Denver v. Welcome

• Court: Colorado Court of Appeals
• Decided: April 30, 2026
• Docket: 25CA0854
• Status: Unpublished

Opinion

25CA0854 Denver v Welcome 04-30-2026

COLORADO COURT OF APPEALS

Court of Appeals No. 25CA0854 City and County of Denver District Court No. 24CV31083 Honorable Mark T. Bailey, Judge

City and County of Denver, a home rule City and municipal corporation,

Plaintiff-Appellee,

v.

Welcome To Realty 401k PSP, a Colorado Trust,

Defendant-Appellant.

JUDGMENT AFFIRMED

Division VII Opinion by JUDGE JOHNSON Pawar and Gomez, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e) Announced April 30, 2026

Miko Brown, City Attorney, Michele A. Horn, Senior Assistant City Attorney, Adam Hernandez, Assistant City Attorney, Denver, Colorado, for Plaintiff- Appellee

Hatch Ray Olsen Conant LLC, Christopher J. Conant, Denver, Colorado, for Defendant-Appellant ¶1 Defendant, Welcome to Realty, LLC 401k PSP (Welcome),

appeals the district court’s judgment in favor of plaintiff, the City

and County of Denver (the City). Welcome purchased real property

at a sheriff’s sale and contends that an affordable housing covenant

requiring only income-eligible persons to own the home was

extinguished as part of the foreclosure action. We disagree and,

therefore, affirm.

I. Background

¶2 The Town Center Metro District (District), located in Denver,

was created in 1983 pursuant to sections 32-1-101 to -1807, C.R.S.

2025. In 2002, the City enacted an ordinance to establish a supply

of moderately priced dwelling units (affordable units). Denver Rev.

Mun. Code § 27-101. The ordinance provides that housing

developments meeting certain requirements must designate a

portion of units as affordable units. See id. § 27-105. The

ordinance also places restrictions on the affordable units, such as

maximum sales price, ownership eligibility based on income, and

rental prohibitions (affordability restrictions). See id. §§ 27-103(v),

-109 to -111.

1 ¶3 In the early 2000s, a developer constructed a housing

development within the District. The developer designated certain

homes as affordable units, including the property at issue. The

property’s status as an affordable unit subject to the ordinance was

memorialized in a covenant (affordability covenant) recorded with

the Denver Clerk and Recorder in September 2004 and re-recorded

in March 2005. In addition to the affordability covenant, the

property was subject to the District’s enforcement covenant (the

District covenant), which included the District’s authority to charge

certain fees and rates under section 32-1-1001(1)(j)(I), C.R.S. 2021.1

¶4 In 2005, the property was sold to Gildardo Gonzalez, Jr.

(Gonzalez). During the next several years of Gonzalez’s ownership,

the District enforced the District covenant against him and

assessed fines relating to his failure to maintain landscaping and

1 The General Assembly has since amended this provision, placing

limits on special district boards concerning the types of unpaid assessments that might be subject to foreclosure and imposing certain procedural due process requirements on the board before initiating foreclosure proceedings when authorized. See Ch. 117, secs. 1, 3, §§ 32-1-1001, -1004.5, 2024 Colo. Sess. Laws 377-79; Ch. 230, sec. 2, § 32-1-1001, 2024 Colo. Sess. Laws 1412-13. These amendments are not at issue in this case, and throughout this opinion we apply section 32-1-1001, C.R.S. 2021, which was the version in effect at the time of the foreclosure action.

2 fencing. Gonzalez did not pay the fines. As a result, the District

recorded a statutory lien against the property in 2018. In 2021, the

District initiated an action to foreclose on the lien (foreclosure

action). The district court in the foreclosure action issued a decree

of foreclosure. The sheriff held a foreclosure sale and Welcome

purchased the property.

¶5 The City then brought this action against Welcome,

contending that the property remained subject to the affordability

covenant and that because Welcome was not an “eligible

household,” it could not own the property. Welcome argued that

the affordability covenant was subordinate to the District’s lien and

was extinguished in the foreclosure action. The district court

agreed with the City that the property remained subject to the

affordability covenant, determined that Welcome was therefore

ineligible to own the property, and entered judgment in favor of the

City.

¶6 Welcome appeals and asserts that (1) the district court erred

by holding that the District’s lien was subordinate to the

affordability covenant; (2) the City’s claims against Welcome were

an impermissible collateral attack against the foreclosure decree

3 and the foreclosure statutes preempt the City’s ordinance; and

(3) the term of the affordability restrictions should not have been

extended.

