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What was the Rule Against Perpetuities, again?

The Colorado Supreme Court has entered its Opinion on the Vallagio at Inverness Residential Condo Assoc. v. Metro Homes, Inc., case. A copy of the Opinion is available AT THIS LINK. In its Opinion, the Justices held that the Colorado Common Interest Ownership Act’s provisions, designed for greater owner control and flexibility in management of communities, do not prevent a developer from writing into the community’s governing documents, a perpetual, and permanent, right to allow or disallow, any changes to the community’s governing documents.

In Vallagio, a community was built by a developer who inserted into the declaration for the community, a provision stating that no amendments to the declaration would be valid unless approved-of by the developer. The Vallagio association took a vote of its owners to amend the declaration to strike that provision, and another requiring arbitration. The owners were looking to 38-33.3-217, C.R.S. (2016) of CCIOA for authority for their actions. Section 217(1) provides that no declaration may require more than 67% percent of all voting interests to make an amendment.

After the Vallagio association sued the developer for defects in the community, the developer challenged the amendment to the Declaration, arguing that the removal of the arbitration provision was ineffective since the developer did not consent to it. The Trial Court disagreed, but the Court of Appeals (first) and the Colo. Supreme Court (second) held in favor of the developer.

This ruling can impact all Colorado communities – new or old. As CCIOA continues to require more and more changes to the governing documents of Colorado communities, those changes are all going to have to be vetted and approved by developer entities which may be inactive, defunct, or hostile to the owners in the community. The window by which owners – without the assistance of the Court – can amend their governing documents, is narrowing, considerably.