Have you ever been to an annual meeting where owners question decisions of the board and complain they were not consulted or allowed to vote on such decisions? How about board meetings where owners attend and demand they be allowed to vote on certain decisions? Unfortunately, this happens fairly often and is the direct result of a failure to understand the roles and responsibilities of boards and owners.
In order to understand the different roles and responsibilities of boards and owners, it is first important to understand how associations are structured. Colorado associations and condominium communities are typically created as nonprofit corporations, which means they must follow corporate laws in addition to laws governing associations. Because corporations are not human, corporate laws require groups of people to act as the brain and voice of the corporations; these groups are called boards of directors.
A board of directors is defined by Colorado law as “the body, regardless of name, designated in the declaration to act on behalf of the association”. Furthermore, the Colorado Common Interest Ownership Act (“CCIOA”) specifically provides, “Except as provided in the declaration, the bylaws, or . . . other provisions of this article, the executive board may act in all instances on behalf of the association.”
Based on the above, the first place to look when determining whether the board or the owners have a particular power is the association’s governing documents. Typically, the declarations and bylaws will contain provisions listing the powers of the association (which are exercised by the board of directors). Most often, association powers include the right to:
- Enter into contracts
- Make all decisions with respect to maintenance of common areas
- Enter into management agreements
- Acquire insurance on the common areas
- Elect officers
- Enforce the association’s covenants and rules, through fines, legal action, or otherwise
- Create budgets
- Collect delinquent assessments and impose late fees and interest
- Adopt rules and regulations (as long as they do not contradict any provisions in the governing documents)
- Grant easements and licenses over common area
Governing documents also discuss the types of actions requiring owner approval. These actions typically include:
- Election of directors
- Removal of directors
- Approval of amendments to governing documents
- Approval of special assessments
- Ratification or approval of budgets
- Approval of the sale/transfer of common area
- Approval to pledge income stream as security for bank loans
In situations where the documents are silent as to a particular power, we refer back to CCIOA and the Colorado Revised Nonprofit Corporations Act, which both provide that boards are entitled to make all decisions on behalf of an association except as limited by the governing documents or the law. If, after reviewing the governing documents and Colorado law, you remain unsure whether the association has a particular power, legal counsel should be consulted.
For more information about board powers v. owner powers, please contact one of our attorneys at 303.432.9999.