Centennial suit puts deed restrictions to the test
October 3, 2017
A judge's dismissal of most claims by the Centennial Owners' Association against local government agencies hardly means the case is a lost cause, a lawyer for the association said Tuesday.
Instead, said attorney David Bovino, co-counsel for the Centennial plaintiff, the most critical aspect of the lawsuit has survived a judge's scrutiny and could change the way the affordable-housing system is run locally and statewide.
The way Bovino interprets the 36-page order delivered Monday by District Judge Anne K. Norrdin, Centennial's claim to partially or fully revoke the deed restrictions among its 95 unit owners remains alive and can proceed through litigation. If Centennial prevails on that claim — which could result in a partial or full rescission of the deed restrictions — a precedent would be set in Colorado affordable housing, he said.
"That's the problem with the whole system statewide," Bovino said, arguing that deed restrictions on employee housing deter a homeowner from making a capital investment because they can resell at only 3 percent appreciation, while the money spent on structural improvements or repairs cannot be included in the resale price. The Aspen-Pitkin County Housing Authority's 10 percent limit on capital improvements to deed-restricted homes also doesn't apply to such major structural repairs as the situation at Centennial.
"That was always on the table," Aspen Pitkin-County Authority attorney Thomas Smith said of the claim for the rescission of the deed restriction. "Things aren't going well for them so far, and they want this determination so at least at this point they can try to make a case. … It doesn't mean that they win by any stretch, nor does it mean that the defense wins."
Smith, who is not the lead attorney on the case, said Tuesday he was trying to digest the judge's ruling as it pertains to the deed-restriction dispute and what it means moving forward. He referred questions to Boulder attorney Josh Marks, who is representing APCHA, Pitkin County and the city of Aspen in its defense. Marks was in trial and could not be reached Tuesday.
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Unit owners at Centennial sued in December 2015 in Pitkin County District Court, accusing the defendants of holding the owners responsible for more than $10 million in structural repairs needed in the complex's common elements to alleviate "dangerous levels of potentially toxic mold," among other deficiencies.
Prior to the suit, a series of inspections commissioned by the city and county yielded cost estimates ranging from $3.5 million to $10 million to repair the damage, the suit says. In March 2014, the city concluded that each owner should contribute upward of $40,000 toward making the fixes, leading to the litigation.
Located at the foot of Smuggler Mountain, the Centennial complex was built in 1985 as part of a public-private venture between local government and developer Sam Brown's World Class Housing business. Of its 148 affordable-housing units, 95 are deed-restricted for ownership and 56 are rentals. The seven-building complex is governed by the housing authority.
Norrin's ruling held that the defendants are protected by the Colorado Governmental Immunity Act concerning most claims by Centennial, essentially absolving it from any financial liability. Norrin, quoting a previous argument by the defendants, said that holding government financially accountable for those claims "would essentially mean that every housing authority provides everyone who purchases an affordable-housing unit with a free, unwritten insurance policy covering the cost of any repair to the property, regardless of the cause."
But lifting the deed restriction, in part or in full, would be the fair thing to do for Centennial, its attorneys argued in previous pleadings. It also would, effectively, elevate those units to free-market status.
"(Centennial) recognizes that rescission of the deed restrictions could result in a perceived windfall," attorneys Bovino and Peter Thomas wrote in a May 3, 2016, brief that is part of the suit, which was filed in Pitkin County District Court. "(Centennial) isn't asking to be unjustly enriched; (Centennial) merely wants to ensure that defendants do not wield the deed restrictions and guidelines in a manner which defeats the reasonable expectations of persons who live in affordable housing."
Centennial's attorneys also have argued that deed restrictions and housing guidelines violate state and public policy because of what they called "unconscionable terms" placed on the unit owners.
Because that was not a tort claim — the judge having dismissed all tort-related claims — it "is not barred by the (Colorado Governmental Immunity Act)," Norrin's order says.
Smith said, "Ninety percent of the claims were thrown out, but how we resolve the claim for rescission based on public policy is something we'll have to knock our heads over."
Bovino said the judge's decision is a win for Centennial because it allows them to advocate, through litigation, for changes to the employee-housing structure that puts owners at a disadvantage.
"With the system here, especially with Centennial, it's impossible," he said. "Basically the owners get to use the analogy that though they were buying a Porsche 911, what they were getting is a broken-down Chevy. Now they're expected to repair their vehicle just to get it running."