Successful Enforcement of Covenants, Rules and Architectural Standards/Guidelines

I.   INTRODUCTION

A.     Community associations use covenants, rules, and architectural standards/guidelines to:

• Maintain, preserve, enhance, and protect the property values and assets of the community
• Promote harmonious community living 
• Preserve the common scheme and harmonious design of the community

B.     Covenants and rules and their enforcement are essential for community associations for several reasons:

• There is the need to create a sense of fairness and equity among residents (owners and tenants).
• In contemporary society, people are more likely to question and challenge authority.
• In cases where rules have been poorly developed or enforced, the courts are ruling against community associations.

C.     Authority to make and enforce rules rests with the board of directors of the association.  But the association manager is expected to

• Give the board practical, technical, and administrative assistance in developing and enforcing covenants and rules
• Maintain records which can furnish legal support if board actions in adopting or enforcing rules are challenged

II.   DEFINITIONS

A covenant affects the use and enjoyment of the property and is said to "run with the land" or "touch and concern" the property.  This means the covenant and the property are inseparable once the covenant is recorded, and all owners, present and future, are subject to the covenant.

A rule is a specific statement of required behavior whose violation carries a penalty (e.g., fine, suspension of voting rights, etc.) 

An architectural or design standard/guideline is a rule that applies to the appearance of an owner's lot or the exterior of his or her unit. 

III.   SCOPE OF COVENANTS (DEALING WITH USE RESTRICTIONS), RULES AND  ARCHITECTURAL STANDARDS/GUIDELINES
In a community association, covenants, rules and architectural standards/guidelines identify expected behavior, identify limitations and assist in the governance of the community in three areas.  These areas include:                   

A.     The use of both common property and individual lots or units.

Rules and architectural standards/guidelines are developed in this area to promote conformity and harmonious living.

B.     Changes in the architecture, the construction, or the appearance of lots or units.

Rules and architectural standards/guidelines are developed in this area in order to:

• Establish and preserve a harmonious design for a community
• Protect the value of the property

C.     The behavior of residents (owners and tenants), guests, and other visitors.

Rules are developed in this area because of the possible impact one person's behavior may have on other persons.

IV.  TYPICAL AREAS OF USE RESTRICTIONS IN COVENANTS, RULE-MAKING, AND ARCHITECTURAL STANDARDS/GUIDELINES

A.     Use restrictions found in covenants typically address:  signs, noise, trash, vehicles, business activities/residential use, animals, antennas

B.     Typical areas of rule making include:  pets, parking, solicitation, maintenance of units, renting and leasing of units, use of common areas and facilities, garbage and trash, noise, and clarification of use restrictions

C.     Architectural standards/guidelines frequently address:  fencing, decks and patios, exterior lighting, landscaping, doors and windows, building protrusions, such as skylights, water coolers and AC units, outdoor equipment, such as play sets.

V.    RELATION OF RULES TO HIERARCHY OF AUTHORITY

In a community association, rules are established by means of resolutions or other motions.  Here is where rules fit in the general hierarchy of authority for operating community associations:

• Federal constitution and statutes
• State and local statutes
• Map or plat for subdivision or association
• Declaration of Covenants, Conditions and Restrictions (CC&Rs)
• Articles of Incorporation
• Bylaws
• Rules and regulations

This hierarchy of authority means that rules and architectural standards/guidelines may not contradict or be in conflict with the legal sources that take precedence over them.  For example, a covenant may be more restrictive than a city ordinance (i.e., the city ordinance allows fences up to six feet in height, but a covenant may prohibit fences in excess of three feet).  Likewise, if a covenant is less restrictive than a county ordinance, the owners must comply with not only the covenant but also the county ordinance.  For example, the county may require that all dogs be registered with the county every year, but the covenants may not require any registration or only a one-time registration.  However, the association is not responsible for ensuring that the owner complies with the county’s requirements.

Although rules and architectural standards/guidelines are lower in the hierarchy of authority for community associations, they may clarify and expand an association's governing documents.  However, they cannot conflict with any source that has a higher precedence.

IV.   SOURCES OF AUTHORITY TO MAKE AND ENFORCE RULES

Check all the legal documents in your association's hierarchy to verify its authority to make and enforce rules.  The most important sources of an association's authority to make and enforce rules are:

A.     State Statutes and Court Decisions

The Colorado Common Interest Ownership Act (CCIOA) provides associations with the authority to adopt rules and regulations.  In addition, case law supports the right of associations to make and enforce rules.

B.     Governing Documents

Governing documents provide general powers.  General powers consist of the broad authority to adopt and enforce rules in order to carry out the purpose of the community association.  That purpose is to preserve, maintain, and enhance the community's property.
   
Governing documents also provide specific powers–the authority to adopt and enforce rules in specific areas.  Final authority to adopt and enforce rules rests with a board of directors, unless the governing documents specify otherwise.

A board may delegate the task of drafting or enforcing rules to standing or ad hoc committees or to other sources when the governing documents allow (e.g., architectural review committee).

