Longform

Has condo development hit a wall in Denver?

In Denver, condominiums are an endangered species.

Their habitat — the empty lots and abandoned widget factories that serve as fertile ground for urban infill projects — has been overrun with for-rent apartments, a breed of housing that looks similar to condos but attracts a different sort of inhabitant to the city's jungle.

See also: Ten Denver apartment projects under construction

For instance, during 2007, at a time when residential construction was on the decline nationwide, there were 112 apartment units and 870 condo units built in the city's central neighborhoods, according to the Downtown Denver Partnership. As of this July, that ratio had been reversed in a major way. A whopping 7,148 apartments were planned or under construction, the organization says, while the number of condos being built was a meager 145 units.

And that lopsidedness isn't just a Denver phenomenon. Mayors and civic leaders throughout the metro area are concerned, not because apartment-dwellers are uncivilized brutes, they insist, but because having too many short-term renters and too few well-rooted owners threatens to upset the delicate balance that makes for a thriving city.

"All I'm advocating for is a variety," says Lakewood mayor Bob Murphy.

The primary predator? In his view, and the view of many others, the development of new condos is being stifled by construction-defect lawsuits.

Developers and builders report that they won't build new condo projects because of the high likelihood that they'll later be sued by the homeowners' association for shoddy construction, a claim they say is often exaggerated. Regardless of where the truth lies, most lawsuits end up settling for millions of dollars. That kind of liability has caused a majority of the companies who previously insured Colorado builders to bow out of the condo game altogether, local agents say, making the outlook for new construction even more bleak.

There's a saying among those who blame the condo decline on these types of lawsuits — and on the tenacious lawyers who file them on behalf of homeowners: "There are two types of condo projects: those that have been sued and those that will be sued."

"We have a very big target on our backs," says Dan Nickless, the Denver division president of Ryland Homes, which builds condos in most of its markets but not in Colorado.

But not everyone agrees — especially the lawyers for the homeowners, who believe there are politics at play. "They've come up with this bogus argument that they haven't built any condos since 2008 because of us," says attorney Scott Sullan, the undisputed king of construction-defect claims. The real reason why no one was building condos, he argues, was the recession. "The strategy now is to use that downturn and the fact that condos weren't built as an excuse to provide immunity to builders to build poor products and walk away from them."

A state bill introduced during this past legislative session that would have provided some legal protections to developers wanting to build condos near light-rail stations was killed by lawmakers after homeowners showed up and offered testimony about their leaking windows, sloping floors and freezing bedrooms. A massive lawsuit, while no fun for anyone involved, is often the only way to force builders to pay for necessary repairs, the homeowners said.

The builders, developers, mayors and economic-development officials behind the failed bill haven't given up, however. They've commissioned a $40,000 study and have been meeting to discuss ways to tackle the issue anew when next year's legislative session starts in January. It's a complicated proposition, especially since the two sides disagree on most everything.

"It's no secret that woven through this entire topic is conflict and litigation and lawyers and money," Senator Mark Scheffel, the sponsor of last year's bill, said during the debate.

What's harder to figure out is who the villains are.

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There are plenty of horror stories on both sides. Take what happened at The Point, a mixed-use urban-renewal project completed in 2003 in the historically African-American neighborhood of Five Points. The Point consists of 35 affordable rental units and 33 condo units, all of which sit above retail space occupied by a coffee shop, Coffee at The Point, and the Crossroads Theater.

While the $13 million development stands out as a success among the empty storefronts that dot the neighborhood, homeowners say the construction does anything but.

"When I purchased my brand-new condo in 2004, it looked great," resident Jonathan Harris testified before lawmakers in April, "until the leaks started."

On a recent afternoon, attorneys Doug Benson and Heidi Storz lead a tour of The Point's problems, most of which can be traced back to improper waterproofing, they say. At The Point, it's caused damage to the ground-level garage, where chunks of the ceiling have rotted and flaked off, and the upper-level concrete patio, which has crumbled due to the water that pools on the surface and continually freezes and thaws in the colder months.

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Melanie Asmar is a staff writer for Westword. She joined the paper in 2009 and has won awards for her stories about education, immigration and epic legal battles. Got a tip? She'd love to hear it.
Contact: Melanie Asmar