Have you ever needed to pursue litigation against an owner for either covenant enforcement violations or failure to pay assessments?
Have you ever considered amending the declaration for your community?
Have you ever considered obtaining FHA certification of your community so that borrowers can obtain FHA insured loans?
Chances are a majority of associations would answer “yes” to at least one of the above questions. But do you have all of the pieces of the puzzle needed to successfully pursue any or all of the above activities?
Piecing Together the Whole Puzzle
One of the biggest pieces of the puzzle for all of the above activities is the community declaration. The declaration includes any recorded instruments that create the community, along with any amendments of the same and the maps or plats for the community. Other recorded instruments that can be considered part of the “declaration” can include annexation declarations, supplemental declarations, amended declarations, and recorded easements and agreements affecting the declaration and the property in the community.
Often when we are asked to collect past due assessments from an owner, to enforce covenant violations, or to amend the declaration, we ask our clients for copies of the declaration and all we receive is the initially recorded declaration and nothing else.
Why is that sometimes a problem?
- Often, the initial declaration does not contain a property description or create all units for the entire community, but instead only establishes an initial phase or a portion of the community.
- If all property is not created by the initial declaration, supplemental or annexation declarations are to be prepared by the developer making the remaining units and property subject to the declaration.
- Sometimes the declaration does not contain the same information as what is listed on the maps or plats for the community, or additional information is provided in the maps or plats.
- If a community is developed in phases, it is likely the allocated interests (i.e. ownership interests and assessment obligations) are changed with each phase as additional units are added.
Why Do Attorneys Need Copies of All Annexation Documents?
Many associations have gone for years after transition from developer control to homeowner control without having any annexation issues arise. However, lately we have seen more associations spending thousands of dollars in research and title fees to determine if properties were properly annexed, only to find out that, unfortunately, those properties were not in fact properly annexed.
So why is it so important to have all of the association’s governing and annexation documents on record?
- If you are going to amend your declaration, you must have all annexation documents to compile the legal description and allocated interests for the community and to seek owner consents.
- If your community desires to be eligible for FHA insured loans, the association must provide proof of proper annexation of all units and provide copies of all maps for all units to be certified by FHA. FHA will not certify or re-certify a community without all of the maps and annexation documents for the community.
- If your community desires to collect past due assessments from an owner, you must be able to prove the owner’s property is subject to the declaration and to the assessment provisions contained in the declaration.
- If your community desires to enforce the covenants and restrictions contained in the declaration, you must be able to prove the owner’s property is subject to the declaration and the restrictions contained in the declaration.
Bottom line: if your association cannot provide evidence of all of the pieces of the declaration to create the entire puzzle, you may not be able to successfully perform your duties as a manager or board member of the association. These common issues can be avoided if the association researches and obtains all of the proper annexation documents before it becomes an issue.
Obtaining Annexation Documents
- The easiest and most efficient way to ensure your association has all of the proper, recorded annexation documents is to demand them at the time of transition of control from the developer to the association, while the developer is still in the picture. Trying to piece together the annexation puzzle after the developer has left can be difficult. The developer is required by Colorado law to turn over all recorded, filed, and executed governing documents at the time of transition, including all annexation documents. Often, the developer provided unrecorded or unsigned documents. This is not acceptable and the association should demand the recorded documents and verify the number of lots/units in the community matches what the annexation documents show. We recommend you have your manager and legal counsel be involved in the transition process to ensure proper transition and documentation.
- If you are not confident the developer turned over all appropriate annexation documentation, or if you have not verified that all properties were properly annexed, we recommend you seek assistance from a title company or legal counsel to confirm that annexation was proper before it becomes an issue.
- If there are only a few lots/units for which you are not sure whether they were annexed properly, you can research those properties at the Clerk and Recorder’s office in the county in which the property is located.
If you are unsure if your association has all of the required annexation documents, or if you are preparing to seek FHA certification, amend your declaration, or pursue collection or covenant enforcement against an owner and have not verified all properties were made subject to the declaration, we would be happy to help you piece your puzzle together.