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She sits on an urban-planning steering group convened by the Denver Regional Council of Governments, or DRCOG. Construction-defect litigation is one of the group's areas of focus, and DRCOG has commissioned a study of the issue. One of the questions it aims to answer is whether these lawsuits are interfering with the metro area's long-term goal to have 50 percent of all new housing and 75 percent of all new employment located in urban centers.

"God love DRCOG," says Clark of the Metro Denver Economic Development Corporation. He and others who backed the failed Senate Bill 52 are eagerly awaiting the report in the hopes that it will provide them with some additional perspective and help in shaping their strategy for reintroducing a construction-defects bill in the 2014 legislative session.

In the meantime, there is the raw data. The latest estimate is that 15,000 apartment units are under construction in the seven-county metro area.

Attorney Doug Benson represented condo owners at The Point, where water damage has rendered two units uninhabitable.
Anthony Camera
Attorney Doug Benson represented condo owners at The Point, where water damage has rendered two units uninhabitable.
Scott Sullan, the king of construction-defect claims, blames the economy for the lack of condo projects.
Anthony Camera
Scott Sullan, the king of construction-defect claims, blames the economy for the lack of condo projects.

Some projects in Denver include: The Douglas, a five-story building comprising 310 apartments at Walnut Street and Park Avenue West in the Ballpark neighborhood; the Delgany Apartments, a 284-unit, ten-story luxury apartment building at 15th and Delgany streets, next to the Museum of Contemporary Art; the Skyline View Apartments, a project comprising 105 apartments on Zuni Street between 28th and 29th avenues in the Lower Highland neighborhood; a 332-unit apartment development at Speer Boulevard and Alcott Street known as 2785 Speer; and One City Block, a 300-unit project spanning Pennsylvania and Logan streets between 18th and 19th avenues in Uptown.

By comparison, the number of condo units under construction in the seven-county metro area is 371, according to John Covert, the director of the Colorado office of MetroStudy, a market-research and consulting firm.

Cary Bruteig, the president of Apartment Appraisers & Consultants, which studies the Front Range apartment market, projects that 5,800 apartment units will be completed this year, and that between 8,500 and 9,000 will be completed next year. That's twice as many as in an average year. "Primarily, construction activity is picking up because the current inventory of apartments is performing so well," Bruteig says. "Developers are wanting to make a profit."

It's true that apartment vacancy rates are low and rents are rising, both signs that apartments are hot right now. But Mike Zoellner, the president and CEO of RedPeak Properties of Denver, which specializes in apartments and is developing both One City Block and The Burnsley at 1000 Grant, a project to convert the Burnsley Hotel in Capitol Hill into penthouse apartments, knows that won't last forever, especially if the market is about to be flooded with new units. Some of those projects are being led by builders who traditionally focused on single-family homes or condos. "As an investor, we think it's a problem," he says.

Kniech's approach to solving that problem differs, in that she doesn't seem loyal to either side. "There are probably four or five reasons people are not building condos," she admits, including consumer preference and the lagging economy. But there's a reason that politicians are focusing their energy on curtailing construction-defect lawsuits, she says. "It's not because the sky is falling. It's because it's an area we may have influence over."

Though the DRCOG study isn't expected to be completed until the end of September, Kniech says the early indications are that construction-defect lawsuits do indeed add to the cost of building condos. Builders can't pass that additional cost along to homeowners, she says, because wages have stayed stagnant throughout the recession and consumers can't afford to pay more for housing. (That theory explains why the few condo projects that have been completed in recent years or are under construction are on the luxury end of the scale.) Faced with that reality, builders are choosing to eschew condo projects altogether, Kniech reasons.

Since it's nearly impossible to separate the predators from the prey, and both sides have persuasive arguments in their arsenals, Kniech figures the only way to come to a compromise is to sit down and hash it out. "We are going to have to do this the old-fashioned way," she says.

Brick by brick.

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39 comments
BTBT62
BTBT62

Sorry you need to read from bottom to top for the comment to make sense.

BTBT62
BTBT62

An additional economic perspective… maybe there is just less demand for brand new multi-family construction.The article doesn’t really address what consumers want in this market.There may be a perspective worth considering, in that after the last decade and an half of construction and defect contention, consumers don’t want to risk buying new shoddy products.Colorado’s defect atmosphere has demonstrated or alluded to a stigma about multi-family builders and their ability to build quality products.Who wants to “invest” in housing that has a higher than not percentage of being defective and costing one a lot of time, money and headache.I don’t.

