Beginning January 1, 2014, Colorado homeowners’ associations (“HOAs”) face new requirements to collect unpaid assessments, dues, and other debts from homeowners. 

House Bill 13-1276 (“HB 13-1276”), which was approved May 28, 2013 and which amended the Colorado Common Interest Ownership Act (“CCIOA”), requires that in order for an HOA to use a debt collection agency or take legal action to collect unpaid assessments from homeowners, the HOA must adopt and adhere to a written debt collections policy.  This policy must contain certain provisions, including that before an HOA can submit a homeowner’s delinquent account to a collection agency or refer it to an attorney for legal action, the HOA is obligated to send the homeowner a notice of delinquency delineating specific information. 

CCIOA will also require two things before an HOA can foreclose on a lien.  First, the balance of assessments and charges secured by the lien must equal at least six months of common expense assessments based on a periodic budget adopted by the HOA. Second, the HOA board must formally resolve to file a legal action against the specific unit owner on an individual basis.

As for collecting the debt, the HOA must make a good faith effort to coordinate with the unit owner to set up a payment plan that meets the statutory prescriptions of C.R.S. § 38-33.3-316.3.  Among other things, such a plan must allow a unit owner to pay off the debt in equal installments over at least six months.  Importantly, however, an HOA will not be precluded from pursuing legal action against a unit owner if the unit owner defaults under the payment plan. Additionally, the HOA does not need to negotiate another payment plan with a unit owner who has previously entered into a payment plan under the statute.

For the second time in two years, a negotiated settlement will prevent the U.S. Supreme Court from deciding the validity of disparate impact claims under the Federal Fair Housing Act.  The governing body of Mount Holly Township, New Jersey, voted November 13 to approve an out-of-court settlement in the case of Township of Mount Holly v. Mount Holly Gardens Citizens in Action.  The settlement ensures that, for the time being, disparate impact claims remain cognizable under the FHA.

Mount Holly, previously set for oral argument on December 4, was to decide whether the FHA could be violated by neutral policies or actions—including those of private landowners as well as local government regulations—impacting certain groups more than others.  The FHA prohibits discrimination among and against certain “protected classes,” including race, religion, sex, national origin, familial status, or disability.  All eleven federal courts of appeals have determined that FHA violations can occur by facial or intentional discrimination, or by policies or actions which—although facially neutral as to protected classes—may negatively affect protected classes.  The dispute over the availability of disparate impact analysis in FHA claims arises because of language differences between the FHA and other civil rights laws which more clearly permit disparate impact analysis.

The Mount Holly settlement means that disparate impact claims will remain available to plaintiffs under the FHA.  Private landowners and local governments should therefore remain vigilant about maintaining rules, ordinances, or policies that differentially impact certain racial, ethnic, gender, religious or disability groups.  Courts analyzing disparate impact weigh the actual impact on a protected class against the defendant’s interest in the policy or action.  If disparate impact claims had been invalidated in Mount Holly, the avenues for plaintiffs to show FHA violations—and perhaps violations of other federal laws, including those related to lending discrimination—would be limited to cases of facial or intentional discrimination, both of which can be difficult for plaintiffs to prove.

The Mount Holly litigation, which has been ongoing for nearly ten years, stems from the township government’s designation of blight and implementation of a redevelopment plan for the Gardens neighborhood, populated primarily by low-income and minority residents.  Under the redevelopment plan, the township is acquiring and demolishing existing homes to make way for new market-rate homes and commercial uses. 

The Mount Holly settlement comes only one year after an out-of-court settlement in the case of Magner v. Gallagher, which precluded the Supreme Court from hearing arguments on the same issue presented in Mount Holly.  Fair housing advocates, including the Obama administration, have sought to prevent the FHA disparate impact issue from reaching the Supreme Court due to predictions that the Court’s conservative majority would treat disparate impact review unfavorably, which would also potentially affect fair lending laws.

Denver District Court Judge Robert McGahey has ruled that the U-MS-5 zoning of the four parcels of land in the West Highlands neighborhood was part of a valid legislative action and did not constitute impermissible spot zoning.

The four parcels, located adjacent to the commercial corridor on 32nd Avenue and Lowell Boulevard, were rezoned U-MS-5 during the 2010 citywide legislative rezoning process.  In the case, ten neighbors in the West Highlands neighborhood contended that the Denver City Council’s zoning of the parcels was an ultra vires act, or beyond the powers granted to Denver City Council, and that Denver City Council engaged in impermissible spot zoning.  An impermissible spot zoning occurs when it appears that a rezoning was designed to relieve a particular property from applicable zoning restrictions.

The court held that Denver City Council has the power and authority to make zoning decisions so long as they are made in accordance with a comprehensive plan.  Therefore, zoning determinations are presumed to be valid.  Because there was not clear and convincing evidence that City Council acted in an arbitrary or capricious manner, the court held that Denver City Council’s U‑MS‑5 zoning of the parcels was not an ultra vires act.

The court further held that spot zoning did not occur on these parcels because they were subject to the same treatment as other Denver properties during the citywide rezoning process.  The court found that the treatment of these parcels was not unique and there was no indication that the City intended to target the parcels to relieve them of zoning restrictions.

