Specialty Law Columns
Construction Law Forum
When the Developer Controls the Homeowner Association Board: The Benevolent Dictator?
by Ronald M. Sandgrund, Joseph F. Smith

This column is sponsored by the CBA Construction Law Forum Committee. The column addresses various construction-related issues in both public and private areas. The column editor and Committee encourage the submission of substantive law articles addressing issues of interest to practitioners in the field of construction law.

Column Editor:

James W. Bain of Brega & Winters, P.C., Denver—(303) 866-9408

About The Authors:

This month’s article was written by Ronald M. Sandgrund, Greenwood Village, a partner with Vanatta, Sullan, Sandgrund & Sullan, P.C.—(303) 779-0077, and Joseph F. Smith, Greenwood Village, an associate with Vanatta, Sullan, Sandgrund & Sullan, P.C.—(303) 779-0077.

This article discusses the potential conflicts of interest and liabilities a real estate developer faces when it acts as builder, vendor, declarant, and property manager for a Colorado common interest community, such as a multi-family development, and potential solutions to these problems.

A real estate developer may experience potential conflicts of interest and liabilities when it acts in different capacities—for example, builder, vendor, declarant, and property manager—for a Colorado common interest community ("CIC"), such as a multi-family development. Possible solutions to some of these difficulties (none fully satisfactory) are explored below.

Conflicts come into sharp focus if suspected construction defects begin to manifest themselves during the period the developer controls the community association’s board. During this time, capitalism confronts socialism in the form of a for-profit business assuming management and control over, along with the legal responsibilities of, a not-for-profit homeowner association board.

In one case, a creative settlement valued at over $10 million was reached after several years of bitter litigation that pitted neighbor against neighbor. The situation escalated when a developer-controlled board allegedly failed to properly investigate and remedy slope stability and fill problems affecting the community’s road system. Ultimately, a class action suit was certified against several board members and the declarant-developer who appointed them. These board members also controlled or managed the affairs of the declarant-developer. The declarant-developer allegedly was responsible for the defective condition of the roads and various claimed misrepresentations and nondisclosures accompanying the sale of lots in the community when acting in its capacity as developer-vendor.

Colorado’s Common
Interest Ownership Act

Colorado’s Common Interest Ownership Act, CRS §§ 38-33.3-101 et seq. ("CCIOA"), enacted by the General Assembly in 1992, was intended to provide a "clear, comprehensive, and uniform framework for the creation and operation of common interest communities."1 CCIOA is the embodiment of a legislative effort to promote planned communities, which the General Assembly determined was critical to the "continuation of the economic prosperity of Colorado."2

CCIOA attempts to establish a balance between developer and homeowner interests. For example, CCIOA: (1) provides for the strengthening of homeowner associations by, among other things, giving associations the power to sue on behalf of the individual unit owners who make up the community; (2) serves to promote "effective and efficient property management through defined operational requirements that preserve flexibility" for homeowner associations; and (3) gives "developers flexible development rights with specific obligations within a uniform structure of development of a common interest community that extends through the transition to owner control."3 These "specific obligations" may create legal trouble for the developer, particularly during the period that the developer controls the association’s board.

Developer’s Role During Period of Declarant
Control

CCIOA describes the role typically occupied by the developer of a CIC as that of "declarant." A declarant is any person or group of persons acting in concert who: (1) as part of a common promotional plan, offers to dispose of to a purchaser such declarant’s interest in a unit not previously disposed of to a purchaser; or (2) reserves or succeeds to any special declarant right.4 A declarant may have one or more "affiliates"—namely, "any person who controls, is controlled by, or is under common control with a declarant." A successor affiliate of a special declarant is subject to the same obligations imposed by CCIOA on the declarant.5

CCIOA grants a declarant, through a written and recorded declaration,6 the power to provide for a "period of declarant control," during which time the declarant, or persons designated by the declarant, may appoint and remove the officers and members of the executive board.7 The period of declarant control begins no later than the date the first unit in the CIC is conveyed to a purchaser. Unless required by the terms of the declaration to terminate sooner, the period of declarant control lasts until: (1) no later than either sixty days after conveyance of 75 percent of the units to unit owners other than the declarant; (2) two years after the last conveyance of a unit by the declarant in the ordinary course of business; or (3) two years after any right to add new units was last exercised.8

