Summary : Requiring H.O.A. related litigation to be filed in Small Claims Court, when such claims would fall under the already existing jurisdiction of Small Claims Court — which is about 99% of current H.O.A. litigation — would remove the perverse incentives and moral hazards for H.O.A. attorneys to engage in destructive and expensive litigation against individual homeowners over trivial amounts and reasons.
Since Small Claims Court is an agency that already exists, the additional cost to the State would be zero. By comparison, an out-of-court H.O.A. dispute resolution process would cost over $ 2 million per year and require 20 additional employees under the Department of Regulatory Agencies (DORA).
A Man’s Home Is His Castle
Colorado Homeowners Protection Act
Small Claims Court
In Colorado Revised Statutes, add § 38-33.3-XXX as follows:
(1) Legislative Declaration – Use of Small Claims Court
The General Assembly finds that the cost of C.C.I.O.A.-related litigation is burdensome and harmful to homeowners, that the complexity and cost of litigation creates a gross and unconscionable inequality before the law that favors H.O.A. corporations over individual homeowners, and that the C.C.I.O.A. has created perverse incentives and moral hazards that encourage H.O.A. corporations, their managers, and their attorneys, to engage in destructive and expensive litigation against individual homeowners for trivial amounts and reasons. The General Assembly also finds that a vast majority of H.O.A.-related litigation already falls under the jurisdiction of Small Claims Court, an institution which already exists to streamline and reduce the costs of litigation, for both the parties involved and the State itself. Therefore, the General Assembly finds that the continuation of economic prosperity of Colorado is dependent upon requiring all litigation to enforce the C.C.I.O.A. to be filed in Small Claims Court when possible would reduce the cost of litigation, create a more balanced and equitable process to settle disputes, and disincentivize H.O.A. related litigation intended to harass and intimidate individual homeowners by burdening them with rapacious and usurious attorney fees intended to threaten the homeowners with financial harm and foreclosure.
(2) (a) The General Assembly hereby requires that all litigation to enforce claims under Colo. Rev. Stat. § 38-33.3.-101 et seq., the “Colorado Common Interest Ownership Act” (C.C.I.O.A.), shall be filed in Small Claims Court when such civil actions would fall under the existing jurisdiction of Small Claims Court per Colo. Rev. Stat. § 13-6-403 “Jurisdiction Of Small Claims Court”; regardless of anything to the contrary in the governing documents of an H.O.A. corporation, the C.C.I.O.A., any other state law, or any agreement between parties.
(b) Void Agreements. Any agreement, understanding, or practice, written or oral, implied or expressed, between an H.O.A. corporation and any homeowner that violates the rights of any homeowners as guaranteed by this section is void.
(c) Penalty. Any person who directly or indirectly violates any provision of this section is guilty of a misdemeanor and, upon conviction, shall be punished by a fine of not more than one thousand dollars, imprisonment in the county jail for not more than ninety days, or both a fine and imprisonment for each offense.
(d) Civil Remedies.
(II) Any person injured as a result of a violation or threatened violation of this section may bring suit in a court of competent jurisdiction for injunctive relief, to recover all damages, including costs and reasonable attorney fees, resulting from the violation or threatened violation, or both.
(II) The remedies provided by this section are independent of, and in addition to, any other penalty or remedy established by this section.
(e) Investigation of Complaints – Prosecution of Violations. The Attorney General or the District Attorney in each judicial district shall investigate a complaint of a violation or threatened violation of this section, prosecute any person violating this section, and take actions necessary to ensure effective enforcement of this section.
(3) Amend Colo. Rev. Stat. § 13-6-411 “Limitation On Number Of Claims Filed” to add
The limitation imposed by subsection (1) of this section shall not apply to plaintiffs who file claims to enforce their rights under Colo. Rev. Stat. § 38-33.3.-101 et seq., the “Colorado Common Interest Ownership Act” (C.C.I.O.A.).
Author’s note : I make no claim that this would make it easier for homeowners as Plaintiff to sue homeonwer associations as Defendant. The intent of this proposal is to protect homeowners as Defendant from being sued by their H.O.A. corporation as Plaintiff.
Credit for this Small Claims Court proposal goes to Sherry Christensen. When she was president of the Lakeside Terrace II H.O.A. corporation from 2017 - 2019, she used Small Claims Court to collect delinquent assessments from homeowners without the use of lawyers.