This case is particularly notable because it is a spot zoning challenge to a legislative rezoning scheme.  All previous Colorado spot zoning cases have involved situations in which a property owner seeks and is granted a rezoning for their specific property.  As shown in this case, it appears that a court is less likely to find that a particular property was singled out for special treatment when the rezoning was part of a larger rezoning process.  This case also demonstrates the broad discretion and authority granted to Denver City Council in making zoning decisions for the City and County of Denver.

Otten Johnson attorneys Tom Macdonald and Heather Park represented the property owners in this case.

doj memo.jpgToday, the federal government made clear that it does not currently intend to interfere with Colorado’s efforts to implement a system to regulate the cultivation, distribution and sale of marijuana to adults for recreational purposes.  Federal authorities also clarified their approach toward state-regulated medical marijuana industries. 

Specifically, United States Deputy Attorney General James M. Cole issued a memorandum directed to all United States Attorneys, setting forth the Department of Justice’s (DOJ) policy toward marijuana businesses in states that have legalized marijuana for medical and/or recreational use.  The memorandum is cast as guidance for prioritizing the “limited investigative and prosecutorial resources” available to the federal government.

Like the two previous federal memoranda addressing state-level efforts to liberalize marijuana laws, which were issued in 2009 and 2011, today’s memorandum makes clear that marijuana remains illegal for all purposes under federal law, and that federal authorities will enforce federal drug laws where appropriate.  Particularly, the memorandum highlights eight enforcement priorities that will guide federal authorities:

  • Preventing distribution of marijuana to minors;
  • Preventing revenue from marijuana businesses from going to criminal organizations;
  • Preventing diversion of marijuana from states where it is lawful to other states;
  • Preventing state-authorized marijuana activities from being used as a pretext for other illegal activity;
  • Preventing violence and use of firearms in the marijuana industry;
  • Preventing driving under the influence of marijuana and other adverse public health consequences associated with marijuana use;
  • Preventing cultivation of marijuana on public lands; and
  • Preventing marijuana possession or use on federal property.

While the memorandum stresses that it does not change federal law, and does not bind federal authorities, it makes clear that federal authorities are at least willing to allow Colorado and Washington state an opportunity to implement “strong and effective regulatory and enforcement systems that will address the threat those state laws could pose to public safety, public health, and other law enforcement interests.”  Federal authorities will watch the implementation of these regulatory regimes close, and, if they fail to live up to expectations, federal authorities may act.  If anything, this reinforces the importance of the process playing out at the state and local level in Colorado, as final regulations and procedures are developed and implemented to regulate the coming recreational marijuana industry. 

Today’s memorandum also provides clarifying guidance concerning medical marijuana businesses, noting that they should not be an enforcement priority, regardless of their size or commercial nature, provided that the operation in question “is demonstrably in compliance with a strong and effective state regulatory system.”  This represents a reversal of policy guidance provided in the 2011 memorandum, which had drawn a distinction between medical marijuana patients and their caregivers, on the one hand, and large-scale, for profit commercial enterprises, on the other hand.  In some states, U.S. Attorneys had seized on this distinction to justify targeting large-scale medical marijuana businesses.  In Colorado, however, federal authorities have generally taken a hands-off approach toward state-regulated medical marijuana businesses, which seems even more likely to continue in light of today’s memorandum.

It is important to emphasize that today’s memorandum is nothing more than a statement of current policy. It is not law, and it binds no one.  U.S. Attorneys in various states may have differing interpretations of the policy guidance, which could lead to variations in enforcement from state to state.  If state-level regulatory regimes fail to live up to federal scrutiny, federal authorities could quickly change their approach.  Indeed, nothing prevents federal authorities from issuing new policy guidance down the road, which could reverse course.  For example, when a new presidential administration comes into office in 2017, it could choose to completely ignore the Obama administration’s approach, and instead aggressively enforce federal marijuana laws. 

That said, the significance of today’s memorandum cannot be understated.  The previous two DOJ memoranda on state-sanctioned marijuana activities have had an enormous impact on the development of medical marijuana industries in a number of states.  In removing the most significant potential barrier to the full implementation of Amendment 64 (and Washington state’s similar measure), today’s memorandum will likely have a similarly profound impact.

 

 

Three years after its creation, the Colorado HOA Information Office and Resource Center (the “HOA Offfice”) has been given additional guidance as to its present duties and will soon have an idea of what its future duties may include.  (To see what the HOA Office was doing in 2012, see its 2012 Annual Report.) House Bill 13-1134, which took effect August 7, 2013, prescribes that, among other duties, the HOA Office must compile a database about registered associations that includes each association’s name, address, email address, web site, and telephone number.  This dovetails with the bill’s requirement that when an HOA registers with the HOA Office, the HOA submits that information. The HOA Office must also coordinate and assist in preparing educational and reference materials that helps parties involved in HOAs understand their rights and responsibilities. The bill further tasks the HOA Office with monitoring changes in federal and state laws related to common interest communities and to provide information about those changes on its website.  Looking towards the future of the HOA Office, House Bill 13-1134 charges the Director of the Colorado Division of Real Estate with studying the functions and duties of other state’s HOA offices—specifically those in Florida, Virginia, and Nevada.  The study must assess the structure, costs, funding, and success of certain, enumerated functions.  These functions include, but are not limited to, investigating and resolving complaints, providing regulatory oversight over declarant-controlled boards, and monitoring and reviewing HOA election-related disputes. The Director must present the study’s conclusions and make recommendations for the HOA Office based on them by the end of 2013.