New Colorado Bill Would Loosen Restrictions on Construction-Defects Lawsuits

By   –  Senior Reporter, Denver Business Journal

For the first time in the nearly three years since Gov. John Hickenlooper signed construction-defects reform into law, a new legislative proposal takes direct aim at rolling back some of the aims of that legislation by making it easier to file lawsuits against builders of both condominiums and single-family homes.

Senate Bill 138, sponsored by Democratic Sen. Robert Rodriguez of Denver and introduced late Monday, would extend from six years to 10 years the time period for homeowners to file legal action based on purported construction defects. It also would require that a homeowner know that a problem was caused specifically by a construction defect before the two-year statute of limitations begins on that particular issue.

The six-year statute of limitations for actions stemming from defects was not one of the provisions in tort law that was changed by the 2017 bill that had unanimous support and was hailed as a major first step toward restarting what by then had become a nonexistent market for new, affordable condominiums. That stock of housing, once an entry way into home ownership for younger or lower-income professionals, had dried up since changes in state law about a decade earlier made it harder to file class-action lawsuits over the building of single-family homes and had made condos such a target of lawsuits that most builders found it infeasible in the face of such action to construct condominiums that sold for less than $500,000.

Instead, the law required that a majority of property owners in a condominium building agree to file a defects lawsuit rather than just a majority of the homeowners association board, as had been the previous mandate. A Colorado Supreme Court ruling that came about a month later in June of that year found that HOAs could not unilaterally negate a requirement by builders that any legal disputes go to arbitration rather than court, and those two actions upended tort law in regard to construction defects and made it much harder to file lawsuits over perceived defects.

SB 138 attacks a long-standing provision of the law that gives owners only six years after the completion of their homes to seek legal remedies. Only four states allow less time to find and file complaints about defects, and raising the bar to 10 years would bring it more in line with a majority of states, add proponents such as Build Our Homes Right, an interest group of homeowners who have dealt with such troubles.

“The reality is consumers need more time to identify problems, work things out with their builders and get their homes fixed properly,” said A.J. Rose, who fought a builder over defects in his Douglas County condominium development, in a statement.

The bill, which does not yet have a House sponsor, caused concerns for the coalition that passed the 2017 law, however. House Majority Leader Alec Garnett, the Denver Democrat who sponsored that bill along with Republican Rep. Lori Saine of Firestone, said he spoke to Rodriguez before he introduced the bill about some of the market conditions the bill was meant to address that were leaving younger Denver-area residents at a particular disadvantage in regard to home ownership. Within seven months of the bill becoming law, at least 12 affordable condominium developments containing nearly 1,200 combined units were announced or underway in the Denver metro area.

“For the first time [in the 72nd General Assembly], we have a new group of legislators that weren’t in the chamber when that was passed,” Garnett said, noting that he was thankful that Rodriguez, a senator first elected in 2018, came to him before introducing SB 138. “We’re constantly talking with each other about what happened.”

“This is so obviously a step in the wrong direction and will result in higher costs for everyone, particularly first-time home buyers,” Kopp said. “If passed, investment in affordable housing options like condominiums will diminish precisely when more development is desperately needed.”

January 29, 2020