Amending an association’s governing documents is never an easy task. The Colorado legislature recognized this in 1992 when it capped the maximum approval requirement to 67% of the entire community. Even with this reduction in the approval requirement, amending a declaration was problematic due to owner apathy, lack of building a consensus of the owners, and at times varying opinions of the owners in the community as to what should be in an amendment.
One of the tools associations have used to overcome some of these challenges is the Court Petition Process permitted by section 217(7) of Colorado Common Interest Ownership Act (“CCIOA”). This section of CCIOA permits an association to petition the District Court to approve an amendment to its declaration if the association has sent at least two written notices to all owners in the community, discussed the amendment at a membership meeting at least once, and has received at least one-half of all of the consents it would otherwise need in order to approve the amendment. While historically this approval process has been a routine process successfully utilized by associations, recent events indicate the use of the court petition process is no longer a slam dunk method to obtain approval for a declaration amendment. This article will discuss the biggest challenges this firm has seen in the last year.
Opposition disguised as apathy
One of the intentions of the Court Petition process is to overcome true owner apathy. However, a board of directors must be attuned to what is really going on in the community and be aware if lack of response is truly apathy or rather true opposition to the amendment. When an association petitions the District Court, it is representing it has not received objections to the petition by more than 33% of the owners in the community. Furthermore, the petition to the court will be “defeated” if more than 33% of the owners in a community object to the petition prior to the hearing. Just because an association does not receive objections from 33% of the owners during the balloting process, this does not guarantee owners will not muster sufficient objections to the petition and prevent the petition from being granted.
Prior to making a decision to use the CCIOA section 217(7) petition process, the board must first determine if the amendment failed to obtain the requisite approval because of the content of the amendment or true owner apathy. In other words, did the owners just not return a sufficient number of ballots because they didn’t care or didn’t want to be bothered? During the discussion about the amendment with the community, was there overall support for the amendment or was it met with opposition by most owners? Was there a large number of owners who objected to the amendment, but not insufficient numbers to reach the 33%? Boards must be able to answer these questions prior to filing a court petition for approval of an amendment as this process was not created to overcome opposition, but rather address apathy in a community. When the petition hearing is held, it should not be a surprise as to the outcome; the Association should have a very good feel as to what will happen and whether or not there will be opposition to the petition.
Following the Statute is critical
Because the Court Petition process is technical in nature and provides no discretion for the court, a judge must determine an association followed every single mandate in the statute in order to grant the petition request. But if a judge determines all requirements of the statute were not followed, the judge is prohibited from granting the petition by statute. Thus, following the statutory requirements is crucial for a successful petition hearing.
Section 217(7) of CCIOA provides that in order to petition the court, the association must complete the following:
(I)The association has twice sent notice of the proposed amendment to all unit owners that are entitled by the declaration to vote on the proposed amendment or are required for approval of the proposed amendment by any means allowed pursuant to the provisions regarding notice to members in sections 7-121-402 and 7-127-104, C.R.S., of the “Colorado Revised Nonprofit Corporation Act,” Articles 121 to 137 of title 7, C.R.S.;
(II)The association has discussed the proposed amendment during at least one meeting of the Association; and
(III) Unit owners of units to which are allocated more than fifty percent of the number of consents, approvals, or votes of the association that would be required to adopt the proposed amendment pursuant to the declaration have voted in favor of the proposed amendment.
To comply with the above, the actual amendment must first be provided to owners before being discussed at the membership meeting. Although the amendment may be revised after the meeting, the proposed draft amendment must be discussed during the meeting. Discussing the concept of the amendment or what will go into it without having an actual proposed amendment distributed to the membership will not suffice.
Furthermore, CCIOA requires a statement in the petition describing what makes the amendment necessary and advisable. This statement should not be a generic blanket statement, but rather contain information explaining why the board proceeded with the process in the first place. A good statement goes a long way for the judge reviewing the petition.
In conclusion, the Court Petition process is a valuable tool to assist associations with amendment of their declarations. However, associations must strictly comply with every provision of the statute to be successful. The petition should only be used to overcome owner apathy, not to pass an amendment opposed by the membership.
For more information about the Court Petition process, please contact a Altitude Community Law attorney at 303.432.9999.