Whenever a homeowner association (HOA) starts thinking in terms of a construction defect lawsuit against its developer and/or builder, its board members will inevitably be confronted with the purported risk and liability to their homeowners if they do not pursue the alleged defects and deficiencies brought to their attention.
Not surprisingly, the board members are on occasion led to believe that pursuing such claims is synonymous with acting in the homeowners’ “best interests.” Further—and unfortunately—board members often feel as though they will breach their obligation to the homeowners if they don’t agree to proceed with such claims.
Nevertheless, how well do we really know what the board members’ duty actually consists of, when it applies, and what potential liability exists for a board member’s breach of same? The answers might surprise you.
Colorado’s Common Interest Ownership Act, which was enacted ideally to “establish a clear, comprehensive, and uniform framework for the creation and operation of common interest communities” – but which in reality provides the statutory basis for most multi-family construction defect lawsuits – describes a board member’s duty of care in express and unequivocal terms:
Except as otherwise provided in subsection (2.5) of this section [pertaining to the investment of the association’s reserve funds]:
Furthermore, Colorado law makes it clear that courts will generally not interfere with a board member’s decision regarding whether to pursue a claim, provided they engage in a “reasonable and honest exercise of [that] judgment.” See Rywalt v. Writer Corp., 526 P.2d 316 (Colo. 1974).
In the context of a board member’s decision to [or not to] pursue claims against a developer or builder for alleged construction defects, it reasonably follows that such a board member will not be subject to liability unless they willfully or wantonly fail to exercise judgment and discretion in good faith.
Given Colorado’s construction litigation climate, where homeowners and communities are subjected to long and frustrating legal battles with uncertain results (while the attorneys and forensic experts profit), it begs the question whether the board members’ decision to pursue such claims was really in the homeowners’ best interests in the first place.
For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.
