Canyons Resort filed a complaint Feb. 28 against the individual owners of condominiums in the resort's Grand Summit Hotel - over 600 of them.
The move comes over two years into litigation at 3rd District Court in Silver Summit between the Grand Summit Resort Hotel Owners Association and ASC Utah, LLC, doing business as the Canyons.
The suit revolves around a dispute over the way in which common area assessments are calculated between the residential owners and the commercial owner (i.e., the Canyons) of various units and spaces within the Grand Summit.
From the Grand Summit's inception in 2000 to 2008, assessment fees for each owner, including the Canyons, were calculated according to an exhibit in the hotel's condominium declaration - its founding document. That exhibit breaks down what the assessments are for each and every unit in the hotel.
The Grand Summit has over 200 individual condominium units, divided into quartershare units. It also has "an 87,450 square foot parking garage and 69,240 feet of interior commercial space," according to the complaint.
"In 2008, it was discovered," according to the complaint, that assessments had been calculated and paid for eight years in an incorrect manner. According to one section of the declaration, assessments were to be calculated according to "total par value" while the assessments-breakdown exhibit to the declaration calculates assessments based on "total square footage."
Canyons contends that the Grand Summit HOA, via its board, was made aware of the conflicting language in the declaration at the time of its discovery and that it "agreed that dues for common elements from that point forward would be based upon total par value, not square footage," according to the complaint.
The result of the switch? "Instead of roughly 42% of the association's expenses, the Canyons begin paying roughly one quarter of the common expenses, or roughly 25%. In short, roughly 17% of the common area expenses were shifted to residential unit owners in proportion to their percentage interests in the association, as calculated using par value," according to an opinion from the HOA's counsel, John Morris, after the HOA sought legal advice in late 2012.
The HOA also contests the manner in which the decision was communicated to owners.
"It is doubtful that any owner reading the March 24, 2008 meeting minutes would have received meaningful notice that the percentage interests in Exhibit B were being abandoned and substituted with unrecorded percentages," reads Morris' 2012 opinion.
The lawsuit also involved conflict over the membership of the HOA's board. Several quartershare owners who were displeased with the actions of the board's members formed an ad hoc committee in 2011 to attempt to change the board's appointees.
The committee set up a website, "Grand Summit HOA Owner Action Committee," in order to communicate with other quartershare owners.
The committee was successful in getting several new members appointed to the board and in late 2012, "the newly comprised HOA Board voted to adopt a budget for fiscal year 2012-13 that allocated common dues based upon square footage instead of par value," according to the complaint.
Soon after, the Canyons initiated litigation, which includes claims against the board members for improperly advising quartershare owners "to not sign rental management agreements with Plaintiff Canyons," according to the complaint.
Such rental management agreements are made directly between the individual owners and the managing company (now Vail). Canyons insists that the board members improperly interfered in the agreements.
Involving the owners
None of the parties involved in the lawsuit appear pleased with the fact that 600-plus owners had to be brought into the suit individually last month. Properly serving and bringing so many parties into a lawsuit is a logistical nightmare.
"We apologize for having to inconvenience you by naming you in this case," reads a Feb. 28 letter from John Lund, who is representing Canyons in the lawsuit, to the individual owners. Lund quotes Judge Ryan Harris as saying he was "loathe" to bring in the individuals, but that it is required if the suit's declaratory judgment claim is to move forward.
Morris appears equally unhappy with the development, saying that the HOA "did everything possible to keep the owners out of the lawsuit."
Settlement a possibility
Both sides appear willing to settle. "Our client is willing to compromise in order to reach a resolution," Lund wrote in his Feb. 28th letter.
"There are settlement conversations ongoing and the [HOA] is very eager to settle and certainly willing to compromise," Morris confirmed.
The sticking points in those settlement talks include determining what the calculation of assessments going forward will be and agreeing on who underpaid/overpaid assessments in the past -- a figure that could reach millions of dollars.
Note: This article has edited to remove an incorrect reference to "a parallel Grand Summit lawsuit."