Construction-defects reform bills will benefit builders and owners.
This could be the year that Colorado stops talking about construction defects tort reform — the problem of too many frivolous lawsuits being filed against builders for flaws in construction — and move on to other pressing issues in the state.
Lawmakers are tantalizingly close to passing two bills that represent considerable compromise on the issue. House Bill 1279 and Senate Bill 45 could curb predatory lawsuits that have cropped up under Colorado laws. The system is so broken that developers have almost stopped building multifamily units that are for sale and instead are building apartments or other rental units to avoid costly litigation and costly liability insurance.
We’ve already urged lawmakers to approve SB 45 which would allow a judge to proportionally assign responsibility for defense costs and potential awards based on actual responsibility for the flaw. Believe it or not, that doesn’t happen now. If the defect is leaky windows, the painter and landscape architect share the same responsibility for court costs as the general contractor and the window installer. It’s completely nonsensical.
SB 45 has been awaiting a second committee hearing in the Senate for several weeks now, despite bipartisan support from Senate President Kevin Grantham and House Speaker Crisanta Duran. We certainly hope that delay doesn’t spell trouble for a good solution to one small problem
In a similar vein, it’s hard to find a problem with HB 1279.
Even the staunchest advocate of homeowners’ rights to sue could see logic in requiring a majority vote of those who own units in the building to approve a class action lawsuit before a homeowners association files one.
Gaining such a coalition not only protects builders from frivolous lawsuits, but also protects condo owners from the possibility a class action lawsuit gets filed, takes a year to settle and encumbers the property in a legal limbo that makes selling or refinancing difficult.
Rep. Lori Saine, a Republican co-author of HB 1279, calls that situation “financial house arrest.”
The bill requires a simple majority of unit owners to vote in favor of taking legal action against a builder, instead of just a majority of members of the HOA. It also provides guidelines of disclosures on behalf of the homeowners association seeking to file suit and allows the builder to address the HOA before a vote is taken. That presentation can include an offer to fix the problem instead of going to court.
But unlike other, more drastic bills, this one does not require that builders first get a right to remedy the problem, and it also doesn’t require that the issue go to mediation before hitting the courts.
Furthermore, the bill would protect homeowners from nefarious builders who intentionally hold a majority of units for themselves to block litigation or write into HOA rules that the developer holds a majority vote on the board until seven years (the statute of limitations for defects claims) have passed.
What a smart middle ground Saine and Rep. Alec Garnett, a Democrat, seem to have struck on this bill.
Additionally, even if the majority of unit owners refuse to file a lawsuit, nothing prohibits an individual unit owner from pursuing their own lawsuit.
These two bills could do much to thaw Colorado’s frozen market for multi-family units, and could also help lower the cost of construction and thus the cost of condos.