Condo developers in Colorado scored a victory this month in a decision from the Colorado Court of Appeals. In Vallagio at Inverness Residential Condominium Association, Inc. v. Metropolitan Homes, Inc., et al, the court held that a clause contained in a homeowner association’s declaration requiring arbitration of construction defects claims cannot be amended without consent of the developer/declarant if the declaration requires its consent. This is the case even if the declarant no longer owns any units, provided the declaration reserves the right to declarant after it sells its last interest in the community.
In Vallagio, the declaration required the developer/declarant’s consent to any change in the declaration’s requirement that construction defects be tried in arbitration. After the homeowner’s association gained control, it amended the declaration to eliminate the arbitration requirement. It then file suit in court against the developer. The trial court held the association’s vote eliminating the arbitration requirement was valid, but the Colorado Court of Appeals reversed finding the amendment invalid because it did not first obtain the developer/declarant’s consent to the change.
The Vallagio decision is good news in the wake of the failure of state legislative efforts to encourage further condo development in Colorado. This spring, the Colorado house rejected legislation, passed by the state senate, that stated when the governing documents of a common interest community require mediation or arbitration of a construction defect claim and the requirement is later amended or removed, mediation or arbitration is still required for a construction defect claim.