VII.   CRITERIA FOR A VALID AND ENFORCEABLE RULE

A.     List of Criteria.  In general, the courts recognize the following lists as characteristics of a valid rule.  Furthermore, residents are more likely to accept and cooperate with rules with these characteristics.  The following criteria should be used when developing or reviewing rules:

a.     The rule must be reasonable. A reasonable rule is one that is just, sensible, and not excessive (i.e., a rule should be necessary and not more punitive than necessary).

b.     The rule must be fair.  It must not create a separate class or group of people (e.g., certain rules that treat resident owners and nonresident owners differently).

c.     The rule must be clear and unambiguous.

d.     The rule must reasonably relate to the operation and purpose of the association (i.e., a rule must protect, preserve or enhance the properties within the community).

e.     The rule must not violate a fundamental constitutional right (e.g., freedom of speech).

f.     The rule must be consistent with applicable federal, state and local statutes (e.g., FHAA, ADA, Civil Rights Act).

g.     The rule must be consistent with the association's governing documents (i.e., a rule cannot prohibit what the covenants permit and vice versa).

h.     The rule must be uniformly enforced - this means there must be no selective enforcement or exceptions (i.e., a rule must be enforced against all owners not just owners who are delinquent in payment of assessments).

B.     What is an Unreasonable Rule?  If reasonable rules promote a legitimate goal, unreasonable rules promote an illegitimate goal.  They are illogical or unfair; too broad or too severe.  To determine if a rule is unreasonable, take the following test: 

a.     Is the restriction based on outdated notions?  If circumstances change, restrictions should change, too.  Associations should constantly review their restrictions to ensure they are current.

b.     Does the restriction create safety hazards?  Most courts will choose safety over aesthetics.  Reasonable community associations recognize this.

c.     Is the restriction too intrusive?  It is unreasonable to restrict activities within a unit that have no affect on neighbors or property values.

d.     Does the restriction provide alternatives?  Inflexible restrictions are often unreasonable restrictions.  Provide residents with options.

e.     Does it unfairly target a particular group?  Restrictions that unfairly benefit a majority of residents at the expense of a minority are typically not reasonable.

C.     Examples of Unreasonable or Ambiguous Rules.  Examples of unreasonable or ambiguous rules and covenants appear below, with suggestions for improvement in italics.

a.     No worshiping on general common elements.    
       No Rule.

b.    Children may not ride bikes in parking lot or on sidewalks.
       No person may ride a bike in the parking lot or on the sidewalks.

c.    Owners may have a reasonable number of household pets.
       Owners may have no more than two (2) dogs and no more than two (2) cats.

d.    Pets shall be on a leash while on common areas and while on city property adjacent to any common areas.
       Pets shall be leashed while on common areas.

e.     No vehicles are allowed in the community except 2 and 4 door sedans.
       Abandoned and inoperable vehicles are prohibited. Trucks in excess of 1 ton are prohibited.

f.     First floor owners will be assigned 2 parking spaces. Second floor owners are limited to 1 parking space.
       All residents will be assigned 2 parking spaces.

g.    Paint colors shall be muted earth tones except for pastels.
       Paint colors shall be muted earth tones as indicated on approved color chart or other earth tones approved by the ARC.

D.     Required Policies.  All associations must adopt written policies, procedures, and rules and regulations regarding:

a.     Collection of unpaid assessments;

b.     Handling of board member conflicts of interest;

c.     Conduct of meetings with reference to applicable provisions in the Nonprofit Act or other recognized rules and principles if desired;

d.     Enforcement of covenants and rules – including notice and hearing procedures and the schedule of fines;

e.     Inspection and copying of association records by unit owners;

f.     Investment of reserve funds; and

g.     Adoption and amendment of policies, procedures and rules.

h.     Handling of disputes between association and homeowners.       

E.     Restrictions on Covenants.  Effective June 6, 2005, Senate Bill 100 enacted the following restrictions on association enforcement of covenants and bylaws:

a.     Xeriscaping

i.     Any restrictive covenant that prohibits or limits xeriscaping, prohibits or limits the installation of drought tolerant vegetative landscapes or requires the primary use of turf grass is unenforceable.  [37-60-126(11)(a)]

ii.     Associations may not place any additional burdens (procedural or financial) on owners who submit xeriscape plans for approval.  [37-60-126(11)(b)]

iii.     Associations may bring enforcement actions against unit owners who allow their grass to die unless water restrictions are in effect. [37-60-126(11)(c)]

iv.     Associations must give unit owners a reasonable and practical time period to try to revive grass that died during a period of water restrictions before requiring re-sodding. [37-60-126(11)(c)(1)]

b.     Patriotic and Political Expression, Emergency Vehicles, and Fire Mitigation.

