The Colorado Common Interest Ownership Act (“CCIOA”) applies to Colorado owner associations that govern and operate common interest communities (“CICs”).
But, what is a CIC?
A CIC is defined in the statute, but the best definition is a community with mandatory assessments.
- If a community has mandatory assessments CCIOA typically applies in one of two ways.
One application of this statute is where the CIC existed prior to the date CCIOA came into effect - July 1, 1992 (“pre-CCIOA communities”).
- The other application is to CICs created after that date (“post-CCIOA communities”).
Post-CCIOA communities (except condominiums) may be exempt from this statute. Exemption from CCIOA is a different topic, not addressed here.
CCIOA does not apply to the voluntary associations of owners in communities (those without a mandatory assessment).
When CCIOA applies it has application to:
- the CIC
- owners in the community
- the owners association
- lenders to owners
- management companies engaged by the HOA
- the assigned manager of the management company
These distinctions on the type of community:
- Pre-CCIOA communities
- Post-CCIOA communities and not exempt
- Post- CCIOA communities and exempt
- Voluntary HOA
make it important for owner associations, boards and others to understand whether or not their community is a “common interest community” under CCIOA or under Colorado case law.
CCIOA defines a CIC as a community that includes
“[R]eal estate described in a declaration with respect to which a person, by virtue of such person’s ownership of a unit, is obligated to pay for real estate taxes, insurance premiums, maintenance or improvement of other real estate described in a declaration.”
Unfortunately, this definition often leaves HOAs, boards, owners and others confused, because the community. Some have concluded that the HOA must have common property (referred to in the statute as common elements). Yet, the HOA is not required to have common elements to be a pre-CCIOA community or a post-CCIOA community subject to this statute.
A more user-friendly way to approach this definition is mandatory versus voluntary assessments. Required assessments or dues payable to an HOA is the defining feature of CIC’s.
A community is a common interest community if its declaration provides for the payment of mandatory assessments by virtue of owning property described in the declaration.
If the declaration does not provide an assessment obligation, in some cases, an assessment obligation may be implied, as a matter of law. Here, it is recommended to check with an experienced HOA attorney.
Implied assessment authority was recognized in Colorado in 2003 when the Colorado Supreme Court set forth factors that must be present for that authority to be found to exist. Those factors are set forth in the Colorado Supreme Court’s decision in the case of Evergreen Highlands v. West.
Whether or not an association has common areas, common elements or CC&Rs, if the payment of assessments is mandatory, CCIOA may apply.
If owners voluntarily pay assessments, the community does not fall within the definition of a CIC and CCIOA does not apply.
Regardless of whether a community is bound by CCIOA’s requirements, the community or the board of directors of a voluntary based association may wish to consider following many provisions of CCIOA.
All Colorado covenant controlled communities, regardless of whether or not the community is a CIC as defined by CCIOA and state law can benefit from disclosing important association documents to owners and adopting policies and procedures that educate owners on how their association is governed, managed and operated.