Colorado condominiums have all kinds of technical and legal requirements regarding notice when changing by-laws or anything which has previously been placed into the organizations documents of governance. It is even more complicated when dealing with mortgagees who are often referred to in the by-laws. Here is a simplified explanation of how to deal with some issues Colorado Boards frequently must be concerned.
Section 38-33.3-217 of the Colorado Common Interest Ownership Act pertains to the requirements for amendment of declaration. Section 217 sets forth requirements relating to the number of votes required for an amendment, satisfying first mortgagee consent, recordation of amendment, challenge to amendment, and procedure for petition the district court for amendment.
Number of Votes Required
Section 217(1) sets forth the limitations and requirements regarding the number of votes required to amend the declaration. Specifically, the declaration may only be amended by vote or agreement of a minimum of fifty percent (50%) and maximum of sixty-seven percent (67%) of the unit owners. Any requirement set forth in the declaration requiring affirmative vote or agreement in excess of sixty-seven percent (67%) of the unit owners is void, and will be deemed to specify a percentage of sixty-seven percent (67%). While the declaration may specify a percentage less than fifty percent (50%), all of the units must be restricted exclusively to nonresidential use. Finally, the association may petition the court, as described below, to reduce the required percentage of affirmative votes or agreement.
Satisfying Declaration Requirement That First Mortgagees Consent to Amendment
Where the declaration requires first mortgagees to approve or consent to amendments, but does not set forth a procedure for registration or the notification first mortgagees, the association may utilize the following procedure to satisfy the declaration requirement.
First, the association must send dated, written notice and a copy of any proposed amendment by certified mail to each first mortgagee at its most recent address as shown on the recorded deed of trust or recorded assignment. Next, the association must print the dated notice, together with information on how to obtain a copy of the proposed amendment, at least twice and on separate occasions at least one week apart, in a newspaper of general circulation in the county in which the community is located.
Should the first mortgagee not deliver a negative response to the association within sixty days of the association providing the above described notice, that first mortgagee shall be deemed to have approved the proposed amendment.
Petitioning Court for Order For Declaration Amendment
Section 217(7) of the Colorado Common Interest Ownership Act provides a mechanism whereby associations may petition a district court within their county for an order amending the declaration of the community. However, it is important that associations understand the procedure and requirements to petition a court for such an order.
A. Requirements Prior to Petitioning Court
Section 217(7)(a) outlines three requirements that the association must satisfy prior to petition the court. First, the association must have twice sent notice of the proposed amendment to all unit owners entitled to vote. Section, the association must have discussed the proposed amendment during at least one meeting of the association. Finally, at least fifty percent (50%) of the unit owners entitled to vote have voted in favor of the proposed amendment.
B. Requirements of the Petition
Section 217(7)(b) outlines the requirements and documents that must be included within the petition to the court.
(1) Summary of the procedures and requirements for amending the declaration as set forth in the declaration.
(2) Summary of the proposed amendment to the declaration.
(3) Summary of the effect of and reason for the proposed amendment, including a statement of the circumstances that make the amendment necessary or advisable.
(4) Summary of the results of any vote taken with respect to the proposed amendment.
(5) Summary or copy of any other matters or documents that would be useful to the court in deciding whether to grant the petition.
(6) Copy of the declaration as originally recorded, and any recorded amendments to the declaration.
(7) Copy of the text of the proposed amendment.
Assuming the association has satisfied the requirements prior to the petitioning the court and the requirements of the petition, the district court—within three days of the filing of the petition—will set a hearing to occur between forty-five to sixty days of the date of the filed petition.
C. Requirements Once Petition Hearing Has Been Set
Within ten days after the hearing has been set, the association must:
(1) Provide Notice of the Petition
Notice of the petition must be sent by first-class mail or postage prepaid to any unit owner and any lender that holds a security interest in one more units and is entitled to vote on the proposed amendment.1
Notice of the petition must include a copy of the petition,2 the date the district court will hear the petition, and a statement that the court may grant the petition and order the proposed amendment to the declaration unless any declarant entitled by the declaration to vote on the proposed amendment, the federal housing administration, the veterans administration, more than thirty-three percent of the unit owners entitled by the declaration to vote on the proposed amendment, or more than thirty-three percent of the lenders that hold a security interest in one or more units and are entitled by the declaration to vote on the proposed amendment file written objections to the proposed amendment with the court prior to the hearing.
(2) File With The District Court
Finally, the association must file with the district court:
- a list of the names and mailing addresses of declarants, unit owners, and lenders that hold a security interest in one or more units and that are entitled by the declaration to vote on the proposed amendment; and
- a copy of the notice of the petition send to any unit owner or lender as described above.
D. Hearing On Petition For Declaration Amendment
Section 217(7)(e) provides that the court shall grant the associations petition after hearing if it finds that:
(1) The association has complied with the requirements of Section 217(7);
(2) No more than thirty-three percent (33%) of the ownership interests entitled to vote have filed written objections to the proposed amendment with the court prior to the hearing;
(3) Neither the Federal Housing Administration nor the Veterans Administration is entitled to approve the proposed amendment or if so entitled has not filed written objections to the proposed amendment with the court prior to the hearing;
(4) The proposed amendment does not eliminate any rights or privileges designated in the declaration as belonging to a declarant or no declarant has filed written objections to the proposed amendment with the court prior to the hearing;
(5) The proposed amendment does not eliminate any rights or privileges designated in the declaration as belonging to any lenders that hold security interest in one or more units or no more than thirty-three percent (33%) of such lenders have filed written objections to the proposed amendment with the court prior to the hearing; and
(6) The proposed amendment does not terminate the community or alter the allocated interests of the unit owners as specified in the declaration.
Once granted and recorded by the association, the amendment shall have the same legal effect as if it were adopted pursuant to any requirements set forth in the declaration.
Recording Declaration Amendment
Section 217(3) requires that every amendment to the declaration is effective only upon recordation, and must be recorded in every county in which any portion of the community is located. Section 217(6) pertains to the expenses associated with the preparation and recoding of an amendment to the declaration:
Challenge to Validity of Amendment
Section 217(2) provides that no action to challenge the validity of an amendment adopted by the association pursuant to Section 217 may be brought more than one year after the amendment is recorded.
1 The lender may be entitled to vote on the proposed amendment by the declaration, any underwriting guidelines or requirements of that lender, the federal national mortgage association, the federal home loan mortgage corporation, the federal housing administration, the veterans administration, or the government national mortgage corporation.
2 Notice of the petition does not need to include the exhibits attached to the original petition filed with the district court.