i.     An association may not prohibit the display of the American flag by     a unit owner or occupant on a unit owner’s property, in an owner’s window or adjoining balcony if the display is consistent with the Federal Flag Code. [38-33.3-106.5(1)(a)]

ii.     An association may not prohibit the display of a service flag by a unit owner or occupant on the unit owner’s window or door who is or whose immediate family is a member of the active or reserve military service. [38-33.3-106.5(1)(b)]

iii.     An association must at least allow unit owners and occupants to display political signs in the manner no more restrictive than any applicable local ordinances.  If no ordinances apply, an association may not prohibit the display of at least one political sign per political office or ballot issue within 45 days before any election and within seven days after any election on a unit owner’s property or window. [38-33.3-106.5(1)(c)]

iv.     An association may not prohibit the parking on the association’s streets, the unit owner’s driveway, or the association’s guest parking spaces of an emergency vehicle with an official emblem weighing less than 10,000 lbs that is a condition of employment for a unit owner’s employment as a emergency service provider and does not impede the safe and efficient use of the streets for other unit owners. [38-33.3-106.5(d)]

v.     An association may not prohibit unit owners from removing vegetation surrounding the owner’s home for fire mitigation purposes and following a written defensible space plan created for the property and filed with the association. [38-33.3-106.5(e)]

vi.     An association may not prohibit a unit owner from replacing flammable roofing material with non-flammable material, but the bylaws may specify standards for the color and appearance of the replacement material.  [38-33.3-106.5(f)]

VIII.  STEPS IN DEVELOPING RULES

Use the following ten steps to develop rules for your association:

A.     Determine the need for a rule in the specific area.  Answer the question, "Why?"  Also, ask whether the rule is designed to maintain, preserve, enhance and protect the property value of the community, promote harmonious community living and preserve the common scheme and harmonious design of the community.  Determine whether the problem identified is of sufficient consequence to justify creating a rule - what are the trade offs?  Then check to be sure that your association's existing rules and governing documents are inadequate to address the issue.

B.     Consider both the immediate impact of such a rule and its long term implications.  How is the rule likely to be received?  Will a solution to a current problem create future ones for the community?

C.     Identify the source(s) of your association's authority to make a rule in the specific area involved.  Review your governing documents and CCIOA.  They may also provide who has authority to act and thus allow you to make a determination as to whether the proposed rule must be an amendment to the governing documents or can simply be a new board adopted rule.

D.     Define the scope of the rule.  Specify "who" and "what" will be covered by the rule.  The "what" of a rule includes:

• Required steps, procedures, acts, or prohibitions a person is expected to follow
• Enforcement procedures
• Penalties for violations
• Due process procedures

E.     Apply the "enforceability test."  Check to be sure the proposed rule has the eight criteria of a valid and enforceable rule listed earlier.

F.     Use clear, concise and unambiguous language.  The proposed rule should be drafted in such a manner as to be concise and simple, yet clear and understandable.  Avoid words or phrases that are vague or ambiguous (e.g., trucks, commercial vehicles, recreational vehicles).  Check the rule out with several people who had nothing to do with drafting the rule.

G.     Give notice of any proposed rule.  Build consensus and support for the rule before it is adopted in order to gain acceptance and compliance.  In addition to giving notice of the proposed rule, provide an explanation of the purpose, value and benefit of this rule as well as rules in general.  For example, make owners and tenants aware that the board is considering a particular rule.  Invite written comments.  Schedule a hearing on a proposed rule if it is a major matter.  Consensus and hence compliance is possible when rules are seen as fair and reasonable by owners and tenants.

H.     Have the rule reviewed by attorney.  Have your association's attorney review the wording of rules - as proposed and as adopted - to ensure that they are legally sound.

I.      Act promptly on a proposed rule.  Once a proposed rule has been published and input received, the board should act on it at its next regularly scheduled meeting.  The board's options are to either approve or reject the proposed rule as it is or as amended.  Failure to act will cause the board and the rule to lose credibility.

J.     Give notice of an adopted rule.  Actual notice of an adopted rule is necessary if people are to voluntarily obey it, and may be required by the declaration.  Send a notice to the owner's last known address in the community's records.  Send a notice to the unit or lot address, too, in case the occupant is a non-owner.  Use a first-class mailing, either with a billing notice or separately, to maximize the likelihood of people receiving the notice and reading it.  Publish the rule in the community newsletter.  Whatever notice you give, use a positive "tone of voice."  Avoid sounding demanding or condescending.

IX.   PROBLEM AREAS

A.     Retroactivity and grandfathering.

B.     Actions of developer/sales people.

C.     Commercial vehicles.

D.     “Concealed from View” provisions.

E.     Parking on public streets.

F.     Children.

G.     Home businesses.

H.     Satellite dishes/antennas.

I.     Leasing/renters.

J.     Signs.

K.    Painting.

L.    Fair Housing.

X.    DEVELOPMENT OF ARCHITECTURAL STANDARDS /GUIDELINES AND THE REVIEW  PROCESS

A.     Usually an association's declarations or CC&R's provide a review process for architectural changes.  The approval or denial of unit owners’ applications for architectural or landscaping changes must be made in compliance with standards and procedures contained in the declaration or bylaws and may not be made arbitrarily or capriciously.

It is in the community's best interests for a board to establish written architectural standards/guidelines for two reasons:

a.     Written standards/guidelines indicate to owners what types of changes will be allowed under normal circumstances.

b.     Written standards/guidelines are a way to avoid claims of arbitrary or selective treatment of owners.

