Amending a set of covenants/declarations is no easy task. Declaration amendments typically require approval from owners representing at least 67% of the total votes in the association. To make things worse, sometimes we also see requirements for first mortgagee approvals, which means the association must obtain approval from banks to whom owners issue their mortgage payments.
So, what happens when a community desperately needs to amend its declaration and cannot get the requisite owner and/or first mortgagee approval? Luckily, the Colorado Common Interest Ownership Act (“CCIOA”) provides two different aids: 1) court petition process, and 2) certified mailing process. Each process is discussed separately below.
Court Petition Process
The court petition process allows an association to file a petition with the District Court (in the county it is located) requesting the judge approve its proposed declaration amendment. This process assists associations who are unable to obtain the requisite owner approval and/or the requisite mortgagee approval.
To qualify for this process, the Association must obtain approval from owners representing at least one half of what the Declaration requires. For example, if the declaration requires approval from 67% of the votes, the court petition process may be utilized if the association obtains approval from owners representing 33.5% (1/2 of 67%) of the votes.
No mortgagee approval is required to commence the court petition process. However, prior to filing the petition, an association must do all of the following:
- Send at least two written notices to owners advising of the amendment;
- Hold at least one membership meeting to answer questions about the amendment; and
- Conduct the vote of owners and obtain approval from owners representing at least one half of what the declaration requires.
Assuming all three of the above prongs are met, the court petition process may be commenced by legal counsel. However, it is important to be aware of the statutory “deal breakers” prohibiting judges from approving proposed declaration amendments:
- 1/3 or more of all owners file objections with the court; or
- 1/3 or more of the first mortgagees file objections with the court; or
- The proposed amendment changes allocated interests (i.e., number of votes allocated to each unit, a unit’s share of assessments, or a unit’s interest in common elements); or
- The proposed amendment seeks to terminate the community.
The court petition process is a good tool to address homeowner apathy, but it may not be as useful in situations where owners have strong objections to the proposed amendment. When a faction of owners strongly opposes a declaration amendment, it is feasible that such owners will convince 1/3 or more of the members to file objections with the court, in which case the judge could not approve the amendment. So, make sure you know the political climate in your community before utilizing this process.
Certified Mailing Process
The certified mailing process provides another option for associations to aid with declaration amendments. However, this process only aids with the mortgagee approval requirements and not owner approval requirements.
To utilize this process, associations must obtain the requisite owner approval set forth in their declarations. This means if the declaration requires approval from owners representing 67% of the total vote in the association and 51% of the first mortgagees, an association must obtain the full 67% owner approval before it can utilize the certified mailing process.
The certified mailing process requires the following steps:
- Publishing notice of the amendment in a local publication at least two times and one week apart;
- Sending a certified letter to each mortgage holder containing the amendment and voting documents;
- Waiting 60 days after the final step;
- At the expiration of the 60 days, a non-response is deemed a “yes” vote.
So, for example, if a declaration requires approval from 51% of the first mortgagees, and an association utilizes this process (assuming it obtained the requisite owner approval) the declaration amendment will be approved unless more than 49% of all mortgagees submit “no” votes, which is extremely unlikely.
Please contact an Altitude attorney with questions concerning the amendment process and the above-discussed tools at 303.432.9999 or at [email protected].