BTBT62
BTBT62

My opinion, the current lack of ownership condo projects has less to do with construction defect, as it has to do with the economy’s supply and demand along with the timeline to initiate, fund and start a project.Right now all the “apartment” projects were started at or about the downturn and through the “recovery”.Statistics demonstrate that during down economic times, the rental demand jumps and the demand for ownership housing drops.Because rental demand has jumped, there is a need for more rentals because the supply is low.There were less multi-family rental starts in 2011, down almost 100,000 from the 10 year avg.So the supply is low, despite increase demand.From 2011 to projected 2015, rental demand is solid at an increase of 1.7 million units, whereas multifamily ownership housing is still dipping downside 1.4% last year to project 2015.If the economy rebounds, multi- family homeownership is project to be at the 1999-2000 level in 2015.So essentially, there is greater demand for rental property.(All stats either from multi-family section of HUD or multi-family section of Freddie Mac)

BTBT62
BTBT62

I do not agree with Tom Clark's assessment of "Fewer condos means fewer young couples who will be able to build wealth by buying a condo and then selling it for a profit once they have a kid and upgrade to a single-family home."You can't sell a defective home for a profit Tom.As a matter of fact, if the building is defective, the homeowners can’t re-fi or sell the condo and usually the homeowner loses money. So there should be a huge invested interest to ensure that ownership condo are built correctly.

And really, construction defects causing fewer condos causes poorer academic performance for children?Tom, we shouldn't settle for just throwing up condos because that's what was promised, we should strive to provide a quality condo units for ownership that will create value and return on investment.It’s hard to realize profit on a defective home.

BTBT62
BTBT62

For homeowners and HOAs, the question comes down to, who has the ability to protect themselves from defect issues.The builders absolutely can, not the homeowners.The homeowners aren't standing on-site for 24 hours a day ensuring construction is completed correctly and nor do they have the ability to fix an issue like the builder does. If the project was built right in the first instance and extra time was spent on carefully paying attention to details, the builder can limit its own risk.Which leads to the question addressed in the article, would someone pay an extra $500 to have the unit inspected during construction?Given even a higher estimate, I would have paid an extra $3,000.00 for my unit and given the builder as much extra time as it needed to ensure the job was done right... absolutely.You are usually talking less than 1% extra on a condo price. Given the headaches of the defects and what the process brings, it is an extremely small price to pay.

BTBT62
BTBT62

And to complain about expansion of the defects at that point seems to be capitulating to blaming someone else for problems one created or chose in the first instance not to properly address.That one window that leaked turned in a lot of windows, simply because the builder didn’t fix the one window issue when it was contacted in the first place.Another problem I experienced is that when builder’s treat homeowner’s like they are dumb and the builder emphatically espouses that the band-aid fix is sufficient, it does not lend to great relations for the defect issues when the band-aid fails (which we know it will b/c band-aids fall off).It lends to entrenchment and dissent. Lending to a potential solution for the builder, if there is an actual and serious warranty program that included a high level customer service piece, a builder could possibly end run many of these defect issues and get outside the SOR.

BTBT62
BTBT62

From an HOA's perspective there is usually no choice but to go through the defect suit process.Any claim about warranty issue... when you call the builder and tell them you have problems, they usually send the lowest guy on the totem pole off another job with a caulk gun (b/c he is really non-essential to the other job, which should help one conclude the quality of work that is going to be performed).If the fix involves anything beyond that, the developer/builder usually ducks its head into the sand like an ostrich.So after no response from the builder/developer or offer to repair (my experience, didn't even get an offer of repair or Plan B proposal), the HOA has no choice because the issues are too big for the homeowners to come out of pocket to pay for the repairs.Even if the homeowners are not made completely whole, being 60% of the way there is better than being nowhere near at all.