B.     The Purpose of Architectural Control

The purpose of architectural review (or architectural control) is to keep the community attractive for the enjoyment of residents and for the protection of property values.  The single most important step in organizing the process of architectural review is the development of a set of standards/guidelines.  The declaration of covenants typically contains architectural authority and broad, general objectives.  These need to be supplemented and expanded upon by specific procedures and standards.  The standards/guidelines serve two basic purposes:  first, they assist the homeowner, both in designing any proposed improvement and in determining how to apply for approval; and second, it provides criteria for consistent decisions by the architectural committee. 

An essential element to successful architectural review is the recognition by all members of the association that it is a benefit and not a burden.  Homeowners will not tolerate, let alone support, architectural review unless it is clearly understood and works effectively.  Well-drafted “Architectural Standards/Guidelines” will result in substantial benefits to all.

C.   Checklist of Recommended Provisions

The following is a checklist of recommended provisions for inclusion in Architectural Standards/Guidelines:

• What must have approval.  The scope will vary with the nature of the development (e.g., high rise condos v. single family, detached homes).  The architectural review process normally applies to all new construction and exterior changes.  Likewise, any exclusions should also be stated.
• Design criteria/standards.  The guidelines should state in broad, general terms the basic design objectives it is seeking to accomplish.  These must be consistent with those stated in the declaration.  Example objectives include:  improvement in harmony with surrounding structures; improvement will not result in unnecessary destruction or blighting of the natural landscape or of the achieved man-made environment.  In addition to these design objectives, members need to know what criteria or standards the association will be using to determine whether a proposed design meets the stated objective.  Examples include height, color, setback, materials, etc.
• Establishment of Architectural Committee.  If this is not spelled out in the governing documents of the association, the architectural standards/guidelines should do so.  Include such things as number of members, terms, how they are appointed, whether they should be board members also, record keeping procedures, and waiver of liability of members to homeowners.
• Application procedures.  Detailed procedures for making application should be spelled out so that owners know what is expected of them.  This should include a standard application form for use by all persons seeking approval.
• Decision-making process.  The process for rendering a decision on any application and communicating that decision should be spelled out.  Included should be time frames, voting procedures, criteria for approving or rejecting an application, and the process for notifying the homeowner of the status of his/her application.
• Variances.  Indicate what authority, if any, and under what circumstances, the architectural committee (or board) can grant variances from the standards/guidelines.  Again, check your declaration to see if it provides for a variance process.
• Appeal process.  The procedures for the homeowner to appeal a decision of the architectural committee to the board of directors should be spelled out, if that right exists.
• Licensed contractors.  Consider requiring all construction to be done by licensed contractors with appropriate liability and workers compensation insurance.
• Indemnification and responsibility for maintenance and repair.  In many instances, it may be appropriate for the association to require the homeowner to indemnify the association for any injuries or damage resulting from the construction or improvement.  Likewise, in certain situations, the board may want to require the owner to assume all responsibility for the maintenance and/or repair of the improvement.
• Enforcement.  The various enforcement alternatives available to the association in the event of a violation of the standards/guidelines (e.g., fines, injunctive relief via lawsuit) should be spelled out in detail.  Also, include a provision that the failure to enforce the standards/guidelines shall not constitute a waiver of the right to do so in the future and a provision for the award of attorney fees to the prevailing party.

D.     Checklist of Recommended Documents

The following is a checklist of recommended documents and forms that every association should have for use in connection with the architectural review process:

• Design guidelines, if any
• Written architectural application and review procedures
• Written enforcement procedures including fine schedule
• Written procedures for conducting violation hearing
• Warning letter (no fine imposed)
• Cease and desist letter
• Notice/letter of alleged violation
• Notice/letter of violation hearing
• Notice of violation hearing findings and decision
• ACC/ARC application for improvement/modification
• Receipt of application checklist
• Review of applications/plans checklist
• Application approval/denial form
• Request for variance
• Review of request for variance checklist
• Approval/Denial of variance form

E.     Enhance enforcement of Architectural Restrictions in these ways

By following the Three “Rs” in architectural approval, you can enhance the enforceability and value of your Architectural Standards/Guidelines.

a.     Receipt of Application

Purpose - Determine when submission is complete to guard against thirty (or forty-five) day waiver mandate.

The majority of documents state that applications will be deemed approved if written approval or disapproval is not received by the applicant within thirty (30) or forty-five (45) days of submission.  As a result, it is imperative that architectural committees understand what is required for a complete submission and that the status of the submission is carefully documented.  There are two possible determinations at this stage:

1.     The application is deemed complete and will be ruled upon without the need for any further information.

2.     The application is deemed incomplete and will not be ruled upon until the missing information is submitted.

Recommended Forms:

1.     Application

2.     Application Checklists

3.     Letter to Applicant

4.     Variance Request

5.     Variance Checklist

b.     Review of Application

Purpose - it is imperative that the substance of the application be compared to the factors set forth in the governing documents for approval or disapproval.

