Cli­mate shift­ing af­ter cities move to re­form law

The Denver Post - - FRONT PAGE - By John Aguilar

As state law­mak­ers take an­other crack at re­form­ing the state’s con­struc­tion-de­fects law this leg­isla­tive ses­sion, they will be do­ing so in a shift­ing le­gal en­vi­ron­ment that prom­ises to re­main in flux in the ab­sence of state ac­tion.

A dozen com­mu­ni­ties — in­clud­ing Colorado’s three largest cities — have taken ac­tion on their own to make it harder for home­own­ers to sue for faulty build­ing prac­tices. Most did so in the months fol­low­ing the leg­is­la­ture’s un­suc­cess­ful at­tempt to pass a con­struc­tion-de­fects re­form bill last spring.

And in May, the Colorado Court of Ap­peals handed down a de­ci­sion in Val­la­gio vs. Metropoli­tan Homes that but­tressed the use of ar­bi­tra­tion as an al­ter­na­tive to lit­i­ga­tion in de­fects cases. That rul­ing has been ap­pealed to the state Supreme Court.

“The land­scape is com­pli­cated,” said Sen. Jessie Ulibarri, a Demo­cratic spon­sor of last year’s Se­nate Bill 177. “It’s a dif­fer­ent land­scape than last year.”

Mean­while, there is some ques­tion as to how ef­fec­tive the var­i­ous mu­nic­i­pal mea­sures will be in lur­ing condo builders back to Colorado. Lake­wood passed the first such mea­sure in Oc­to­ber 2014 and has yet to re­ceive an ap­pli­ca­tion for a condo pro­ject.

Mayor Adam Paul said there have been many in­quiries from builders, but get­ting that ini­tial com­mit­ment has been dif­fi­cult.

“There’s some hes­i­ta­tion to be first,” he said.

Sen. Mark Sch­ef­fel, RParker, said af­ter so many years of deal­ing with the state’s con­struc­tion-de­fects law, many builders have be­come “gun-shy” about mov­ing for­ward with con­do­minium projects.

“It’s not go­ing to turn on a dime,” he said.

That’s why the sen­a­tor thinks state leg­is­la­tion on the topic of con­struc­tion de­fects is still nec­es­sary. He is help­ing craft a bill for the 2016 ses­sion, which be­gins Wed­nes­day. It is the fourth at­tempt at such leg­is­la­tion in as many years.

“Per­son­ally, I still think this is an is­sue of statewide con­cern,” Sch­ef­fel said. “This is in­cred­i­bly im­por­tant topic to the state, and the econ­omy is get­ting talked about a lot.”

A lack of condo units has caused ex­tended con­cern as hous­ing prices and rents have soared.

Ac­cord­ing to a re­port from Pa­tri­cia Sil­ver­stein, chief econ­o­mist with De­vel­op­ment Re­search Part­ners in Jef­fer­son County, only 3.4 per­cent of sin­gle­fam­ily home starts in metro Den­ver in 2015 were con­dos. Nine years ago, that share was 25 per­cent.

In down­town Den­ver, 870 town­homes or con­dos went up in 2007. That num­ber had fallen to 59 by last year, ac­cord­ing to the Down­town Den­ver Part­ner­ship.

Re­form pro­po­nents blame Colorado’s con­struc­tion-de­fects law for the condo short­age, say­ing the law makes it too easy for home­own­ers to sue over cracked foun­da­tions, leaky win­dows and other struc­tural prob­lems.

In turn, they ar­gue, in­sur­ance com­pa­nies have jacked up rates for condo builders, and builders have stayed away. Those seek­ing af­ford­able hous­ing, like young fam­i­lies in search of a starter home, have suf­fered most, they say.

Molly Fo­ley-Healy, an at­tor­ney who serves as leg­isla­tive li­ai­son for the Com­mu­nity As­so­ci­a­tions In­sti­tute’s Leg­isla­tive Ac­tion Com­mit­tee, said those push­ing for changes in Colorado’s con­struc­tion-de­fects law are mak­ing spe­cious ar­gu­ments.

