Denver Construction Defect Reform Infographic

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The State of Colorado is set to upend its current construction defect regime with a new law designed to make filing lawsuits over incompetent and defective building practices more difficult, Construction Dive reports.

Narrowing Colorado’s Construction Defect Laws

Today, all it takes to sue a developer over water damage or faulty stucco construction is the go-ahead from a condo’s homeowner’s association board. None of the condo’s other residents need to give their consent, or even be consulted. That’s put a strain on relationships, supporters of House Bill 17-1279 say, and made it hard for condo owners to refinance or sell their units. Meanwhile, insurance costs for developers are rising and new condo starts have stalled.

HB 17-1279 is meant to reverse these economic trends, relieving some of the pressure on condo developers who have been scared away from Denver and the surrounding areas. Lawsuits for construction defects will now be put to a vote, taking the opinions of every unit owner into account. An informational meeting, required prior to a suit’s commencement, will allow homeowners to air their grievances and give developers an opportunity to respond.

Putting Litigation To A Vote

Here’s how the Colorado General Assembly outlines the new law’s requirements, which must be met before a homeowners’ association files a construction defect lawsuit:

  • “Notify all unit owners and the developer or builder against whom the lawsuit is being considered;
  • Call a meeting at which the executive board and the developer or builder will have an opportunity to present relevant facts and arguments and the developer or builder may, but is not required to, make an offer to remedy the defect; and
  • Obtain the approval of a majority of the unit owners after giving them detailed disclosures about the lawsuit and its potential costs and benefits.”

There’s little doubt that House Bill 17-1279 will become law in Colorado. The bill just passed the State’s Senate, after having been enacted by the House of Representatives with bipartisan support in April. It will now reach the desk of Democratic Governor John Hickenlooper, the Vail Daily reports, an ardent supporter of the statute’s passage.

Colorado’s Housing Market Is Tanking

Condominium GraphicReforming construction defect laws probably isn’t on most people’s radar, but it’s been a highly contentious issue in Colorado for years. That’s especially true in Denver, where apartment building construction is up but new condominium starts are almost nonexistent.

Supporters of HB 17-1279, like Kathie Barstnar, a representative for the Homeownership Opportunity Alliance, say developers have become leery of Denver’s housing market. More accurately, builders are wary of wandering unprotected into Colorado’s legal system. “Developers were realizing it wasn’t a matter [of] if they would be sued,” Barstnar told Denver’s ABC7, “it was a matter of when they would be sued.”

A lack of supply in Colorado’s housing market is certainly hurting potential homeowners. As the Denver Post reports, the State reached an “affordability ceiling” in 2016, as housing prices and mortgage rates skyrocketed to their highest levels in nine years. Condominium development has bottomed out. In 2005, condos made up nearly 20% of Colorado’s housing market. Today, that proportion is around 2% or 3%.

For many residents, home ownership appeared out of reach. In the Denver metro area, housing prices have now surpassed their previous peak, which was reached during the housing bubble that exploded spectacularly to cause the Great Recession.

Lawsuit Time Limit: Discord, Then Compromise

Contract GraphicNew language sent the State’s current legislation swiftly through Congress, which likely reflects the grim reality of Colorado’s housing market. It also represents a significant turnaround in the legislature. Just two months ago, proponents of construction defect reform were almost ready to concede defeat, after a series of bipartisan talks failed to find common ground. Similar proposals have been burning out in Colorado’s congress for the last five years.

At the center of this struggle was a single clause, intended to alter the State’s statute of limitations. An earlier version of the bill would have paused this legal time limit for up to 120 days, giving homeowners associations more time to discuss and vote on their legal options. After developers raised concerns over providing potential litigants with too much leeway, the tolling period was shortened to 90 days, which is where the legislation now stands.

Bipartisan Cooperation Finds Happy Medium

Neither side of the debate believes that HB 17-1279 is perfect, but both supporters and opponents have hailed the law’s passage as a breakthrough in bipartisan collaboration.

While advocates for homeowners’ rights aren’t happy about making it tougher to file suit, they aren’t particularly discouraged, either. “Even though this bill […] isn’t our ideal solution[,]” says Suzanne Leff, “we believe it does strike a balance that is fair to homeowners, their communities, builders and developers.” Leff works as a spokesperson for the Community Associations Institute, which represents homeowners and homeowners’ associations.

Governor John Hickenlooper was less moderate in his enthusiasm in an interview with the Colorado Springs Gazette. “Oh, happy day!” Hickenlooper said. “It really does show that if people are willing to listen hard enough to the other side and stick with it and then listen even harder than they had before, you can solve problems.”