In the last few years the economic downturn has hit community associations in many forms. We have seen more and more developers filing bankruptcy or otherwise leaving communities in the lurch. One fallout is that at times, the developer still sits on the board and the period of declarant control has not expired, but the developer is not taking appropriate steps to maintain the community or manage the Association (read a full article for a story about this kind of situation). If an association is faced with this situation and needs to call an owner meeting to elect directors, ratify budgets, etc., but the developer-controlled board refuses or neglects to do so, what options do the owners have?
One option is for owners to demand that a special meeting be called. Most bylaws will give the owners the authority to demand a special meeting of owners be held upon the petition by a specified percentage of owners. The Colorado Common Interest Ownership Act also gives owners that right. Once a demand for a meeting is properly made by the owners, if the board fails to call the meeting within 30 days, the Colorado Revised Nonprofit Corporation Act allows the owners who have demanded the meeting to set the meeting date and give notice of the meeting.
If that doesn’t work, the Colorado Revised Nonprofit Corporation Act provides another option. Per the Nonprofit Act, any member of an association can petition the district court and seek judicial relief in the form of a court order requiring a meeting to be called. The order may further relieve the owners from meeting the quorum requirements, which may be necessary to allow the association to conduct its business at the resulting meeting. Note that while this option could help associations to force an owner meeting to elect directors or ratify budgets, it may not enable the Association to change or override the period of developer control and allow owners to elect directors prior to the expiration of developer control.
If the period of developer control has not expired, and all attempts at urging the developer-controlled board to maintain and manage the community have failed, a last resort may be to seek the appointment of a receiver to manage the association. A receiver is a person appointed by the court and paid by the association to perform management services for the association. This person may or may not have any kind of expertise in managing community associations. The receiver’s role is generally to control funds and pay bills. However, the receiver may not have authority related to maintenance or other important functions of the Association. Therefore, receivership really is the last option for an association.
If you have any questions about the above options, please contact one of our attorneys at 303.432.9999.