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The power to raise funds reasonably necessary to carry out the functions of a common interest community will be implied if not expressly granted by the declaration. Therefore, even in the absence of an express covenant mandating the payment of assessments, a homeowner association has the implied power to levy assessments against lot owners in order to raise the necessary funds to maintain the common areas of the subdivision.
In 1972, defendant Evergreen Highlands Association ("Association") recorded protective covenants governing the Evergreen Highlands Subdivision ("Subdivision"). The covenants allowed 75 percent of the property owners to "change or modify" any restriction. In 1982, an amendment to the covenants indicated that the "change or modify" provision in the 1972 covenants allowed for "amendment" of the protective covenants. In 1986, plaintiff Robert A. West purchased property within the Subdivision, which was subject to the 1972 and 1982 covenants. In 1995, the Association recorded an instrument to add additional protective covenants that required all property owners in the Subdivision to be members of the association, permitted the Association to assess dues against the owners, and gave the Association the power to subject property to a lien for the nonpayment of dues. When West refused to pay the dues, the Association notified him that it would place a lien against his property. West thereafter filed a lawsuit against the Association in Colorado state court seeking to have the 1995 document declared invalid. The trial court ruled in favor of the Association. On appeal, the court of appeals reversed the trial court's judgment, holding that the 1972 amendment provision only allowed changes to the existing covenants, not the creation and addition of new covenants that had no relation to the existing covenants. The state supreme court granted the Association a writ of certiorari.
Was the Association's 1995 amendment valid and binding on West and other lot owners in the Subdivision?
The Supreme Court of Colorado reversed the appellate court's judgment and remanded the case to that court with directions to return it to the trial court for calculation of the Association's damages. The court held that the addition of the new article to the covenants fell within the permissible scope of the modification clause of the original 1972 covenants. The court further held that even in the absence of an express covenant, the declarations for the Subdivision were sufficient to create a common interest community by implication with the concomitant power to impose mandatory dues on lot owners to pay for the maintenance of common areas of the Subdivision.