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New Bill Would Have Stifled Consumer Rights in Suits Against Builders – Part 2

By Burg Simpson

June 16, 2015   Colorado Blog, Colorado Construction Defects

In Part 1 of this blog we wrote about Colorado Senate Bill 15-091, which would have significantly reduced consumer rights by limiting the time within which single-family homeowners can sue construction professionals (architects, contractors, builders or builder vendors, engineers, and inspectors performing or furnishing the design, supervision, inspection, construction, or observation of the construction of any improvement to real property) over construction defects in their homes. In this Part 2, we discuss the other builder-friendly bill introduced during the 2015 General Assembly session, Senate Bill 15-177.

As the battle over changes to construction laws raged across Colorado this spring, it appeared that industry lobbyists may have chalked up a victory in the Colorado Senate during a “voice vote” on SB15-177. According to scores of homeowners and their advocates, the bill would give a distinct advantage to the construction industry by forcing homeowner associations to mediate or arbitrate claims when “construction professionals” deliver substandard homes. Among other provisions, SB15-177 would have left homeowners holding the bag when construction defects leave their dwellings in the dumps.

Why aren’t condominiums being constructed?
Actually, they are (between October 2014 and late May 2015 over 20 new condo/townhome projects were announced or started in Colorado), but you won’t hear that from building industry insiders and certain politicians. According to a recent Denver Business Journal article, “Developers say current state laws make it too easy to file class-action lawsuits over condo construction defects, bringing construction of condos to a virtual standstill.” So, like SB15-091, SB15-177 was introduced to protect construction professionals from what they claim to be overly homeowner-friendly Colorado construction defect laws.

Majority rule?
If passed, SB15-177 would have prevented townhome and condominium homeowner associations from amending their governing documents to change or remove construction defect arbitration provisions. In addition, the bill required the association to provide pre-litigation notice to all of its homeowners, and a majority of all homeowners in the association would have to approve legal action before it could be taken. Without such approval, individual homeowners and/or their association could be left without a remedy, regardless of the serious defects with which their units might be plagued.

Currently, homeowner associations can typically amend their governing documents with the consent of 67% of their homeowners and are already required to provide notice of construction defect litigation to the homeowners before serving a Complaint on those being sued.

Is quality housing “cost prohibitive”?
On a basic level, SB15-177 sought to make it harder for people whose homes are besieged by construction defects like sinking foundations and destructive mold to hold responsible the construction professionals whose second-rate work causes these problems. According to the building industry, bearing responsibility for such mistakes is just too expensive for them, and is the ultimate reason that the condo market in Colorado has run dry. Apparently, builders in the Keystone State don’t want homeowners to have their day in court when they get stuck with far less than they paid for.

What is to blame for housing shortage?
At a hearing on SB15-177, an expert economist cast serious doubt on the construction industry’s argument that liability for construction defects is driving Colorado’s housing shortage. Instead, this economist demonstrated that problems in the condo market have actually been caused by the national economic recession, decreases in wages, a tighter lending market, and an overall increase in unemployment. According to this expert, giving the industry a free pass on construction defects won’t actually fix the problem the industry claims it is remedying.

Builders can’t avoid liability for their mistakes.
SB15-177 passed the Republican controlled Senate on April 14, but was postponed indefinitely by the House Committee on State, Veterans and Military Affairs on April 27. Whether SB15-177 would have resulted in more affordable housing remains unknown, but is doubtful. What is abundantly clear is that builders would have faced far less accountability if they and their lobbyists had succeeded in getting the bill passed.

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