II. Priority Status of the District’s Lien

¶7 Welcome raises separate arguments but we distill them to this

main contention: The district court erred by distinguishing or

limiting Wasson v. Hogenson, 583 P.2d 914 (Colo. 1978) — a case

that, according to Welcome, held a special district’s lien enjoys

superior status to all other liens — because, if read properly, the

holding compels the conclusion that the District’s lien was senior to

the affordability covenant, resulting in its extinguishment as part of

the foreclosure action.2 We are not persuaded.

A. Standard of Review

¶8 A district court’s interpretation of statutes and case law is a

question of law we review de novo. See Simpson v. Bijou Irrigation

Co., 69 P.3d 50, 58 (Colo. 2003).

2 Welcome uses the term “super-priority” to argue that the District’s

lien is superior to the affordability covenant, but we do not find usage of that term in the case law or relevant statutes that Welcome relies on.

4 B. Lien Priority and Wasson

¶9 No party disputes that the District is a special district. At the

time of the foreclosure action and under section 32-1-1001(1)(j)(I),

the board of a special district had the authority “[t]o fix and from

time to time to increase or decrease fees, rates, tolls, penalties, or

charges for services, programs, or facilities furnished by the special

district.” That provision also stated that “[u]ntil paid, all such fees,

rates, tolls, penalties, or charges shall constitute a perpetual lien on

and against the property served, and any such lien may be

foreclosed in the same manner as provided by the laws of this state

for the foreclosure of mechanics’ liens.” Id. The mechanics’ lien

statute states that liens “relate back to the time of the

commencement of work” and that the lien shall have priority over

junior liens and encumbrances. § 38-22-106(1), C.R.S. 2025. And

the foreclosure statute states that after a foreclosure decree enters,

title to the property vests “free and clear of all liens and

encumbrances junior to the lien foreclosed.” § 38-38-501(1), C.R.S.

2025; see also Reishus v. Bullmasters, LLC, 2016 COA 82, ¶ 37 (a

real covenant is a form of encumbrance on land that must touch

and concern the land, which it does “if it ‘closely relate[s] to the

5 land, its use, or its enjoyment’” (quoting Cloud v. Ass’n of Owners,

Satellite Apartment Bldg., Inc., 857 P.2d 435, 440 (Colo. App.

1992))).

¶ 10 All this legal authority leads Welcome to rely on Wasson, 583

P.2d at 917 and its progeny, North Washington Water & Sanitation

District v. Majestic Savings & Loan Ass’n, 594 P.2d 599 (Colo. App.

1979), and Skyland Metropolitan District v. Mountain West

Enterprise, LLC, 184 P.3d 106 (Colo. App. 2007). Those cases,

Welcome argues, stand for the proposition that all special district

liens under section 32-1-1001(1)(j)(I) are in the nature of general tax

liens, so they are superior to all other liens or encumbrances.

Indeed, it argues that, regardless of the type of special district and

assessments at issue, the District lien is equivalent to a general tax

lien and thus superior to the affordability covenant.

¶ 11 We agree with the district court, which held that Wasson and

its progeny are specific to water and sanitation districts — not

necessarily all special districts — so the District’s lien filed against

the property was not superior to the affordability covenant. We

reach this conclusion for three reasons.

6 ¶ 12 First, Welcome reads Wasson and its progeny too broadly, as

nothing in the cases suggest that all special district assessments

enjoy the superior status afforded those of water and sanitation

districts.

¶ 13 The issue in Wasson was whether a deed of trust was junior in

priority to a water and sanitation district’s lien for sewer installation

charges incurred even though the private deed of trust was

recorded before installation of the sewer service. 583 P.2d at 915.

The supreme court concluded that the water and sanitation

district’s lien was senior in priority because the owners of the home

took their interests with the knowledge that the property was not

inhabitable without installation of water and sewer services and the

water district had an interest in collecting fees related to its

installation services since the district was organized in 1961. Id. at

919. As a result, the Wasson court equated charges for installation

of the sewer services with an assessment “in the nature of taxes”

because the services enhanced the value of the property. Id. at 917,

919. In reaching this conclusion, the court also noted that allowing

the water and sanitation district to foreclose on its lien in the same

manner as a mechanic’s lien fulfils the equitable consideration that

7 “one who has enhanced the value of property by his labor or

material is entitled to a superior lien if he follows certain prescribed

procedures.” Id. at 919 (emphasis added).

¶ 14 North Washington applied Wasson, holding that the water and

sewer tap fees at issue in that case were also in the nature of taxes

and thus superior to a deed of trust executed by the owners in favor

of a mortgage company. See N. Washington, 594 P.2d at 601. And

Skyland held that because the water and sanitation district charges

at issue were in the nature of taxes, the district’s lien was already

perfected, so notice on the developer was not required. See

Skyland, 184 P.3d at 116. We read nothing in these cases to

suggest that the supreme court or divisions of this court considered

— much less held — that all special district liens are similar to tax

liens and should be superior to other types of encumbrances.