She said con­dos will come back when the mar­ket calls for it. Right now, she said, apart­ments and rental prop­er­ties are com­mand­ing top dol­lar.

“As the econ­omy con­tin­ues to re­bound and hous­ing is on the up­swing, they’re go­ing to build more con­dos,” Fo­ley-Healy said. “Ob­vi­ously, de­stroy­ing home­owner rights is not the panacea to get­ting con­dos built.”

The leg­is­la­ture should leave the is­sue alone, she said.

Sch­ef­fel con­cedes that a bill this year would have to look dif­fer­ent from last year or risk de­feat again.

“We’re look­ing at dif­fer­ent ap­proaches,” said Sch­ef­fel, who wasn’t ready to di­vulge de­tails.

Last year’s bill would have made me­di­a­tion or ar­bi­tra­tion, rather than lit­i­ga­tion, the pre­ferred method of dis­pute res­o­lu­tion in con­struc­tion-de­fects cases. It also would have re­quired that a ma­jor­ity of all home­own­ers in a condo or home­own­ers as­so­ci­a­tion ap­prove any le­gal ac­tion be­fore it is taken.

House Speaker Dickey Lee Hullinghorst, D-Boul­der, was one of the top Democrats to block con­struc­tion-de­fects leg­is­la­tion last year. She is not con­vinced that an­other bill would do much to im­prove the af­ford­able hous­ing chal­lenge, but she does fear it could let builders off the hook for shabby work.

“We have to be very care­ful that we don’t in­ter­fere with the rights of peo­ple who are mak­ing one of the very big­gest in­vest­ments they will ever make — their home — that they wouldn’t have the abil­ity to get re­dress if there are se­ri­ous con­cerns,” she told a Den­ver Metro Cham­ber of Com­merce break­fast meet­ing last week.

Lead­ers of mul­ti­ple cities around the metro area, es­pe­cially those on the Re­gional Trans­porta­tion District’s bur­geon­ing com­muter rail sys­tem, say they can’t wait for the state to make the condo mar­ket healthy again.

Cen­ten­nial Mayor Cathy Noon said “we hear from our res­i­dents that own­er­ship other than sin­gle fam­ily hous­ing is very lim­ited — es­pe­cially from our ag­ing pop­u­la­tion and young pro­fes­sion­als.”

The south­ern sub­urb is the most re­cent Colorado city to em­brace con­struc­tion-de­fects re­form, pass­ing a mea­sure last month. The area hasn’t seen a condo built within its bor­ders for years.

“With lim­ited va­cant land re­main­ing in Cen­ten­nial, we needed to do what we could as a city to help pro­vide choices,” Noon said.

But just pass­ing mea­sures lo­cally doesn’t guar­an­tee they will stand up to le­gal scru­tiny.

“I ex­pect that all of th­ese lo­cal mea­sures will be chal­lenged in court,” said Bruce Likoff, a real es­tate trans­ac­tion at­tor­ney with the law firm Bryan Cave.

The ba­sis for the le­gal ar­gu­ment against cities tak­ing the mat­ter into their own hands, Likoff said, is that such ac­tion un­law­fully pre­empts state con­trol over the is­sue.

That’s just as well, said Jonathan Har­ris, pres­i­dent of Build Our Homes Right. The Den­ver res­i­dent wres­tled for years with the builder of his Five Points home, try­ing to get ma­jor struc­tural is­sues fixed.

He called the de­fects or­di­nances passed by Lake­wood, Den­ver and oth­ers “a back­door ero­sion of home­owner rights” that even­tu­ally will get struck down in the courts.

Har­ris urged state law­mak­ers not to go down the same path.

“It’s not pop­u­lar to take away peo­ple’s rights — es­pe­cially in an elec­tion year,” he said.

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