaim,HOAsmustdisclosethecostofrepairs;theeffectuponmarketabilityofunits;andotherinformationthattheHOAlikelydoesnotknowatthattime

Littleton

ForcedArbitration

ForcedRepairsbyBuilder• HomeownerorHOAhasnorighttorejectabuilder’sproposeddeficientorunsaferepair

TakesControlOutofBoard’sHands• Requireshomeownervote formattersthattheBODshouldhandle

RequiresHOAstoMakeDisclosureofUnknown Information• Beforemakinganoticeofclaim,HOAsmustdisclosethecostofrepairs;theeffectuponmarketabilityofunits;andotherinformationthattheHOAlikelydoesnotknowatthattime

LoneTree

ForcedArbitration

TakesControlOutofBoard’sHands• RequireshomeownervoteformattersthattheBODshouldhandle

RequiresHOAstoMakeDisclosureofUnknownInformation• Beforemakinganoticeofclaim,HOAsmustdisclosethecostofrepairs;theeffectuponmarketabilityofunits;andotherinformationthattheHOAlikelydoesnotknowatthattime

Loveland

TakesControlOutofBoard’sHands•RequireshomeownervoteformattersthattheBODshouldhandle

RequiresHOAstoMakeDisclosureofUnknownInformation•Beforemakinganoticeofclaim,HOAsmustdisclosethecostofrepairs;theeffectuponmarketabilityofunits;andotherinformationthattheHOAlikelydoesnotknowatthattime

Parker

ForcedArbitration

WheatRidge

ForcedArbitration

ForcedRepairs• HOAcannotrejectabuilder’sunsafeordeficientrepairs

TakesControlOutofBoard’sHands• Requireshomeownervote formattersthattheBODshouldhandle

RequiresHOAstoMakeDisclosureofUnknown Information• Beforemakinganoticeofclaim,HOAsmustdisclosethecostofrepairs;theeffectuponmarketabilityofunits;andotherinformationthattheHOAlikelydoesnotknowatthattime

CriticalIssuesRaisedbyTheseOrdinances

Defining“ConstructionDefect”• Denver

AbsoluteBuilderRightstoRepair• Aurora• CommerceCity• Lakewood• Littleton• WheatRidge

StrategicEffortstoEliminateBuilderLiability• AllMunicipalities

Absolute“RighttoRepair”

SpoliationofEvidenceofConstructionDefects

RepairofDefects•CureofProblem•CorrectionofResultantDamages

OtherConcerns

SpoliationofEvidenceofConstructionDefects

• Ifrepairsareunsuccessful,orthepartiesendupinlitigationafterrepairs,evidenceofdefectswouldhavebeendestroyedduringrepairsperformedbybuilder

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Two-ProngstoRepairstoConstructionDefects

• Correctionofdefectivecondition– Nothird-partyoversighttoensurerepairsaremadeincompliancewithcodeorotherrequirements

• Repairofresultantdamage– Noqualitycontrolorthird-partyoversighttoensurecorrectionofresultantdamage

– Noincentivetodoso(resultantdamagecanbehiddenduringrepairprocess)

– NomethodforownersorHOAtorequiresuchrepairs

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Absolute“RighttoRepair”OtherConcerns

• Samecontractorwhocauseddefectsinthefirstplacecouldmakerepairs– NoopportunityforHOAorownerstovetcontractor

• Consequencesofpoor/incompleterepairs:– Increasedmaintenancecosts– Reducedservicelifeofbuildingorcomponent– Change/damageaestheticalappearance– Reducevalueofproperty

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Absolute“RighttoRepair”OtherConcerns

• Norequirementtocorrectlife-safetyissues• NocompensationtoownersorHOAfor:– Priorrepairs– Investigation/engineeringcosts– Attorneyfees– Lossofuse

• Noprotectionfromfilingofsubcontractorliens?

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StrategicEffortstoLimitorEliminateBuilderLiability

• LimitsonPowersofBODtoTransactAssociationBusiness

• RequiredDisclosures• Non-negotiatedarbitrationprovisions• AbilitytocontrolHOAlongaftercompletion

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LimitsonPowersofBODstoTransactAssociationBusiness

• CCIOApermitsAssociationstoinstitutelitigationonbehalfoftheAssociationortwoormoreownersregardingmattersaffectingthecommon-interestcommunity– Colo.Rev.Stat.Sec.38-33.3-302(1)(d)

• Manyofthelocalordinancesremovethispowerandrequireamajorityvoteofhomeownerswithinspecificrestrictivetimeperiods– Thesetimeperiodsservenofunctionbuttoprovideonemore

stumblingblockforHOAstoseekremediesfordefectsandprovideadditionalgroundsforbuilderstoescapeliability

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RequireDisclosuresofUnknownInformation

• Undermanyoftheseordinances,Associationsmustdisclose:

– Natureofactionandthereliefsought– ExpensesandfeesBODanticipateswillbeincurred, including potentialliability

iftheHOAisnottheprevailingparty– Estimatedcostofrepairingdefect,or, ifunrepaired, impactonunitvalue– Impactuponmarketabilityofunits, including impactonabilitytorefinance– Mannerof funding thecostsoftheaction– Anticipateddurationandlikelihood ofsuccess– Whetherbuilderhasofferedto,andmade,repairs– Stepstakenbybuilder toaddressdefect(including inspections)– Datebywhichclaimsmustbefiled tobetimelyunderSORandSOL

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DisclosuresMustBeGiven60DaysBeforeNoticeofClaim

• Disclosuresarerequiredtobemade60daysbeforeservinganoticeofclaim

• IfanAssociationisclosetoadeadlineforstatuteoflimitationsorrepose,this60-day“waitingperiod”couldendupservingasabartotheAssociation’sclaimsunderthestatuteoflimitationsorrepose

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Non-NegotiatedArbitrationClauses

• LocalordinancesprohibitamendmentstoDeclarations/CC&Rsrelatedtoarbitrationprovisions– Onejurisdiction(FortCollins)actuallymadeitacrime toattempttoamendaDeclaration

• Asaresult,builderscanputwhateveronerousrequirementsitdesiresintotheDeclarations,andtheHOAwillhavenoabilitytoavoidcomplyingwiththem– Insomeinstances,theserequirementscouldultimatelyserveasaneffectivebartoallconstructiondefectclaims

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ExemplarOnerousArbitrationClauses

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AbilitytoControlHOABusinessLongAfterTransition

• SomeordinancesprohibitamendmentofDeclarationarbitrationprovisionswithoutbuilderconsent– Irrespectiveofwhethertransitionhasoccurred,builderisoutofbusiness,buildernolongerownsunits,andisnolongerontheBOD

• AllowsthebuildertoexertcontroloveroperationoftheHOAlongafterthepropertyiscompleteandtheyhaveleftthecommunity

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Questions?

ThankYou!

CAIRockyMountainChapter2016SpringShowcase

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