¶ 15 Second, we decline to extend Wasson and its progeny beyond

the water and sanitation district context because not all special

districts, even if they impose assessments on property owners, have

the same purpose. As noted above, Wasson placed significant

emphasis on the fact that the water and sanitation district worked

8 on the property, so even though the deed of trust was recorded first,

it was unequitable for the district’s lien to be junior.

¶ 16 Here, the District is a metropolitan district that engages in

enforcement of the District covenant. The District assesses fines

against properties in the community if the homeowners, among

other things, fail to maintain landscaping and fencing, engage in

offensive activity, or lack enclosures to shelter unsightly equipment

and objects.3 See § 32-1-1001(1)(j)(I).

¶ 17 According to the ledger of fines imposed against Gonzalez for

enforcement of the District covenant, none of the fines were in

connection with the District conducting work on Gonzalez’s

property for its improvement. Although the District would likely

argue that its covenant provisions are intended to improve property

value, such neighborhood-improvement-type restrictions are

markedly different from the work undertaken by the water and

sanitation districts at issue in Wasson and its progeny, which

3 The district court’s judgment referenced documents from the

foreclosure action. We take judicial notice of those documents as they are relevant to our analysis. See Harriman v. Cabela’s Inc., 2016 COA 43, ¶ 64 (noting that appellate courts may take judicial notice of court records in related proceedings under CRE 201(f)).

9 directly improved the property. In short, the District’s fines in this

case are wholly different from and not in the nature of a general tax

as contemplated by Wasson.

¶ 18 Finally, based on a plain reading of section 32-1-1001(1)(j)(I),

which at the time authorized the District to foreclose on a lien in

the manner of a mechanic’s lien without further procedures, section

38-22-106(1) requires us to look at when the lien came into

existence from “the time of the commencement of work.” See

Castillo v. STEM Sch. Highlands Ranch, 2025 COA 88, ¶ 22 (when

interpreting statutes, a court must apply the words in accordance

with their plain and ordinary meaning). The affordability covenant

was recorded in 2004. The District assessed its first fine against

Gonzalez in 2015. There is no evidence that the District did any

“work” on Gonzalez’s property dating back to when the District was

formed in 1983. Given these facts, the affordability covenant is

unequivocally senior in priority to the District’s lien because the

District’s “commencement of work” as it relates to the District

covenant occurred eleven years after the affordability covenant was

recorded.

10 ¶ 19 Therefore, the district court did not err by holding that the

affordability covenant was not extinguished as part of the

foreclosure action.

III. Collateral Attack and Preemption

¶ 20 Welcome asserts that the City’s lawsuit is a collateral attack

against the foreclosure decree and that its ordinance was

preempted by state law. We disagree.

¶ 21 Whether a claim collaterally attacks a judgment is a question

of law we review de novo. McClure v. JP Morgan Chase Bank NA,

2015 COA 117, ¶ 25, aff’d, 2017 CO 22. Similarly, whether state

law preempts a municipal ordinance is a question of law reviewed

de novo. Webb v. City of Black Hawk, 2013 CO 9, ¶ 16.

B. Analysis

¶ 22 Welcome asserts that the City’s claims are an impermissible

collateral attack on the foreclosure decree because the decree was a

complete adjudication of the rights of all parties, the decree did not

limit who could purchase the property, and the City’s enforcement

of the affordability covenant conflicts with the foreclosure decree.

11 ¶ 23 A collateral attack on a district court judgment is “an attempt

to avoid, defeat, or evade it, or deny its force and effect, in some

incidental proceeding not provided by law.” Brennan v. Grover, 404

P.2d 544, 546 (Colo. 1965) (quoting 49 C.J.S. Judgments § 408b

(1947)).

¶ 24 The affordability covenant does not challenge the foreclosure

decree. Local governments have the authority to regulate land use,

including regulating the development of affordable housing units.

See § 29-20-104(1)(e.5), C.R.S. 2025. While the affordability

covenant may limit who can ultimately own the property, it does not

attempt to avoid, defeat, evade, or deny the force and effect of the

foreclosure decree by limiting who could bid on the property. The

City’s claim seeking to enforce the affordability covenant is a

separate cause of action that arose based on the actions taken by

Welcome after entry of the foreclosure decree. See Emerick v.

Greene, 575 P.2d 441, 443 (Colo. App. 1977) (holding that when a

party’s claim does not challenge a foreclosure decree itself but “is

dependent upon [an] action” following entry of a foreclosure decree,

“the present action is not a collateral attack upon the foreclosure

decree”). Therefore, we reject Welcome’s collateral attack argument.

