Colorado Construction Defect Bill Dies In Senate

colorado construction defect bill

An attempt by the Colorado State legislature to improve condominium owners’ legal remedies for shoddy commercial building practices has failed. Seeking controls over access to litigation by disgruntled Condominium Home Owner Associations (HOA), SB 177 died in a House committee in late April 2015. Six Colorado legislators believed the bill unfairly limited the rights of condominium owners to sue for construction defects.

In Colorado, HOA Boards of Directors have file numerous multi-million dollar lawsuits against condo builders and developers to have alleged building code violations remedied. The failed SB 177 sought to require actual condominium owners to engage in the remediation process, and to prohibit HOA’s from unilaterally removing the “arbitration only” clause from homeowner contracts. The multiple lawsuits have chilled interest by builders to develop future condominium projects, resulting in a significant reduction in condominium stock, and a consequential increase in the price of existing condominiums. Some industry observers believe the low stock/high-cost challenge is freezing potential new-comers out of the condo-purchasing market.

On the surface, every newly completed commercial building — condominium projects included — looks sound, dry and safe. Weather, time and environmental factors will eventually reveal hidden construction or product defects that can erode the health and safety of the structure. Water can be especially damaging. Early water intrusion issues are usually seen around windows and doors, and should be remedied as quickly as possible. Hidden water infiltration is far more insidious, and can rot structural framing, short out electrical services, and cause mold to develop.

Prevention is the answer to building defect challenges. Homeowners who experience no challenges with the safety or integrity of their dwelling will have no reason to sue. Builders who actively seek out quality products and services within their projects will avoid future litigation to prove the quality of their work. In the case of water infiltration, initial installation of efficient moisture-impervious or management materials, like membranes and drainage systems, will prevent water intrusion above and below grade. These materials ensure that the building and all its parts stay dry over the long term.

In Colorado, opposition to SB 177 was based on a number of factors:

  • The apathy of some homeowners to the troubles suffered by neighbors would prevent those homeowners with legitimate complaints from having any forum in which to raise their concerns. SB 177 had required that plaintiffs in the lawsuit be a majority of condo owners, rather than just a majority of the directors on the HOA Board.
  • The Colorado Construction Defect Bill did not affirmatively address the need for more affordable condominium housing. If SB 177 passed, condo builders would have less exposure to construction defect lawsuits, which may compel them to build more condo units, but there is no guarantee that would be the consequence.
  • Two contradicting studies. A study done by a Boulder economist Patricia Pacey indicated that there was actually a lack of demand for condominiums, and builders were only responding to that market trend. The data was contradicted by Habitat for Humanity Colorado and a local Denver real estate agent, both of whom cited numbers indicating that both demand for and price of condos were on the upswing.

Clearly, the struggles of Colorado’s condominium owners will continue to percolate until a balance can be struck between owners and condo builders. Owners will need an appropriate forum in which to raise construction challenges, and builders need to keep construction costs down by limiting their exposure to frivolous litigation.

For the builders, it may be that proper weatherproofing could have prevented some of those past Colorado cases, and kept those homeowners warm and dry. Certainly, improved weatherproofing in future developments reduces the risk of litigation for weather-related intrusions. For information on Eco-friendly moisture control in commercial developments, contact us.