Case law in Colorado and other jurisdictions has consistently held that associations can enforce their governing documents if, and only if, they base their decisions upon the factors set forth in the governing documents.  As a result,  applications are reviewed based upon the particular subjective factors and objective use restrictions set forth in the governing documents.  A checklist should be created consisting of these specific factors to consider.

Recommended Form:

1.     Application Evaluation Checklist.

c.     Response to Application

Purpose - to document the decision of the committee and provide a written response to the application as to approval or disapproval prior to expiration of the waiver period.

Once an application is deemed submitted and thereafter reviewed, it is imperative that a written response of approval or disapproval be provided to the applicant prior to the expiration of any time limits imposed by the governing documents.  Whether the application is approved or disapproved, the letter should utilize the language set forth on the checklists and in the governing documents.

Recommended Forms:

1.     Decision of Committee

2.     Variance Decision

3.     Letter to Applicant

XI.   FACTORS IN SUCCESSFUL ENFORCEMENT

A.     Voluntary Compliance:  Every effort should be made to achieve voluntary compliance with the rule in order to reduce the need for active enforcement and enforcement problems.  Give ample notice of the existence of the rule.  Build a community consensus in support of the rule.  Make timely amendments to the rule when situations and circumstances change.

B.     Timely Enforcement:  Failure to act promptly upon notice of a violation results in a loss of confidence and breeds an air of permissiveness.  Past board failures to enforce rules do not foreclose the possibility of enforcement of rules by subsequent boards.  However, there is a danger that failure to enforce against some violations or permitting a violation to exist for too long a period of time may result in losing the right to enforce in subsequent situations.

C.     Reasonable Rules and Reasonable Penalties for Violations:  Community support is necessary for effective enforcement. To achieve this, the need for the rule, the rule itself, and the penalty for violation must all be viewed as reasonable - both within the community and by the courts.

D.     Consistency and Uniformity of Enforcement:  Once a rule has been adopted, the board must uniformly and consistently apply the rule and the standards against all situations.  Permitting one fence but not another or acting against one owner but not another is inconsistent and destroys the consensus upon which voluntary compliance is based.  If the board adopts a rule, it must uniformly and consistently apply it against all violations.

XII.  OPTIONS FOR ENFORCING COVENANTS, RULES AND ARCHITECTURAL STANDARDS/GUIDELINES

A.     Six Enforcement Options

There are generally six (6) enforcement options available to the association:

a.     Fines

b.     Internal Resources

c.     External Resources

d.     Alternative Dispute Resolution (ADR)

e.     Legal Action

f.     No Action

B.     Type of Violations

Which option(s) to utilize will depend in large part upon the nature of the violation.  Violations can be classified into one of the following four categories:

a.     Work in process

b.     Completed act

c.     Ongoing violation

d.     Neighbor to neighbor dispute

C.     Fines

a.     Authority.  Be sure your association has the authority to impose fines, as well as to collect them.  Fines must bear a reasonable relation to the violation involved.  Courts will not allow an association to continue to fine until the amount owed becomes unreasonable.  Therefore, daily fines that continue to accrue will typically be found to be unreasonable.

b.     CCIOA Provisions on Fines.  The Colorado Common Interest Ownership Act (CCIOA) allows associations to treat and collect fines in the same manner as assessments, provided the violator is first given notice of the alleged violation and the opportunity to have a hearing to determine whether the violation occurred.  Therefore, an association can lien the violator's property and ultimately foreclose its lien if payment is not received, or file suit to obtain a money judgment for the amount owed.  In addition, the association can also collect its reasonable attorney fees and costs associated with any of these actions. 

c.     Due Process.  However, before a fine can even be imposed for a violation, CCIOA requires certain due process requirements must be complied with.  Specifically, the violator must receive notice of the violation and be given an opportunity to have a hearing.  Without this notice and opportunity for a hearing, fines are unenforceable.

d.     Basic Due Process Steps.  The basic steps in a due process procedure for handling alleged rule violations are:

1.     Issue a "cease and desist" warning letter which contains:

• Notice of the alleged violation
• The action required to end the violation
• A specific time within which the violation must be corrected
• The penalty (sanction) which will be imposed after a hearing if the violation does not end within the stated time

2.     Issue a notice of the right to a hearing if the violation does not end within the stated time.

This is a written notice to an alleged violator informing him or her of the alleged violation and that a hearing has been scheduled to consider his or her alleged violation.  A hearing is only required if you are imposing a fine.

3.     Hold the scheduled hearing.

This is a fact-finding hearing to determine if a violation has occurred.  It is recommended that the hearing procedure be kept informal.  The following are suggested procedures to be followed:

• State the rule allegedly violated
• State the possible penalty (e.g., fine)
• Explain the rules to be followed:

• All remarks are to be addressed to the chair
• Complaining witness(es) speaks first and/or presents evidence, if any
• Hearing panel may then ask that person questions
• Alleged violator speaks next and/or presents evidence, if any
• Hearing panel may then ask that person questions
• Chair asks if anyone else has anything to say
• The Association will advise everything that if there is no more information for the board they will conclude the hearing and issue a written ruling by a set date.
• Written decision will be issued by [date}

It is recommended that the procedures to be followed be in writing and provided to the alleged violator in advance of the hearing.

