Mountain Mutual Water Company -- Liens & Delinquencies

Table of Contents

1.     Charges for Service Due In 30 Days

2.     Delinquencies Are Not Expunged By Transfer of Ownership

3.     Delinquent Memberships Are Not Entitled To Vote

4.     Interest, Collection Costs, and Attorneys' Fees Owed On Delinquent Amounts

5.     Delinquent Members Are Not Entitled To Service

6.     MMWC May Sue To Recover Delinquent Amounts

7.     Delinquent Memberships May Be Forfeited

8.     MMWC Has a "Perpetual Lien" Against Any Delinquent, Non-Forfeited Membership

9.     A Lien Against a Delinquent Membership Is Not Expunged By Tax Sale or Foreclosure

10.   Forfeiture

Charges for Service Due In 30 Days

        Article VI, § 5, of the MMWC By-Laws provides that charges for service become delinquent 30 days after the date fixed for payment thereon. 

Delinquencies Are Not Expunged By Transfer of Ownership

        Memberships in MMWC are automatically transferred with sale of the lot.  See MMWC By-Laws, at Art. V, § 2.  When a lot is transferred the unpaid charges of the prior owner are not "wiped out."  The charges remain due and owing, and can be collected from either the old or the new owner.  See MMWC By-Laws, at Art. V, § 2 ("Obligations of the transferring member for unpaid assessments, charges, or other debts owed to the Corporation, including any such assessments or other charges accrued prior to a sale of the Lot for unpaid real property taxes or other liens, shall remain unimpaired by the transfer of the Lot, or the Certificate and membership.").

        Until all past due charges and amounts are paid -- whether by the old member or the new member -- the new member is not entitled to service.  See MMWC By-Laws, at Art. V, § 2 ("The Corporation shall not be obligated to supply water or water service to the new member until all obligations of the old member to the Corporation have been satisfied.  Until all assessments, charges, and other debts owed the Corporation are paid in full, the membership shall not be considered current or in good standing.").

Delinquent Memberships Are Not Entitled To Vote

        Art. II, § 10 of the By-Laws provides: "No member who is in violation of the Articles of Incorporation, these By-Laws, or rules and regulations of the Corporation, or whose membership is delinquent shall be entitled to vote at any regular or special meeting of members."

Interest, Collection Costs, and Attorneys' Fees Owed On Delinquent Amounts

        Pursuant to Art. VI, § 5, of the MMWC By-Laws, interest accrues at a rate of 1.5% per month.  Such interest may be compounded.  C.R.S. § 5-12-103(3).  Delinquent members are also obligated to pay any attorneys' fees and costs which MMWC may have incurred to collect the delinquent assessment or charges.

Delinquent Members Are Not Entitled To Service

        State law authorizes ditch companies to withhold water until all assessments are paid.  See C.R.S. § 7-42-104(3).  MMWC's Articles of Incorporation provide that "[t]he corporation may refuse to provide service to any member who is delinquent in paying any assessment, charge or other debt to the corporation, and may refuse to recognize and treat as a member any transferee of a membership until all delinquencies of the transferor have been paid."  See MMWC Art. of Incorporation, at ¶ 5.  MMWC's By-Laws, at Art. VI, § 5, provide that "[a] Member or non-member customer shall not be entitled to water, water service, to vote at meetings of members, or to be a director or officer until he/she has paid all delinquent assessments or charges...."

MMWC May Sue To Recover Delinquent Amounts

        Pursuant to C.R.S. § 7-42-104(4) and Art. VI, § 5, of the MMWC By-Laws, MMWC may sue a member for the amount due.

Delinquent Memberships May Be Forfeited

        See Forfeiture Section, below.

Liens

MMWC Has a "Perpetual Lien" Against Any Delinquent, Non-Forfeited Membership

        State law gives mutual ditch companies a "perpetual lien" against the membership -- not the lot itself -- for any and all charges owed.  See C.R.S. § 7-42-104(3) ("[S]uch corporation shall have a perpetual lien upon such shares of stock and the water rights represented by the same for any and all such assessments until the same are fully paid.").  MMWC's Articles of Incorporation likewise provide that "[t]he corporation shall have a perpetual lien upon the membership or memberships of any member for delinquent charges or assessments of any type or other debts owed by any such member to the corporation."  See MMWC Art. of Incorporation, at ¶ 5; see also MMWC By-Laws, at Art. VI, § 4.

       The lien, however, is expunged if the membership becomes forfeited.

A Lien Against a Delinquent Membership Is Not Expunged By Tax Sale or Foreclosure

        By law, a membership in a mutual ditch or reservoir company is a form of personal property.  See C.R.S. § 7-42-104(4).  Because the lien is against personal property, not against the lot, it is not defeated by a tax sale or foreclosure on the lot.

Forfeiture

        State law empowers a mutual ditch and reservoir company to "prescribe by bylaws for a forfeiture or sale of stock on failure to pay the installments or assessments that from time to time may become due."  C.R.S. § 7-42-104(3). 

        Art. VI, § 5 of MMWC's By-Laws provide that "Memberships and Certificates of any member who becomes delinquent in the payment of any assessment or other charge due the Corporation may be forfeited to the Corporation and/or sold, after demand has been made for the amount due, either in person or by written or printed notice duly mailed to the last known address of such member at least thirty days prior to the time the forfeiture is to take effect."  Any time before the forfeiture occurs, the delinquent member can prevent the forfeiture by "paying all amounts due plus all costs in the matter, including attorneys' fees."

        If you wish to allow your membership in MMWC to be forfeited, please realize that it will very likely significantly affect the value of your property.  Your lot will no longer have water service from MMWC.

        Moreover, even if you choose to let your membership be forfeited, you are prohibited -- under covenants that run with the land, among other legal impediments -- from installing your own well or water supply system.  See Amended and Consolidated Declarations of Protective Covenants of Cripple Creek Mountain Estates, dated March 16, 2005, at § 2.1(b) ("No water ... drilling ... of any kind shall be permitted within the Subdivision...."); § 2.1(f) ("No individual water supply system shall be constructed or allowed in the Subdivision.  Water will be provided and distributed in accordance with the Articles of Incorporation and By-laws of the authorized mutual water company.....").

        Importantly, MMWC is under no obligation to reinstate or sell a membership to the owner of a lot whose membership has been forfeited.  Although MMWC presently allows owners of lots with forfeited memberships to buy a membership, MMWC could discontinue that practice at any time.  A CCME lot owner who forfeits their membership risks forever forfeiting the opportunity to develop their lot.