Denver Senior Counsel Colleen Kwiatkowski and Partner John Palmeri obtained dismissal of an 11-count complaint against the firm's client, a homeowner’s association in Colorado.
The defendant homeowner's association ("HOA") is a small, residential, nonprofit association comprised of eight tracts of land. When the HOA came into existence, the lots were subject to certain use restrictions, such as limitations on breeding, raising, and keeping commercial livestock and prohibitions against engaging in retail, wholesale, or manufacturing business. One lot was exempt from these use restrictions so long as activities did not create a nuisance to the community.
When the primary owner of the exempt lot passed away, his spouse began efforts to sell the lot. Out of concern that a new owner may create a nuisance to the community because of the lot’s exemption, the HOA called a vote and 75 percent of the member-owners voted in favor of an amendment to place the lot under the same use restrictions as the other lots in the HOA. The spouse filed suit, claiming that the HOA and its members unlawfully amended the HOA’s covenants without a 100 percent vote. The plaintiff argued that the amended covenants encumbered her property, effectively making the plaintiff unable to sell the property. The defendants, including the HOA and its members, filed motions to dismiss.
The court found that all 11 claims, including claims for quiet title, slander of title, fraud, civil conspiracy, and intentional interference with prospective business relationships and contractual relations, were dependent on whether the amendment to the covenants was lawful. The court determined that under all applicable statutes, the HOA had no obligation to require a 100 percent vote to amend its covenants, and, thus, the amendment was lawful. The court granted the motions and dismissed the case.