The rights and responsibilities of the developer during the period of declarant control are clearly set forth in CCIOA,9 while related provisions prohibit or limit a declarant’s ability to modify these rights and responsibilities. Except as expressly provided in CCIOA, the provisions of the statute "may not be varied by agreement," and rights conferred by CCIOA "may not be waived." Additionally, a declarant may not use any device to evade the limitations or prohibitions of CCIOA or the declaration. A court may limit the application of any contractual clause relating to a CIC to avoid an unconscionable result. Every contract or duty governed by CCIOA imposes an obligation of good faith in its performance or enforcement. Finally, any officers and members of the executive board of the association who are appointed by the declarant are required to exercise the care of fiduciaries toward the unit owners.10

Declarant’s Potential
Liabilities as Developer, Builder, and Vendor

When a developer also acts as builder and vendor of CIC housing units, three areas of the developer’s commercial activities may create potential liability for construction defects: (1) marketing, (2) sales, and (3) construction. Serious conflicts of interest can arise if the developer also effectively assumes the duties of the community’s board. As a matter of law, the developer effectively becomes the advocate for and guardian of the unit owners’ interest in the condition and performance of the community’s common elements.

Marketing Activities

Like any other builder-vendor, a developer-builder has a duty to disclose all material facts known to it that "in equity and good conscience should be disclosed" when marketing a CIC.11 This duty may arise under the common law,12 or pursuant to state or federal statute.13

Intentional misrepresentation and concealment are actionable against a developer-builder.14 Negligent misrepresentation is another potential basis for a developer’s liability arising from its marketing practices. Colorado recognizes the tort of negligent misrepresentation in two circumstances: (1) where the negligent providing of false information causes physical harm to the plaintiff’s person or property;15 and (2) where the negligent providing of false information occurs during the course of a business transaction causing financial loss.16

A nondisclosure or omission also can constitute a misrepresentation.17 Thus, the negligent omission of material information also can be actionable.18 The duty of care owed by the supplier of information is measured by the use to which the information will be put, weighed against the magnitude and probability of loss that might attend that use if the information proves to be incorrect or incomplete.19

Developer-builders also face potential liability under both state and federal statutes. Colorado’s Soils and Hazard Analyses of Residential Construction Act20 requires every developer or seller to provide to the purchaser of a new residence, including a unit in a CIC, a copy of a summary report of the property’s "analysis" and "site recommendations" no later than fourteen days before closing. Where a significant potential for soil expansion is identified, a publication must be provided detailing the problems associated with such soils, the building methods used to address these problems during construction, and suggestions for care and maintenance to address such problems.

When deceptive trade practices are involved, the developer-builder may be liable to purchasers of its units under Colorado’s Consumer Protection Act ("CCPA").21 The CCPA prohibits the use of a veritable laundry list of deceptive and misleading trade practices in conjunction with the sale or advertisement of goods, property, or services. Relief in a civil action may include recovery of the injured party’s actual damages, treble damages, and attorney fees and costs.

The Interstate Land Sales Full Disclosure Act ("ILSFDA") forbids the use of false and deceptive practices in the sale of unimproved lots (which may, under some narrow circumstances, include the "pre-sale" of condominiums and townhomes that have not yet been built). The ILSFDA sometimes requires the affirmative disclosure of information needed by potential buyers.22 Anti-fraud provisions of the ILSFDA, which do not require an intent to defraud, prohibit a developer, in selling lots in a subdivision, from engaging in practices that operate or would operate as a fraud or deceit on a purchaser.23

Sales Activities

The developer-builder of a CIC may be liable for contract claims arising out of the construction and sale of the units. For example, residential purchase contracts give rise to specified rights and obligations based on the express terms of the contracts and any related warranties.