rocky
rocky

A big problem is that these attornies partner up with construction defect companies such as reconstruction experts.  Reconstruction Experts work the property management companies angle looking for anything that could potetentially be deemed as a defect.  Once they see that they may have a case they call in Sullen or Benson to build their case.  So in a sense the defect attornies have these construction companies in their back pocket working for them.  Once the case is settled, the HOA typically has a sense of trust in these defect companies because they wrote the cost of repair estimates for Sullen, who got them their money.  So in turn the construction company has a leg up on competition to complete the project for x amount of dollars after they settled.  You tend to see the same companies chasing these defects with the attornies.  For the attornies its a win win.  They get the case and they have defect specialist out their looking for their next  case.  For the construction company, its a win win.  They get the work to get the property functioning during the litigation.  As well as the reconstruction.

bill772
bill772

I'm honestly surprised that the legal profession and the insurance community of risk managers have not created a proactive remedy for Construction Defect claims coming from condo owners.  In the design and construction industry, we limit our risks by assigning responsibility to the various parties within our agreements and Construction Documents.  The developer is the person who is responsible to create the HOA by-laws, CC&R's and purchase contracts.  The fact that they have not used these agreements and rules documents to prescribe a warranty remedy puzzles me.  Developers could put in place a fully staffed warranty service to quickly respond to any one homeowner's complaint without "repairing every window in the building" if they didn't leak.  The responsive and focused warranty team would be far more effective than the extrapolation method of repairs created by the HOA's attorneys and experts who are exclaiming that if they only get "one bite at the apple," they're going to make sure that everything is included in that bite.  No wonder it's such expensive litigation and the attorneys are making so much money on their contingency engagements. By the time the settlement check arrives and the attorneys extract their percentage fee, there's not enough money to fix all the issues that were claimed in the complaint. 

This is not that complicated.  When you consider that the basis for filing a suit against the developer is based upon the CC&R's and the approved set of plans for the project, why isn't anyone making sure that those documents combined with the purchase contract provide a non-litigation remedy?  In the long run, it might be a lot less expensive that some of the high cost, low-rated insurance that is out there now.  There needs to be a serious workshop to create a new set of rules that has some common-sense solutions built into the agreements and rules.  The mayors should convene this meeting along with the various parties and their counsel and build some sensible policy. (bill@wfdexter.com)

bauerku
bauerku

Thanks for writing this expose on construction in Denver.  You discuss the problem that no-condo building is creating with taxes and TOD.  Another issue is affordable housing.  Denver's inclusionary housing ordinance only applies to for sale units NOT rentals.  With no protection for affordable housing, Denverites are now facing one of the highest rent burdens in the country.  

WillieStortz
WillieStortz

Is there anything in this country that lawyers haven't destroyed? 


We need laws that limit lawyers fees in class action lawsuits. So that true victims aren't once again exploited by these bottom feeding lawyers. 


I'm glad that Westword posted the pictures of these two low life scumbags. Everyone should know what they opportunistic weasels look like.

nopenope
nopenope

"Fewer condos means fewer young couples who will be able to build wealth by buying a condo and then selling it for a profit once they have a kid and upgrade to a single-family home."

 This statement is flawed.  It assumes appreciation (profit) on a condo purchase.  Anyone holding a condo right now (particularly if you purchase at the top of the market) knows that it has most likely not appreciated in value.  In all likelihood, it has lost a significant amount of value, and/or of the purchase price.

So instead of a step up property, condo ownership has instead become a financial sinkhole.

patricia.calhoun
patricia.calhoun moderator editor

i'd like to publish some of these comments in our print letters to the editor seciton -- ideally with the author's full name. If that's okay, e-mail me at patricia.calhoun@westword.com.

Gilbilly
Gilbilly

Most modern condo's and apartments are built like shit by the most unskilled of construction workers with the crappiest of materials all in an effort to save a dollar.  Maybe if they built decent developments and lowered their profit margins a little they wouldn't get sued so regularly.

marc_bayes
marc_bayes

I don't think I've seen one condo complex that is not or has not been in litigation with builders. Not to mention that nearly all condo units in the Denver Metro area will no longer go FHA because of owner occupant versus investor ratios. There are a few that will but for the majority condo's are now cash or conventional loans only. 

FHA made it even harder with removing "Kiddie-Condo" loans at the start of 2013 so parents can no longer use an FHA loan to purchase their kids a home that they will not be living in. Condo's are a mess.

 @CONATIVE said it best: "The solution is a combination of more accountability on the builders side to build a better product and less power on the attorneys side for exploiting meager claims".

