For homeowners’ associations whose assessment allocations are based on square footage of units, problems may arise if the developer used incorrect square footages in the calculations and an owner discovers such discrepancy (especially if the owner is paying a higher assessment than they would otherwise). Owners who discover such discrepancies will likely complain to the board and/or manager, oftentimes demand a refund, and typically threaten legal action if the problem is not corrected.
When faced with this situation, the first impulse might be to create a new set of allocations using correct square footage and start assessing owners based on the corrected calculations. However, doing so, would in most cases, constitute a violation of the declaration and expose the association to liability for failing to follow the declaration as it was written.
Declarations that base assessments on square footage (or other formula), typically contain exhibits setting forth a specified percentage allocation for each unit. Whether or not such allocations are based on correct square footage (or other) calculations, is generally irrelevant because associations are required to follow the allocations as they are written in the declaration regardless of whether they are correctly calculated.
Unfortunately, correction of these discrepancies must occur through the declaration amendment process. In other words, the board must propose a declaration amendment to the owners and obtain the requisite owner approval to correct the inaccurate allocations.
Prior to presenting a declaration amendment to its members, the correct square footages for the units must be determined. In fact, it may be necessary to check the square footage of all units (if feasible) to ensure the proposed new allocations are accurate. Oftentimes, square footage can be found on the county assessor’s website, but other options also exist such as retaining a surveyor.
Once the correct square footage has been determined, an amended exhibit to the declaration must be prepared setting forth the new and correct allocations. Pursuant to Colorado law, a declaration amendment seeking to change allocated interests requires approval from owners representing at least 67% of the total votes in the association, or any higher percentage that may be specified in the declaration itself.
Notwithstanding the above, it is important to remember there is no legal requirement for incorrect allocations to be corrected via amendment. It is perfectly lawful to leave the allocations as they are written and continue to utilize such allocations.
In sum, if a square footage discrepancy is brought to the board’s attention, the board has discretion to determine whether to present a declaration amendment to correct the discrepancy. So long as the association is levying assessments pursuant to its covenants, the association should be protected from liability.
For questions about correcting allocated interests, please contact an Altitude attorney at 303.432.9999 or at [email protected].