Lawmakers Introduce Bill to Reduce Construction-Defects Lawsuits

For the second year in a row, Colorado lawmakers have introduced a bill aimed at reducing the number of construction-defects lawsuits — and hopefully increasing the number of condos built in the metro area. Senate Bill 177 would push homeowners and builders toward arbitration rather than litigation when homeowners' units suffer from problems such as leaky windows or crumbly foundations.

Avoiding lawsuits is important, supporters say, because expensive litigation is driving up the cost of building affordable condos, which has led builders and developers to back away from that type of housing. It's an issue we wrote about in our September 2013 feature story, "Design Flaw." More than a year later, supporters contend that the situation hasn't been resolved.
"No condos are being built in Colorado," Tom Clark, the CEO of the Metro Denver Economic Development Corporation, said at a press conference Tuesday held at an empty parcel of land next to the Yale light-rail station on which affordable apartments — not condos — may soon be built. While the number of condos being built isn't zero, it's close, according to bill supporters: They cite statistics that show condos represent just 3 percent of new housing starts in Colorado, which they say is especially bad news for young first-time home-buyers.

"My generation has seen their American Dream deferred," said Senator Jessie Ulibarri, an Adams County Democrat and co-sponsor of the bill who describes himself as one of three Millennials in the Colorado State Senate. Ulibarri sponsored a similar bill last year, which was introduced just four days before the end of the legislative session and did not pass.
This year's bill would bar homeowners associations from skipping mediation and going straight to a lawsuit if their declarations require that they use mediation to resolve disputes with the builder or developer. The bill would also require that a majority of homeowners vote to enter into any legal action — and that they be informed beforehand of the estimated scope and cost of the legal action.

But while the bill's sponsors say the proposed legislation would provide more protections for homeowners, not all owners buy that logic. Jonathan Harris, the chairman of a coalition called Build Our Homes Right, says making it more difficult to sue builders for shoddy construction is good for builders — and no one else. "They’re looking for ways to make it harder for the consumer to hold them responsible for their substandard construction," Harris says. "I think that's just so appalling."

Harris speaks from experience. In 2004, he bought a new condo at The Point in Denver's historically African-American Five Points neighborhood. The homes there, he says, weren't built the way they should have been. For example, drainage holes along the bottom of the sliding glass doors were inexplicably sealed over, which causes water to drain into the units instead of away from them when it rains. Two units at The Point suffered so much water damage that they were deemed uninhabitable.

After unsuccessfully negotiating with the general contractor to provide quality repairs, The Point filed a lawsuit in 2011. The two sides eventually reached a settlement, though Harris says the money isn't enough to pay for all of the work that needs to be done. The homeowners, he says, will be stuck making up the difference. Those familiar with construction-defects litigation say that's a common scenario. But Harris worries that forcing homeowners into mediation will result in even worse outcomes, especially if the builders hire the mediator.

"It’s a real stacked system of justice," Harris says.

A hearing on Senate Bill 177 has not yet been scheduled.

Here's a look at the bill.

Senate Bill 15-177