Colorado also recognizes implied warranties in contracts for the purchase of a new home in which the purchaser intends to live. Among other requirements, the home must be fit for human habitation, be built in a workmanlike manner, and comply with the applicable building code.24 An implied warranty that the home will be "reasonably suitable for its intended use" is subsumed within the implied warranty of habitability.25 The warranty of habitability has been likened to strict liability for faulty construction, and "[p]roof of a defect due to improper construction, design, or preparation is sufficient to establish liability in the builder-vendor."26

The Colorado Supreme Court has, to date, specifically declined to determine whether a builder-vendor of a new home may disclaim Colorado’s implied warranties.27 Related issues remain unanswered as to the creation of implied warranties in conjunction with the development and construction of general and limited common elements in a CIC, standing to sue for the breach of such warranties, and the binding effect of a common element implied warranty disclaimer contained in a declaration of covenants.28

Construction Activities

A developer-builder is obligated to construct a home with reasonable care.29 Generally, an original or subsequent homeowner may seek redress from a builder for latent defects that are discovered within the relevant statutory limitations period. Negligence must establish errors or omissions in workmanship, supervision, quality control, design, or other aspects of development and construction that are the responsibility of the builder and its subcontractors.30

Declarant-Developer’s
Potential Liabilities When Controlling the Board

When the declarant-developer elects to appoint the members of the association’s board, the developer, in effect, controls the association. Special obligations typically arise from such control, as explained more fully below.31

Responsibility to Act for
Benefit of Unit Owners

In light of the common law and statutory duties imposed on directors and officers appointed by a declarant who effectively controls a homeowner association board, it seems likely that both the declarant-developer and those members of the board appointed by the declarant-developer will be charged with the care required of a fiduciary of the unit owners.32 In many instances, the declaration of covenants will impose additional, broad responsibilities specifically assumed by the declarant-developer and appointed board members in establishing the community.33

In comparison, members of a homeowner association board who are elected by the unit owners rather than appointed by the developer are not subject to liability for actions taken or omissions made in the performance of such member’s duties except for wanton and willful acts or omissions, a more forgiving standard of care than that generally imposed on directors and officers of nonprofit organizations.34

All members of the association’s board must exercise the care required of fiduciaries. Developer-appointed members must act with utmost good faith, for the sole good of the beneficiaries of the board’s governance (the individual unit owners who make up the association), and they are required to deal with the unit owners impartially.35

A homeowner association board has the general responsibility to establish adequate preventative and corrective maintenance and repair assessments for the community property. It must maintain adequate reserves for capital and other improvements, and investigate and institute litigation as necessary to preserve the value of the community property. The board also must respond honestly to unit member inquiries regarding the nature of known or suspected construction defects and the cost of needed remedial measures, among other contingent liabilities that may accrue. Often, this information is passed on to prospective purchasers. Bad faith or poorly investigated estimates of future expenditures may give rise to potential liability.36

This fiduciary duty may require a developer-appointed board member to maintain the confidentiality of much of what is learned in his or her capacity as a homeowner association board member. This may be particularly important where the board member investigates potential construction deficiencies, develops theories of liability, evaluates legal responsibility and statute of limitation issues, and consults legal counsel and construction professionals. CCIOA specifically provides for the means to maintain such confidentiality.37 However, there is potential that once knowledge of any of these confidential matters is obtained by a declarant-appointed board member who also works for the declarant, such knowledge may be imputed to the declarant, with uncertain ramifications.

Contractual Liabilities

The declarant-developer must create articles of incorporation and bylaws that further govern the association.38 These other documents, typically referred to in the declaration as constituting part of the "project" or "association" documents, likely establish additional contractual obligations of the developer in much the same manner that the declaration itself imposes such contractual obligations.39 The developer is obligated to perform according to and enforce the terms of these contractual documents in good faith; the developer’s failure to act in good faith with regard to such contractual obligations can result in liability.40

Tort Liabilities

Under CCIOA, the association is responsible for the maintenance, repair, and replacement of the common elements of a CIC.41 Often, the declaration imposes these same, and sometimes broader, obligations on the association.