CONATIVE
CONATIVE

The solution is a combination of more accountability on the builders side to build a better product and less power on the attorneys side to exploit meager claims. 

These attorneys are like ambulance chasers. They pick a project that has not been sued, purchase a unit for $100-$200k, and strip the unit to its bones looking for defects. 

More often than not they are the ones knocking on doors, trying to get as many homeowners to drink their defect Kool-Aid so they can have enough support for a class action suit. 

Hopefully the bill will be tweaked for the next session and they will get it right. Otherwise, a lot of tax-payer money will be wasted since the Fastracks projects will not yield its original intended return on investment. 


fishingblues
fishingblues topcommenter

Scott Sullan is scum. He has made a mega fortune suing home builders.  Some of the problems are real, but most are not.  Sullan doesn't care about anything except lining his pockets.  Think about it.  There are thousands of components in a home.  I could find at least ten things wrong with every home ever built.  Most are not serious.  Do you want to know one of the biggest reason the cost of housing is so high?  Look no farther than racketeers like Sullan and his ilk.    (I am not a home builder and have no dog in the fight.)   

Meghan Smith
Meghan Smith

I have one someone could take off my hands

Ben Beeby
Ben Beeby

Its the condo market nationwide. There are also a lot of limitations on financing on Condos. They cannot have a lawsuit, they have to be more than 50% owner occupied etc. Additionally High Rise Condos are almost impossible to finance. If Denver wants condos, they are going to need to help finance people, cause the banks dont have any appetite for more foreclosed condos.

rocky
rocky

@BTBT62

I do agree with you, to an extent.  60% isn't much after years of litigation where the CD issues get worse.  However, if you fix the problem sometimes the work get's taken out of the litigation because it is considered fixed.  A company can provide "temporary repairs"  but the HOA still has to pay for those repairs.  These day's HOA's typically get 1/3 of what they need to fix their problems.  So say you get have 1 million in repairs needed.  HOA get's a 3rd of that. $300k? Then take out the CD attornies 20%.  Not much left over to fix the repairs needed.  This is also not taking into account the issues getting worse during the few years of litigation.

BTBT62
BTBT62

Yes, but RE give a warranty on its product that extends at least as far as the defect period.  This is way more than what the original contractor gave and the engineering is followed to a T.  That's why RE doesn't have a reputaiton of being sued for defective work, because RE follows the proper protical without cutting corners. 

fishingblues
fishingblues topcommenter

@nopenope    Wow, what a freaking pessimist.  The housing market, whether condo or single family, goes up and down just as the stock market does. We have a cyclical economy.  Over the long haul the stock market and housing both go up.  It is a statistical fact.  Look it up and quit with the hysteria.  If you are dumb enough to buy at the top and sell at the bottom, you deserve what you get.  

patricia.calhoun
patricia.calhoun moderator editor

make that  letters to the editor "section."

doug400
doug400

@Gilbilly My buddy Kieth was a sub for many of the big builders and was asked 5 years ago to cut 15% from his subcontract.  My buddy sharpened his pencil and made the cuts and told me that he was only cashflowing to keep his crews together, but was not making money.  When he went to sign the contracts he was told to cut another 15%.  Instead, he asked me to help him dissolve his company...someone else DID sign those contracts though...it's no wonder there are issues...

nopenope
nopenope

@Gilbilly This is true of most single family homes being built now as well.

doug400
doug400

@CONATIVE This is an urban myth that has no basis in reality.  A rumor that has taken on a life of its own, but is nevertheless completely and utterly false.  Channel 9's Adam Schreger asked me about that rumor first in 2000 when the rumors first started.  The rumor was specifically directed at me.  I even had a local attorney testify to exactly what CONATIVE posted in an Arbitration about me specifically. 

