HOA in rural Colorado community files for bankruptcy amid ongoing lawsuit from homeowners

CBS News

a day ago

A homeowner's association in a rural Brighton community has filed for bankruptcy in the wake of increasing legal fees associated with an ongoing lawsuit.
"It's been frustrating. It's been aggravating," said Edie Apke.
Apke's home in the Todd Creek Farms subdivision is one of 21 properties represented in what had been an ongoing lawsuit against their homeowner's association since 2023. The plaintiffs allege the HOA has been violating its fiduciary duties—the legal and ethical obligation to act in the best interest of the HOA and its members.
The HOA manages 370 lots across 750 acres.
"The straw that broke the camel's back ultimately was what we call a swap of terms," said Attorney Peter Towsky, who is representing the homeowners in this lawsuit. In November of 2022, the president and another board member resigned, and three remaining board members actually appointed them to each other's terms and so that effectively extended the board president's term by two years and allowed him to avoid an election with the HOA."
Over the past two years, the HOA has tried to fend off accusations that its board president, Jason Pardikes, had connections to a landscaping service that were not publicly disclosed.
The lawsuit alleges Pardikes was financially benefiting from using Method Landscaping as the community's contracted landscaping service.
"I felt there were things going on that weren't right," said Apke.
Meanwhile, Pardikes shared multiple independent audited financial reports, which he says show no abnormalities or evidence of financial misconduct.
In his affidavit, the principal for Method Landscaping claimed that at no point has Pardikes been a member, director, or otherwise received or been entitled to any benefit from the company's business with the HOA.
"You cannot have an undisclosed connection to a company with which your company is contracted. You cannot benefit from a third-party contractor," said Towsky.
Towsky and his clients claim they were close to getting the answers they needed when they subpoenaed Pardikes and Method Landscaping's bank records.
That is, until July 15, when they received notice that the HOA filed for bankruptcy.
"It's exceedingly rare for an HOA in any state, especially Colorado, to file for bankruptcy," said Towsky.
The HOA board sent several emails to residents in the Todd Creek Farms community explaining their reasoning for filing for Chapter 11 bankruptcy:
The board's action to file Chapter 11 bankruptcy was a strategic move designed to end the lawsuit and stop the financial drain.
To be clear: this filing was not due to mismanagement, lack of funds, or unpaid vendor obligations. It was due to the unpredictable and uninsurable legal risk posed by the very lawsuit Ms. Apke leads. We can't explain why Ms. Apke is so upset that neither the community nor her fellow plaintiffs would have to continue paying for a never-ending lawsuit, and we're obligated to make sure the board's decision-making process is clear for homeowners.
Since 2023, the HOA board says this lawsuit has cost over $800,000 in legal defense fees and could continue to negatively impact the community if it is dragged out.
Apke and the rest of Towsky's clients believe they would have been able to hold the board and HOA president accountable for allegedly mishandling their fiduciary duties. With this bankruptcy filing, however, the future of their lawsuit is up in the air.
"At this point, the bankruptcy court is ultimately going to have to determine whether or not this bankruptcy petition was filed legitimately," said Towksy, "or, if this is a bad faith filing strictly to end a lawsuit, and Jason Pardikes' attempt to avoid accountability."
CBS Colorado reached out to Pardikes to speak on the record about the bankruptcy filing.
Pardikes initially agreed, but then declined to provide a comment hours before a scheduled interview.
Instead, he shared a statement on behalf of the board.
To Our Community and Creditors:
The Todd Creek Farms HOA Board of Directors has made the decision to file for Chapter 11 bankruptcy protection to address financial challenges and ensure the community's long-term stability.
While we are unable to grant interviews at this time, we are issuing this statement in fairness to our homeowners and creditors, whom we serve directly.
This restructuring will resolve the Apke lawsuit, as those claims are now part of the bankruptcy estate. Our goal is to end the litigation through this process, protecting homeowners from damages while restructuring our obligations responsibly.
Key Points for Clarity:
Services continue uninterrupted: Maintenance, and amenities remain operational.
Homeowner protections prioritized: Assessments will be managed carefully to minimize impacts.
Transparency upheld: Updates will be provided as the court process advances.
We regret any concern this filing may cause and appreciate the community's understanding as we work toward a resolution.
Roughly 5% of the entire HOA community make up the plaintiffs in this lawsuit, and the HOA board claims that over 53% of homeowners signed a petition to end the legal battle.
Apke and other residents feel their concerns are in the best interest of the HOA as a whole, and say they just want to see a new group of members take over the board.
"If they're innocent, then why spend nearly $1 million over the course of 27 months to defend a lawsuit that you can end with bank records," said Towsky.