As discussed above, during the period of declarant control, the developer likely controls the association board and, therefore, may be found to share responsibility for such maintenance, repair, and replacement decisions. Thus, should the developer fail to act reasonably with regard to the upkeep and repair of the common elements in a CIC, the developer may bear tort liability for resulting or threatened property damage and loss of use. The developer also may become liable in tort for the misrepresentation or nondisclosure of material facts pertaining to the development, construction, and operation of the community if the developer or its agents involved in the sale of lots or units provide inaccurate or incomplete information that is disseminated to prospective purchasers.

Declarant-Developer’s
Responsibility for
Construction Defects

No responsibility is more difficult for the declarant-developer to address than its obligations once potential construction defects arise. These obligations, and the potential conflicts of interest that may arise relating to them, are discussed below.

Identifying Potential
Construction Defects

If potential construction defects come to the attention of the developer during the period of declarant control of the association, certain unanticipated obligations may be imposed on the declarant-developer. The declarant-developer may be required to authorize and complete an adequate investigation of the potential defects, with the ultimate goal of determining: (1) the extent of and the cost to remedy such defects; and (2) who is responsible for creating the defects.

A reasonable investigation likely requires the retention of the services of engineers, construction practices, and estimating experts (to determine the scope and cost of repair), a potentially costly venture. This investigation should be undertaken as quickly as possible, not only because Colorado’s construction statutes of limitations and repose provide relatively short periods to bring suit against those responsible for construction defects, but also because CCIOA requires "prompt repair."42

Payment for Repair of Defects

Once potentially responsible parties are identified, the declarant-developer may be charged with a positive obligation to pursue those parties for the cost of repair and any other reasonably recoverable damages resulting from the identified defects. The declarant-developer-controlled board may pursue such claims on behalf of and through the association.43 However, if the declarant-developer and its regularly retained design professionals or other subcontractors are identified as potentially responsible parties, difficult questions arise:

1) Should the declarant-developer authorize further forensic and legal investigation in preparation for negotiation or suit? If so, who will pay the bills for this work?

2) Are potentially applicable statutes of limitations automatically tolled during this period of investigation? If so, does this tolling "pass-through" so as to apply to claims against the developer’s subcontractors?44

3) When should notice be given to the declarant-developer’s liability insurance carrier? Does the carrier itself arguably become a potential "co-conspirator" if it improperly seeks to take advantage of its insured’s control of the homeowner association board to limit its insured’s potential liability?45

4) Should the declarant-controlled board institute suit against the declarant-developer? Who can properly make this decision?

Issues such as these have begun to permeate multi-family construction defect litigation in Colorado. To the extent the declarant-developer fails to timely investigate, or fails to timely pursue viable claims against those responsible for the construction defects, liability may attach for its breach of fiduciary duty and negligence, among other legal theories.

Real Property Improvement Statutes of Limitations
And Repose

Colorado has some of the strictest residential construction defect statutes of limitations and repose in the country. Careful attorneys know to advise their clients of these time-sensitive issues early when presented with a potential construction defect claim. Most prudent association boards would fully investigate the nature and cause of any suspected defects, along with the cost of necessary repairs. They then would evaluate the reasonableness of pursuing those responsible for such defects for the incurrence of such costs. However, declarant-controlled boards may have self-interested reasons to act less quickly, less vigorously, and less aggressively than non-declarant-controlled boards.

Conversely, a declarant-controlled board, due to its "insider" status, may be better positioned to get the declarant-developer to voluntarily address remediation of construction defects. Some declarant-developers may be inclined to take the most conservative view of the problems and, if repairs are effected, to adopt the least expensive (which may translate to the least effective) method of repair. In addition, they may rely on the judgment of the very design professionals and subcontractors responsible for creating the defects for guidance as to their severity and the appropriate method and cost of repair. Such reliance may be unwise, as it may not provide disinterested comment on which the board can base a proper decision as to whether and how to pursue those responsible for the identified defects.