4.     Issue a decision after the hearing is held.

The hearing panel determines the facts; whether or not a rule, covenant or architectural standard/guideline has been violated; the penalty (e.g. fine) to be imposed, if any; and the enforcement date of the penalty, if any.  The hearing panel then issues this information in the form of a written decision.  A hearing panel may find an alleged violator guilty or not, or may decide that not enough evidence was submitted to allow the panel to reach a clear guilty verdict. 

Unlike in criminal actions where the standard of proof is “beyond a reasonable doubt”, the standard for this type of hearing is a “preponderance of the evidence” which means more evidence than not.  Thus, if there is more credible evidence than not that the owner violated a covenant or rule, then the standard has been met.
No decision should be given during a hearing.  This is to avoid the claim that the hearing panel was predisposed to a particular point of view.  The hearing panel should issue its written decision within a reasonable time (i.e., not more than thirty days after the hearing).  If the board of directors is the hearing panel, its decision may be adopted as a resolution.

D.     Internal Resources for Enforcing Covenants, Rules and Architectural Standards/Guidelines 

There are a number of internal resources a community can use to encourage a resident to conform to the association's covenants and rules.  Before using any of the internal resources for enforcing rules, verify that the association has the legal authority to take such action.

a.     Suspension of Owner's Voting Rights - While this may be the mildest action possible, an association should still use it as a resource in encouraging rule violators to conform to common area covenants and rules.

b.     Suspension of the Use of Recreational Facilities and Common Areas - If your governing documents do not contain broad authority allowing for the suspension of an owner’s right to use recreational facilities and common areas, you should only suspend privileges related to the violation. (e.g. suspend pool privileges - not parking privileges - for a pool violation.)

c.     Utility Shutoff - Some governing documents allow utilities, particularly water service, to be shut off if an owner violates certain covenants.  This resource, even if specifically provided for, should be used cautiously, if at all.  Some municipalities prohibit this type of action because of health and safety concerns.  Therefore this very aggressive alternative should not be considered without consulting first with your association’s attorney.

d.     Towing - The authority to tow a vehicle is typically found in either the covenants or rules.  It can be an effective means of resolving a violation, although the cautionary comments under Self-Help are also applicable to towing.  Reasonable notice prior to towing should be provided unless the violation constitutes an immediate threat to the safety of individuals or the community in general, such as a fire lane violation.  In addition, associations should make certain that they are complying with all state and local laws regarding towing.

e.     Self-Help - Self-help means the association takes action to correct the violation itself without a court order.  Because of the potential for confrontation resulting in breach of the peace or damage to an owner's personal or real property, self-help is generally not recommended.  However, if an association decides to utilize self-help, the association must develop careful procedures before using self-help to correct a violation.  Self-help should only be used if it is expressly authorized in the declaration and then only after consultation with legal counsel.  Although governing documents may specifically provide for self-help, the courts may see it as a breach of the peace or trespass and look unfavorably on the association for utilizing this mechanism rather than the court system.  This potentially dangerous alternative should not be considered without consulting first with your association's attorney.

E.     External Resources for Enforcing Covenants, Rules and Architectural Standards/Guidelines

Community associations can also draw on resources within the broader community to help them enforce covenants and rules.  Do not overlook local government agencies and municipal services as resources for enforcing your rules.  Cities, counties, and municipalities do not enforce covenants, rules, regulations or architectural standards.  However, if your covenants or rules are the same as or less restrictive than a county or city ordinance, you may be able to get the governmental agency or municipal service to enforce its ordinance instead of spending association time and resources on enforcement of its covenants and rules.  However, you must ask for help.  And you must take the time to build working relationships with all the parties listed below.

a.     Local Health Department

Your local health department can be asked to enforce the local health code.  For example, possible areas of violation include:

• Number of occupants in a unit
• Internal use of a unit or storage on a lot

b.     Local Building/Zoning Department

This local agency can assist with enforcement of such rules as:

• Fence or shed regulations
• Setback restrictions
• Restrictions on commercial use of dwellings
• Removal of vehicles, boats, and trailers from lots or common areas
• Other matters involving common areas and lots

c.     Local Law Enforcement

In some jurisdictions, the police or sheriff's department will enforce traffic regulations or issue tickets and/or tow violators of the community's parking rules.

d.     Local Fire Department

Your local fire department may help with enforcement of fire lanes and the removal of hazardous materials.

e.     Local Building/Code Enforcement Department

These terms refer to the local government office that issues building permits.  In some areas, this office's responsibilities overlap with those of zoning and health.  In some areas, this office requires the approval of a community's board of directors before it will issue a permit.  This local government office may be able to help you if a unit is in violation of an existing building, plumbing, fire, or electrical code.

f.     Animal Control Department

You can request that this agency patrol your community for animals in violation of its pet rules or local ordinances.

g.    Neighborhood Resource Center

A growing number of cities have established neighborhood resource departments to assist homeowners and homeowner associations with a variety of issues, including the resolution of neighbor to neighbor disputes.  They also have excellent referral services available.

