If your community recently transitioned from developer control, you may be able to terminate some or all of the contracts entered into by the developer without penalty pursuant to Section 305 of CCIOA.

Section 305 sets forth the types of contracts that are subject to this termination provision, and includes the following agreements:

  • Management contracts
  • Employment contracts
  • Lease of recreational or parking areas
  • Any other contract between the association and declarant (or affiliate of declarant)
  • Any contract that is not bona fide (i.e. entered into in good faith) or was unconscionable to the unit owners at the time signed under the circumstances then in existence
    If an association is looking to terminate an agreement based on the last option above, there will likely be legal action involved where the association will need to prove unconscionability of the contract being terminated.

Assuming the contract to be terminated fits one of the above criteria, the board should also make sure the following components are present:

  • Contract was signed before the board was elected by owners (or before such board took office)
  • At least 90 days notice must be provided to the contractor prior to termination

If you have questions or would like to know more about terminating a contract entered into by a developer, please contact a Altitude Community Law attorney at 303.432.9999.

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