Because of the issues raised by the potential early trigger of Colorado’s short statute of limitations during the period of declarant control, CCIOA’s convoluted provision touching on the tolling of statutes is worth noting. This provision states, in relevant part, that: "Any statute of limitation affecting the association’s right of action under this section is tolled until the period of declarant control terminates."46 Thus, CCIOA, as well as the "repair," "equitable estoppel" and "equitable tolling" doctrines, may be relevant to the application of Colorado’s statutes of limitations and repose in disputes involving developer-declarants and common interest unit owners.47

Recognizing Potentially
Diminishing Insurance
Coverage

In Public Service Co. v. Wallis,48 the Colorado Supreme Court adopted a procedure in which insurance coverage for certain kinds of gradually occurring property damage may be prorated over successive liability policy years by a court when an insured voluntarily elects to "self-insure" during some of that time. The Wallis case is important because it suggests that it may be prudent to sue a developer-builder sooner, rather than later, to maximize insurance coverage. A developer-controlled board may be inclined to give less weight to this imperative to file suit early than a board that is free of developer influence. Wallis did not decide when the prorating is to begin or end. The case also did not decide what the effect is on an insured’s coverage where the insured does not voluntarily elect to self-insure against a particular risk but, rather, involuntarily loses the benefits of coverage due to the insurer appending to a renewal policy a new exclusion directed at such risk.

Protection for Declarant-Developer

In light of the potential liabilities assumed by a developer who sets out to create a CIC and who chooses to exercise control over its board for a time, certain risk-mitigation measures are worth consideration. The declarant-developer might seek to:

1) forego direct control over the association board or appoint as board members persons independent of the declarant-developer’s control or influence;

2) hire an independent property management company and delegate to it certain critical decision-making powers where serious conflicts of interest abound;

3) carry adequate liability insurance, and bargain for the broadest available coverage;

4) ensure that the association’s board carries adequate officers’ and directors’ insurance (or similar insurance), and bargains for the broadest available coverage; and

5) adopt reasonable board-member indemnity provisions in the project documents, such as the declaration and articles of incorporation.49

While CCIOA permits a developer to establish a period of declarant control, nothing in the statute mandates the assertion of such control. A declarant-developer wishing to minimize its potential liability could, in theory, create a board that is at no time controlled or influenced by the developer. However, setting up such an independent board may be unrealistic in the early stages of development.50

Conclusion

Developers who elect to exercise control over a homeowner association board assume important obligations to prospective unit owners. If a developer is not willing to fully and fairly discharge its responsibilities in this regard, it should seriously consider appointing an independent property manager to manage the development on behalf of unit owners, or to cede such control directly to the unit owners.

NOTES

1. CRS § 38-33.3-102(1)(a). A common interest community ("CIC") generally consists of any real estate development in which the owners pay for a share of taxes, insurance, maintenance or other improvement of real estate in addition to that which they own in the development. CRS § 38-33.3-103(8).

2. CRS § 38-33.3-102(1)(b).

3. CRS §§ 38-33.3-102(1)(b) through (d).

4. CRS § 38-33.3-103(12).

5. CRS §§ 38-33.3-103(1), and -304.

6. "Declaration" refers to any recorded instruments, however denominated, that create a CIC, including any amendments to those instruments and also including, but not limited to, plats and maps. CRS § 38-33.3-103(13).

7. CRS § 38-33.3-303(5)(a)(I).

8. CRS §§ 38-33.3-301, and -303(5)(a)(I). It is an undecided issue whether declarant control is relinquished for all purposes any sooner than the declarant’s compliance with provisions of CRS § 38-33.3-303(9) requiring, among other things, the turn-over of certain documentation to the elected board.

9. Such rights and responsibilities also are contained in the declaration, the legal document that creates the CIC. To the extent that these rights and responsibilities are inconsistent with the rights and responsibilities delineated in CCIOA, CCIOA prevails. See CRS § 38-33.3-203(3).