F.     Alternative Dispute Resolution (ADR)

A number of community associations are turning to Alternative Dispute Resolution (ADR) as a means of encouraging people to comply with covenants, rules and standards/guidelines.  Alternative Dispute Resolution is a relatively new term for a process that has been around a long time.  It involves submitting a dispute to a trained, uninvolved third party for resolution (e.g., mediation or arbitration).  The third party's decision may be non-binding (e.g., mediation), or binding on all the parties (e.g., arbitration).  However, this approach can be a more efficient and effective way to resolve a dispute than other means.  An association might propose ADR when confronted with a difficult rule enforcement situation or the possibility of prolonged litigation or disputes that involve difficult personalities.

G.     Legal Action

The ultimate recourse of the association is to seek civil legal action against an owner in violation of a covenant or rule.  Legal action may entail seeking a restraining order to stop the offending action and then an injunction to prevent any further violation.  The association may also seek to have the court force the owner to restore the property or situation to that which existed prior to the violation and to reimburse the association for any costs incurred in enforcing the restriction including attorney fees.  A number of factors go into the decision to pursue legal action.  Such a decision should never be made without consulting first with the association's attorney.

a.     Who May (or Must) Enforce Documents?

The right of enforcement lies with the parties for whom the benefit of the covenant was created.  The benefited parties may depend upon whether there is a mandatory association, a voluntary association or only recorded covenants.  Many times the governing documents will expressly identify benefited parties.  Where the parties are not so identified, they must be ascertained from the language of the restriction, construed in light of the circumstances existing at the time the restriction was implemented.  In addition, CCIOA also grants certain rights to associations to bring suit or intervene in suits. 

The typical plaintiff is one or more of the following:

• In a mandatory association, the association through its board of directors

• Power or authority to enforce
• Duty to enforce       

• If a voluntary association, the architectural review committee or a homeowner

• No specific authority nor duty to enforce to association but implied authority (caselaw)
• Power or authority to enforce to architectural review committee
• Power or authority to enforce to homeowner

• Homeowner

• No duty to enforce
• But usually right to enforce           

• Architectural or Design Review Committee (ARC/DRC)

b.     Which Court Can an Enforcement Action be Filed In?

There are three primary courts in Colorado: small claims court, county court, and district court.  Each of these courts can hear enforcement action cases.  There are advantages and disadvantages to each court which should be considered in evaluating where to file a case including costs, discovery rights, the judges, trial process and jurisdictional limits.  These factors should be discussed with your association’s attorney given the specifics of an individual case.

c.     Remedies

Generally, the sole remedy for breach of a restrictive covenant or rule lies within the equitable jurisdiction of the courts.  In other words, the courts will not grant the prevailing plaintiff monetary relief, but instead require the defendant to strictly comply with the restrictive covenant or rule.

In the past, the courts have ordered the following remedies: (1) temporary injunctions, (2) permanent injunctions, (3) court orders directing the removal or modification of building and structures to conform with restrictions, and (4) attorney's fees and costs of the prevailing party.

One other remedy is available in unusual circumstances:  Monetary damages may be imposed on the defendant when the court can no longer strictly enforce the covenant or rule.  However, to receive damages the plaintiff must prove that the violation of the restriction monetarily damaged the plaintiff in some way.

d.     Recovery of Attorney Fees

1.     Colorado law (C.R.S. §38-33.3-123(2)) authorizes the association, a unit owner, or class of unit owner affected by another party’s failure to comply with CCIOA or the association’s governing document to seek reimbursement for costs and attorneys fees without the commencement of legal proceedings.

2.     In the event that a lawsuit is filed to enforce or defend any     provision of CCIOA or an association’s governing documents, Colorado law (C.R.S. §38-33.3-123(c)) requires courts to award costs and reasonable attorney fees to the prevailing party.

Therefore, if a court of law finds in favor of the association, the association is entitled to recover from the losing party the attorney fees it spent.  Likewise though, if the owner wins, the association will be required to pay the owner’s legal fees.

3.     Most declarations also have a provision that authorizes the association to recover from the owner any legal fees the association incurs in enforcing its covenants.

4.     Even though the association may be entitled to recover its attorney fees, a court must still determine if the amount of attorney fees sought is “reasonable.” 

e.     Defenses to Enforcement of Covenants and Rules:  Defenses against restrictive covenants fall into two groups.  The first group includes:

• Change in character of neighborhood
• Abandonment
• Acquiescence

The defenses in this group relate to the magnitude of prior violations.  The three defenses in this group are closely intertwined and, at times, practically indistinguishable.  Typically, three or four prior violations that have gone unenforced are probably insufficient to make any of the defenses valid.  Rather, the number of prior violations must be so great that a reasonable person would come to the conclusion that the particular covenant or rule has been abandoned or waived.