Murrow
Murrow

Thanks for that note at the end. You sound completely unbiased...

marc_bayes
marc_bayes

@Meghan Smith Would love to help you out if you're looking at selling.

rocky
rocky

@BTBT62

From my understanding RE provides a one year warranty unless otherwise worked out.  Also, I know property managers who have used RE on CD cases that have had plenty of issues.  Many considered secondary litigation against RE but were burnt so badly during the first litigation, they chose not too.  Litigation can be extremly trying on homeowners and HOA's.  With HOA's typically only recieving a 3rd of what they need, it's not always in the best interest to go to litigation not only once but a second time.  RE doesn't do new construction for a reason.  If they did, I assure you they would have claims.

fishingblues
fishingblues topcommenter

@doug400   Wow!  So what allegedly happened to your "buddy Keith" is indicative of the entire industry?  Is that what you want people to believe you believe?  

fishingblues
fishingblues topcommenter

@nopenope @Gilbilly   Is it?  How would you know?  You have shown yourself to be highly prejudiced, hysterical and generally full of crap.   

doug400
doug400

After I received the transcript, the attorney called me with the arbiter and all of the other attorneys on the line and apologized.  I have never owned a multi-family residential unit and have never done anything close to what you described.

In addition, understand that we handle these cases on a contingent fee basis.  We do not take marginal or "meager" claims as it would not make sense. 

fishingblues
fishingblues topcommenter

@Murrow   Thanks for your enlightened contribution Ed.  

I believe everyone should disclose their position, so that people can view it accordingly.

Since you don't appear too bright, I'll let you in on a secret.  NO ONE is completely unbiased.  Hope that helps. 

fishingblues
fishingblues topcommenter

@Murrow   "loser pays" is in effect (in watered down fashion) in only Alaska and Texas.

Contingent representation makes it too easy to sue someone.  We have become a litigious society.  Too many think it is the way to a fast buck.  I would concur that some form of this may be necessary.  However, severe restrictions in attorney compensation and "reasonable" awards need to be placed.    

fishingblues
fishingblues topcommenter

@nopenope @fishingblues @Murrow I have purchased several, in fact.  I have not had any problem whatsoever.  My experiences have been mostly positive.  The key is  the superintendent.  All builders use essentially the same materials and subs.  Proper supervision is what yields a good house.  

Murrow
Murrow

@fishingblues You're a feisty one.  

1.  It's my understanding that recoverable litigation fees & costs is a long standing practice.  However, sometimes the "winner" is not always clear cut.  In construction defect there are a number of issues, where in some areas damages may be awarded and others not.

2.  Contingency representation is important for enabling adequate representation and access to the legal system.  In this case individual homeowners or HOA's rarely have the resources to fight a protracted legal battle against a builder/corporation on an hourly basis.

3. I'm sure there is disagreement on what "realistic" means, but fair enough.

nopenope
nopenope

@fishingblues @Murrow Have you ever bought a house or condo at construction?  I have, and it has been a nightmare of shoddy, substandard work.  You can have the longest punch list in the world, but getting a builder to address actually address anything is next to impossible.  Especially if you have a job and must try to chase them down, get appts, get them to SHOW UP to said appts, etc.  They build as cheaply as possible and then just hope that they can avoid the lawsuits and do nothing to cure as well.

fishingblues
fishingblues topcommenter

@Murrow   Golly, aren't you sensitive!  You must be a liberal.  I don't imagine your snide comment to me {"Thanks for that note at the end. You sound completely unbiased..."} would constitute 'trolling' in your unbiased mind?  So now you want to pretend like you are sensible and willing to discuss rationally?  

I'm not sure we will ever rid the earth of the parasitic, opportunistic, greedy slime balls that ruin the legal profession.    However, since you asked ---- considerations for tort reform:

1.  If initiating party loses, they and their attorney pay costs of opposing party.

2.  Serious review and possible elimination of 'contingency' practices.

3.  Realistic cap on damage awards including the elimination of punitive and other non-economic damage. 

Murrow
Murrow

@fishingblues Oh thank you! Your personal insults and diatribe really contribute to the conversation.  I know it's easy to troll online comments and not everyone has the time to write a novel about their disdain for one man, but your position is lacking some context.  Since you're not a builder, what has led you to such visceral hate?  Or better yet how about opining on what kind of tort reform you would like to see.  

No one likes litigation but there has to be a way to promote development while also protecting homeowners from shoddy building.  This is a complex issue, but one of the big problems is it often takes a long time for serious damage from defects to show itself, and not all builders are equally responsive to repairing problems (or even around years down the road).  In the end I think it's better to err on the side of protecting individuals, but I hope that any reform that comes through will help limit the length and outsized costs of these lawsuits.

 
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