10. CRS §§ 38-33.3-104, -112, -113, and -303 (2)(a).

11. Cf. Morrison v. Goodspeed, 68 P.2d 458 (Colo. 1937).

12. Cohen v. Vivian, 349 P.2d 366 (Colo. 1960) (real property vendor has duty to disclose latent defects not known by purchaser).

13. See Soils and Hazard Analyses of Residential Construction Act, CRS § 6-6.5-101 (requiring disclosure of information relating to soils conditions); Consumer Protection Act, Unfair and Deceptive Trade Practices, CRS § 6-1-105 (explicitly and implicitly prohibiting nondisclosures that would establish an unfair or deceptive trade practice); and Interstate Land Sales Full Disclosure Act, 15 U.S.C. §§ 1701 et seq. Cf. Natural Hazards Act, CRS §§ 24-65.1-101 et seq. (controlling development in areas containing geologic hazards and discussing required investigations into suitability of land for development).

14. See Sullan and Sandgrund, Residential Construction Defect Litigation § 5.2.1 (Seattle, WA: Elton-Wolf, 2000).

15. See Bloskas v. Murray, 646 P.2d 907 (Colo. 1982); C.J.I.-Civ.4th 9:3A (1998).

16. See First Nat’l Bank v. Collins, 616 P.2d 154 (Colo.App. 1980), cert. denied (adopting Restatement (Second) of Torts § 552); C.J.I.-Civ.4th 9:3B (1998).

17. See, e.g., Rosenthal v. Dean Witter Reynolds, Inc., 908 P.2d 1095, 1104 (Colo. 1995), quoting Little v. First Cal. Co., 532 F.2d 1302, 1305, n.4 (9th Cir. 1976) ("The categories of ‘omission’ and ‘misrepresentation’ are not mutually exclusive. All misrepresentations are also nondisclosures, at least to the extent that there is a failure to disclose which facts in the representation are not true."); Classic Auto Sales, Inc. v. Schocket, 832 P.2d 233 (Colo. 1992) ("misrepresentations" for purposes of Colorado’s long-arm jurisdiction statute included tort of concealment, as concealment requires as essential element the misrepresentation of a material fact).

18. See Robinson v. Poudre Valley Fed. Credit Union, 654 P.2d 861 (Colo.App. 1982) (evidence of credit union’s failure to inform car purchasers of credit union’s inexperience with out-of-state transactions supported a finding of negligent misrepresentation).

19. Id.; Restatement (Second) of Torts § 553, Comment a.

20. CRS § 6-6.5-101.

21. CRS §§ 6-1-101 et seq. See Willow Springs Condominium Ass’n, Inc. v. Seventh BRT Development Corp., 717 A.2d 77 (Conn. 1998) (developer liable under state consumer protection law).

22. 15 U.S.C. §§ 1701 et seq. The ILSFDA exempts many real estate transactions from its scope. For example, the statute does not apply to the sale or lease of any improved land on which there is a residential, commercial, condominium, or industrial building, or the sale or lease of land under a contract obligating the seller or lessor to erect such a building thereon within a period of two years. 15 U.S.C. § 1702(a)(2). "Lot" is defined by the ILSFDA as any portion, piece, division, unit, or undivided interest in land located in any state or foreign country if the interest includes the right to the exclusive use of a specific portion of the land. 24 C.F.R. § 1710.1. The Office of Interstate Land Sales Registration, which administers the ILSFDA, treats each condominium unit as a lot. 38 Fed. Reg. 23,866.

23. See Ackmann v. Merchants Mortgage & Trust Corp., 645 P.2d 7 (Colo. 1982).

24. See Carpenter v. Donohoe, 388 P.2d 399 (Colo. 1964).

25. Cf. Rusch v. Lincoln-Devore Testing Lab., Inc., 698 P.2d 832 (Colo.App. 1984) (purchaser relies on implied representation that a new house will be suitable as a home); see also Petersen v. Hubschman Constr. Co., Inc., 389 N.E.2d 1154, 1158 (Ill. 1979).

26. Cosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041, 1045 (Colo. 1983); see also Davies v. Bradley, 676 P.2d 1242 (Colo.App. 1983).