The second group of defenses include:

• Estoppel
• Laches
• Waiver
• Statute of limitations

The defenses in this group deal directly with the association's (or plaintiff's) actions or inactions prior to or during the time of the alleged violations which mislead an owner acting in good faith to believe what he or she is doing does not violate a rule or covenant.

1.     Statute of Limitations on Building Restrictions.  Colorado law (C.R.S. §38-33.3-123) imposes a one year statute of limitations on actions brought to enforce the terms of any building restriction or compel the removal of any building or improvement on land.  The complete statute follows:

38-33.3-123.  Enforcement - limitation. (2) Not- withstanding any law to the contrary, no action shall be commenced or maintained to enforce the terms of any building restriction contained in the provisions of the declaration, bylaws, articles, or rules and regulations or to compel the removal of any building or improvement because of the violation of the terms of any such building restriction unless the action is commenced within one year from the date from which the person commencing the action knew or in the exercise of reasonable diligence should have known of the violation for which the action is sought to be brought or maintained. [Emphasis added]

Thus, if no action (i.e. lawsuit) is brought within one year from the date the association knew or should have known of the building restriction violation, the right to sue is forever lost.  It is not sufficient to send a letter demanding removal or compliance, but rather an actual lawsuit must be filed within the one year window.  However, the lawsuit does not necessarily need to be served on the defendant within the one year statute of limitations.

2.     Statute of limitations on use violations:  Each day that a use violation occurs is considered a new violation, therefore the statute of limitations begins to run on the last day the use violation occurs.  Unlike covenant and rule violations involving buildings or improvements, there is no statute of limitations specific to common interest communities for enforcing a use violation, so we must look to the nature of the claim for guidance.  Covenants and the rules passed through the authority of the covenants, are based on contract theory meaning that, without a statute specific to common interest communities, the courts treat covenants similarly to contracts.  Covenant enforcement actions which are analogous to breach of contract actions are to be held to the statute of limitations for contracts which is three years.  Covenants and rules may also result in a claim which is more analogous to a negligence action.  In this case, the statute of limitations for use violations would be the same for negligence actions which is two years.

3.     Other Defenses:  In addition to the above defenses, additional defenses that are often asserted include:

• Violation of a constitutional right, statute, covenant, or public policy
• Board exceeded its authority
• Rule was not properly enacted in accordance with governing documents (declarations require owners to have opportunity to comment on rules)
• Enforcement procedures were not followed (procedure requires 30 days notice before lawsuit and only 10 days notice was given)
• Covenant or rule is vague or ambiguous (No recreational vehicles)
• Covenant or rule is being applied in an arbitrary and capricious manner

f.     Judicial Perspective

1.     Demands on judicial system; very high, crowded dockets

2.     Perception of HOAs and boards; generally negative, unreasonable, arbitrary, controlling

3.     Court sitting “in equity”; broad discretion to fashion appropriate remedy

4.     Making your case:

• Reasonable board
• Procedures documented in writing and followed
• Documents followed
• Correspondence and records exist
• Efforts to resolve prior to filing suit

No Action
Board members often mistakenly believe they must enforce all violations either because they have a legal duty to do so or by failing to enforce a violation they will have waived their right to enforce against a future violation.  This can lead to unnecessary lawsuits and expenses for the association.

While the association through its board of directors is charged with enforcing its covenants and rules overall, not every single violation must be enforced.  The law permits the board to exercise its reasonable business judgment and make a case by case determination of whether (and what type of) enforcement is appropriate.

As long as the board acts reasonably, in good faith and with the best interests of the association, a court will not overrule the board’s decision.  For example, the board may determine that there is a strong statute of limitations defense likely to be asserted if the association were to bring suit for a violation.  The board is within its rights to make a determination in this instance to not pursue legal action.  Such a decision does not breach any duty owed to the association nor does it establish a legal precedence whereby all future violations cannot be enforced or all future requests must be approved.

It is important for the board to consult with legal counsel prior to making any decision, either to take enforcement action or no action.  It is also important for the board to document in writing its decision not to take action.     

Procedures and Forms for Successful Covenant and Rule Enforcement

A.    Covenant and Rule Enforcement Procedures
B.    Fine Schedule
C.    Warning Letter to Owner
D.    Notice of Violation and Hearing Letter to Owner
E.    Violation Hearing Procedures
F.    Findings of Board
G.    Letter Regarding Board’s Decision
H.    ARC Guidelines and Procedures
I.    Application Form
J.    Application Submission Checklist
K.    Letter to Applicant Regarding Receipt and Status of Application
L.    Variance Request Form
M.    Variance Checklist
N.    Application Evaluation Checklist
O.    Decision of Committee Form (Application)
P.    Decision of Committee Form (Variance)
Q.    Letter to Applicant Regarding Committee’s Decision
R.    Appeal Procedures
S.    Notice of Appeal
T.    Decision of Board
U.    Letter to Applicant Regarding Decision of Board
V.    Letter Regarding Cease and Desist
W.    Letter Regarding Restoration of Property
X.    Letter Regarding Construction Not in Accordance with Application
Y.    Letter Regarding Construction Not Completed in Timely Fashion