12 ¶ 25 Next, Welcome asserts that Colorado’s foreclosure statutes do

not impose affordability restrictions, so those statutes preempt the

City’s affordability restrictions ordinance.

¶ 26 Affordable housing “is a matter of mixed statewide and local

concern.” § 29-35-201(2)(c), C.R.S. 2025. “[I]n matters of mixed

state and local concern, local ordinances may coexist with state

statutes as long as the local ordinances do not conflict with the

state statutes.” City of Fort Collins v. Colo. Oil & Gas Ass’n, 2016

CO 28, ¶ 14. A state law may preempt a local ordinance “expressly,

impliedly, or because of an operational conflict.” Id. at ¶ 18.

Express preemption occurs when the legislature “clearly and

unequivocally states its intent to prohibit a local government from

exercising its authority over the subject matter at issue.” Id. at

¶ 19. Preemption may be implied when the legislative intent is to

occupy a given field. Id. at ¶ 20. And preemption by operational

conflict occurs when “effectuation of a local interest would

materially impede or destroy a state interest.” Id. at ¶ 21.

¶ 27 Colorado foreclosure statutes do not preempt local affordable

housing ordinances. It is true that Colorado foreclosure statutes do

not impose affordability restrictions, but likewise, those same

13 statutes do not prohibit such local restrictions, either expressly or

impliedly. Nor is there any indication that the General Assembly

intended the foreclosure statutes to occupy the field of affordable

housing. And enforcing affordability restrictions does not

“materially impede or destroy” the state’s interest in the foreclosure

process because the main goal of foreclosing on properties is still

effectuated.

¶ 28 When a property subject to an affordability restriction is

subject to foreclosure, nothing in the foreclosure statutes prohibits

that process. The property can still be foreclosed on and sold to

“the highest bidder” subject to any recorded affordability

restrictions. Welcome bid on the property with the risk that it

might not ultimately be able to own it if it did not meet the

affordability covenant requirements. And as noted above, that

covenant was recorded with the Clerk and County Recorder, so

Welcome had notice of these restrictions. Thus, we reject

Welcome’s argument on this basis as well.

IV. The Term of Affordability Restrictions

¶ 29 Welcome argues that the district court erred by extending the

City’s term of affordability restrictions. We disagree.

14 A. Standard of Review

¶ 30 The interpretation of a municipal ordinance is a question of

law we review de novo. See City of Golden v. Sodexo Am., LLC, 2019

CO 38, ¶ 22.

¶ 31 The affordability covenant states that the restrictions shall be

implemented for a twenty-year term. If there is a period of time

during that term when the affordability restrictions are violated, the

City’s ordinance provides a remedy by which the City may recapture

a lost term of affordability. See Denver Rev. Mun. Code § 27-

116(g)(3). In this situation, the affordability restrictions would have

expired on May 27, 2025. Welcome argues that because it allowed

individuals to reside in the property rent-free through trial in this

case held March 3, 2025, there was never a period of time when the

affordability restriction was violated. While not stated explicitly in

the briefs, we presume that Welcome raises this argument because,

if the affordability term is not extended, it ostensibly could still own

the property because the property would no longer be subject to the

affordability covenant.

15 ¶ 32 The district court afforded the City an extension of the

affordability restrictions for the period of time between the

foreclosure sale and when Welcome sells the property to an eligible

buyer. We discern no error in the court’s ruling.

¶ 33 The City argues, and we agree, that because Welcome was

never qualified as an “eligible household” by the City’s agency that

manages affordable housing, simply having people live in the

property rent free did not comply with the provisions of the

affordability covenant. Thus, the affordability covenant has not

been complied with since Welcome purchased the property on

December 2, 2021. The City was entitled to recapture that period of

time to ensure that the property was made available to an eligible

resident for the full affordability covenant period.

¶ 34 Welcome’s interpretation of the affordability restrictions is

flawed. Section 2.1(q) of the affordability covenant states that an

“eligible household” is one that owns and occupies the household as

a primary residence. Welcome owns the property but never

occupied it as its primary residence and is therefore not an eligible

household. Accordingly, Welcome’s ownership of the property

16 constitutes a lost term of affordability that the district court

properly determined the City was entitled to recapture.

V. Attorney Fees

¶ 35 Welcome requests that, if we reverse the district court’s

judgment, we award it its prevailing-party attorney fees and costs

pursuant to section 6.7 of the affordability covenant. Because we

affirm the district court’s judgment, we deny Welcome’s request.

VI. Conclusion

¶ 36 The district court’s judgment is affirmed.

JUDGE PAWAR and JUDGE GOMEZ concur.