27. See Sloat v. Matheny, 625 P.2d 1031 (Colo. 1981). However, Colorado appellate courts have held that, at a minimum, such a disclaimer must be clear and unambiguous. Id. Colorado’s Consumer Protection Act requires a disclaimer to be clear and conspicuous. See CRS § 6-1-105(r).

28. Some courts outside of Colorado recognize the existence of implied warranties concurrent with the creation of common interest building elements. See Meadowbrook Condominium Ass’n v. S. Burlington Realty Corp., 565 A.2d 238 (Vt. 1989). See also Briarcliffe West Townhouse Owners Ass’n v. Wiseman Constr. Co., 454 N.E.2d 363 (Ill.App. 1983) (extending the implied warranty of habitability to allow recovery for defects in common areas). One Colorado District Court has held that implied warranties extend to the construction of association property and that this warranty cannot be disclaimed. Order, Terrace at Columbine II v. Vision Homes, Inc., Case No. 99 CV 2632 (Jefferson County Dist. Ct., 5/11/01). Another District Court has held that the sale of lots in a platted subdivision by a developer, where the lots are part of a CIC, gives rise to an implied warranty that the community’s roads are adequately constructed, and that this implied warranty may not be disclaimed. Order, Cedar Heights Community Ass’n v. Northern Colo. Video, Inc., No. 97 CV 3360 (El Paso County Dist. Ct., 12/7/99).

29. Cosmopolitan Homes, supra, note 26 at 1041.

30. Id. See also Colorado’s recently adopted Construction Defect Action Reform Act, CRS §§ 13-20-801 et seq. ("CDARA"), discussed generally in Sandgrund, Sullan, and Achenbach, "The Construction Defect Action Reform Act," 30 The Colorado Lawyer 121-124 (Oct. 2001).

31. It is unsettled whether these obligations are owed only by the declarant-appointed directors, personally, or whether the declarant is jointly liable for these directors’ conduct under CCIOA. Although not yet addressed by Colorado’s appellate courts, other courts have imposed liability on both; see Raven’s Cove Townhomes, Inc. v. Knuppe Dev. Co., 171 Cal Rptr. 334 (Cal. App. 1st Dist. 1981). Other courts have imposed liability on the developer alone; see Board of Managers of Weathersfield Condominium Ass’n v. Schaumburg Ltd. Partnership, 717 N.E.2d 429 (Ill.App. 1999), appeal denied. Although this distinction generally is ignored for the purposes of this article, even if no such joint liability arises directly under CCIOA, there are many potential bases for imposing such liability on the appointing declarant, such as: (1) the common law tort of civil conspiracy, Nelson v. Elway, 908 P.2d 102 (Colo. 1995) (to establish civil conspiracy plaintiff must show: two or more persons; object to be accomplished; meeting of the minds on object or course of action; unlawful overt act; and damages as a proximate result); (2) joint liability for actions performed "in concert," RTC v. Heiserman, 898 P.2d 1049 (Colo. 1995) (relying on CRS § 13-21-111.5(4)); and (3) some species of "ratification," particularly where the appointed director is found to be acting in a "dual" capacity, New Mexico Potash & Chemical Co. v. Oliver, 228 P.2d 979 (Colo. 1951) (a corporation that, with knowledge of its officer’s or agent’s unauthorized act or contract and of material facts concerning it, receives and retains benefits resulting from transaction may be held to ratify the transaction). One Colorado District Court has held that CRS § 38-33.3-303(2)(a) only applies to the liability of the individual appointed as director, and that such liability will not be imputed to the entity making the appointment. See Order, Tamaron II Condominium Ass’n v. Western Skies Tamaron Assoc., LLC, Denver Dist. Ct. 98 CV 8944 (1/11/01). It does not appear in this case that the plaintiff argued for the imposition of joint or common liability on the part of the declarant-developer, other than by application of general principles of agency law based on the principal-agent relationship between the developer and its appointed directors solely in their capacity as officers and directors of the developer.

