Fox Litigation Team Scores Significant Win for Colorado Home Builders

September 29, 2016 – Press Releases

A team of Fox Rothschild litigators led by Partner Christopher J. Dawes secured a major victory for real estate developers on September 26 when the Colorado Supreme Court ruled that a homeowners’ association cannot demand maintenance assessments from builders and developers for property that has not yet been annexed into the common interest community.

The Justices concluded that builders and developers may be entitled to gradually develop subdivisions by annexation. Annexation is a process whereby properties become part of the common interest community only after the residence is built and deeded to the homeowner.  This process of incrementally forming communities through annexation provides necessary flexibility to the developers.

The court’s 31-page opinion in Pulte Home Corp. v. Countryside Community Association, Inc. is a victory for the home building industry and reverses a Colorado Court of Appeals decision that had threatened to cost the industry many millions of dollars by inspiring a wave of lawsuits.

The case hinged on the interpretation of the Colorado Common Interest Ownership Act (CCIOA), C.R.S. §§ 38-33.3-101 et seq., and the applicable covenants for the community. CCIOA provides a uniform scheme for the creation and operation of common interest communities in Colorado.

The Court found that the Colorado Court of Appeals erred when it held that a common interest community is formed immediately upon a developer’s recordation of a declaration and plat rendering the developer immediately liable for assessments.

The Fox attorneys argued that the Court of Appeals’ decision should be reversed because it called into question the viability of the annexation process by which nearly all subdivisions are created in Colorado. They also argued that it created a windfall to homeowners’ associations at the expense of the builders and developers who take on much of the financial risk of subdivision development.

The Colorado Supreme Court not only ruled in Pulte’s favor on the statutory and covenant-based issues of community formation, but also rejected the homeowners’ association’s alternate theory that Pulte was liable for maintenance assessments on a claim of unjust enrichment.

Dawes was joined on the case by Fox attorneys Risa B. Brown and Christopher T. Groen.

The central issue in this case of when a community is formed — and the consequences that flow from it — has the potential for statewide public impact. Dawes said the ruling provides a huge sigh of relief for the home building industry because the Court of Appeals’ ruling could have had a devastating effect. “If the lower court’s opinion had been upheld, annexation would no longer be viable in Colorado.  Also, developers could have faced liability for assessments immediately upon recording a plat,” Dawes said. 

Dawes represents clients in state and federal courts throughout the United States in an array of commercial disputes, including creditors’ rights, corporate litigation, real estate litigation, shareholder litigation, business torts, and labor and employment matters.

Brown handles a range of litigation, with an emphasis on construction defect, insurance, and real estate matters. She practices at both the trial and appellate level.

Groen’s commercial litigation practice involves the representation of companies and individuals from a broad spectrum of industries, including real estate investors, financial service companies, healthcare providers and construction companies. He practices in state and federal court, at both the trial and appellate level, and has tried numerous cases to verdict.