Supreme Court Rules in Vallagio: NO AMENDMENT FOR YOU!
Written by: Marc Sarmiento on Wednesday, June, 7th, 2017
This week, the Colorado Supreme Court announced Vallagio at Inverness Residential Condo. Ass’n v. Metro. Homes, Inc., 2017 CO 69, holding (1) the Colorado Common Interest Ownership Act (“CCIOA”) permits a developer–declarant to retain the right of consent to amend a common interest community’s declaration; and (2) the Colorado Consumer Protection Act does not prohibit the arbitration of construction defect claims.
In Vallagio, the developer-declarant (“Declarant”) developed a common interest community under CCIOA. The Declarant drafted the community’s declaration, providing that (1) the Declaration’s provisions governing construction defect claims “shall not ever be amended” without the Declarant’s consent and (2) all construction defect claims must be resolved through arbitration.
The association later amended the declaration to delete the requirement that construction defect claims be resolved through arbitration. In doing so, the association relied on CCIOA’s provisions stating that a declaration can be amended only by an affirmative vote or agreement of greater than 50%–but not more than 67%–of unit owners. The association did not get Declarant’s consent.
The association then filed a lawsuit against the Declarant for several alleged construction defects within the community. The amendment was challenged and argued in front of the Colorado Supreme Court. In court, the Declarant argued that the association was required to arbitrate its construction defect claims because the amendment was invalid as the Declarant never consented to it. The association argued that the Declarant’s consent requirement was improper under CCIOA because, as noted, CCIOA provides that a declaration can be amended only by an affirmative vote or agreement of greater than 50%–but not more than 67%–of unit owners. In other words, it could not include the additional requirement of Declarant consent.
The Supreme Court disagreed with the association. It held that CCIOA’s limitations on amending declarations applied to “percentage” requirements only and that “nothing in [CCIOA’s] plain language precludes a declaration from imposing additional (i.e. non-percentage based) requirements for amendments.” It then concluded that the Declarant’s consent requirement was allowed under CCIOA and that the association’s amendment was therefore void. Consequently, the declaration’s arbitration provision was valid and binding on the community.
In short, with one decision, the Colorado Supreme Court gave builders what they could not get in five years with the Colorado Legislature, a restriction on amending declarations.
So, what does this mean for your community? Every association should review its declaration to see how amendments to the declaration are carried out. Associations should be positive they are complying with their declaration’s amendment procedures because, in light of Vallagio, any amendment taken in violation of the amendment provisions will be deemed void.
Additionally, associations should anticipate arbitrating construction defect claims as many declarations resemble the declaration discussed in Vallagio and prohibit amendments that seek to delete arbitration requirements of construction defect claims.
If you have any questions regarding the Supreme Court’s decision in Vallagio, your declaration, or your amendment procedures, or if you have questions on whether to amend in the first place, please do not hesitate to contact any of our attorneys at 303-432-999. We are happy to help you navigate the legal issues concerning your community.