32. Cf. Woodmoor Improvement Ass’n v. Brenner, 919 P.2d 928 (Colo.App. 1996).

33. For example, a representative declaration for a CIC located in Arapahoe County states: "Section 1.3. Intention of Declarant. Declarant intends to protect the value and desirability of the Project, further a plan for the improvement, sales and condominium ownership of the Project, create a harmonious and attractive development, and promote and safeguard the health, comfort, safety, convenience and welfare of the owners of Units in the Project."

34. See CRS § 38-33.3-303(2)(b). See also Calvin, Jordan, and Linquanti, Legal Aspects of Condominium Development and Homeowner’s Associations in Colorado, at 337-38 (NBI, 2001) (discussing duties of executive board members). But see CRS §§ 13-21-115.5, -115.7 and -116 (statutory limitations on liability associated with activities of nonprofit organizations).

35. See CRS § 38-33.3-303(2)(a). See also Woodmoor, supra, note 32 at 933.

36. Although representations as to "future events" often are not actionable, this general rule usually is held not to apply when the person making the representation: (a) claims to have superior knowledge; (b) has access to superior information; (c) makes no reasonable effort to investigate the basis for the estimate; (d) intends to induce the other not to conduct his or her own investigation; or (e) is a fiduciary. Under the ILSFDA, a developer is obligated to provide prospective purchasers with a good faith written estimate of the cost of carrying out the responsibility of maintaining the community’s common elements over their first ten years of ownership by the homeowner association. The regulations define "good faith estimate" to mean "an estimate based on documentary evidence. In the case of cost estimates, the documentation may be obtained from the suppliers of the services." 24 C.F.R. § 1710.1. The developer is to secure and retain this backup documentation to prove its compliance with the requirements of the regulation.

37. CRS § 38-33.3-308(3) and (4).

38. See CRS § 38-33.3-203 (construction and validity of declaration and bylaws); CRS § 38-33.3-301 (organization of unit owners’ association); CRS § 38-33.3-302(1)(a) (adoption and amendment of bylaws); CRS § 38-33.3-303 (9)(a) (discussing articles of incorporation and bylaws); and CRS § 38-33.3-306 (bylaws).

39. Each of a homeowner association’s governing documents constitutes an enforceable contract. See, e.g., McDowell v. U.S., 870 P.2d 656 (Colo.App. 1994) (suit for violation of building restriction contained in bylaws is a suit for breach of contract).

40. CRS §§ 38-33.3-113, and -311.

41. CRS § 38-33.3-307.

42. See CRS § 38-33.3-307(1).

43. CRS § 38-33.3-302(1)(d).

44. CCIOA and the common law suggest that the statute of limitations very well may be tolled, at least as to the developer. A former District Court Judge acting as Special Master in the Jefferson County District Court held that such tolling applies to the developer-builder’s subcontractors as well, at least where the tolling is due to the developer making repairs. See Master’s Order, Village at Horizon Pointe Ass’n v. Beacon Hill Investments, Inc. et al., Jefferson Dist. Ct. 99 CV 71 (10/5/00).

45. See note 31, supra, for a discussion of the potential of liability for civil conspiracy and "acting in concert" under these circumstances.

46. CRS § 38-33.3-311(1).

47. See, e.g., Highline Village Assoc. v. Hersh Cos., 996 P.2d 250 (Colo.App. 1999), aff’d in part, rev’d in part; Hersh Cos. v. Highline Village Assoc., 30 Colo.Law. 237-39 (Sept. 2001) (No. 00SC74, annc’d 7/2/01) (both approving rationale for "repair" doctrine).

48. 986 P.2d 924 (Colo. 1999).

49. Unit owners’ interests may be afforded some protection by CCIOA against indemnity provisions that overreach, particularly through application of CRS §§ 38-33.3-104 (non-waiver of benefits of CCIOA), -112 (unconscionability), and -113 (good faith).

50. CCIOA requires that a homeowner association "be organized no later than the date the first unit in the common interest community is conveyed to a purchaser." CRS § 38-33.3-301.