We hope this section answers the most pressing questions you might have about your construction defects case. If you need further details and would like to discuss them, or your case, with one of our experienced construction defect attorneys, please call us at 303-792-5595 or fill out a Free Case Evaluation form to schedule an appointment.
As a construction defect law firm, we regularly represent individual homeowners, community (townhome and condominium) associations, and commercial property owners. The following FAQs address typical questions raised by single-family homeowners, townhome and condo owners, in addition to homeowner association board members and property managers. Because the issues involving commercial property are often more complex and fact-specific, the sorts of problems commercial property owners face aren’t addressed in as much detail here. In most cases, the term “builder” or “builders” also includes developers, and the term “homeowner” or “homeowners” also includes homeowner associations.
A lawsuit should always be the option of last resort. Our Colorado construction defect lawyers strongly believe a builder should be given every reasonable chance to stand behind its product and make things right, especially due to the delays, expense and uncertainty of legal action. Because of extremely tight time limits that apply to bringing construction defect lawsuits, early consultation with a lawyer is advisable just to understand your legal rights and any potential suit deadlines.
Uncertainty arising from changes in the law following passage of the Construction Defect Action Reform Acts of 2001 and 2003 and the Homeowner Protection Act of 2007, as well as potential changes in the law enacted by some municipalities and/or being considered by the Colorado General Assembly, makes attorney consultation even more advisable. Remember, assurances that the problem is only minor, or that the problem will be fixed or will surely stabilize on its own, are no guarantee that a deadline for filing suit or making a claim will not pass in the interim, preventing the homeowner from ever seeking legal relief.
Any of the following issues can arise with regard to a written warranty, which can make consulting with a Denver construction defect lawyer even more important:
- Very strict deadlines apply to bringing suit against those responsible for problems with a home or in a condominium or townhome complex. While you spend time submitting required warranty paperwork and working your way through the maze that often accompanies warranty claims, these lawsuit deadlines can slip by, barring not just legal claims you may have against your builder, but also claims you may have against others responsible for the problems with your home.
- Most written warranties contain strict limitations on the remedies they offer in response to problems, as well as many coverage exclusions. These limited remedies may supply a temporary or shoddy repair, such as patching or painting over cracks in a wall, when the true problem is more serious, such as the failure of your foundation system and movement of your home’s structural elements. The problem can reappear because the real cause was never dealt with and, by then, your warranty may have expired and the deadline to file suit may have long passed. Changes in the law with the Construction Defect Action Reform Acts of 2001 and 2003 require homeowners to allow their builder or developer “one last chance” to make things right. Unfortunately, if the builder or developer technically satisfies this “right to offer a cure” process, even though it does not fix the problem, it obtains complete immunity from treble damages under Colorado’s Consumer Protection Act despite the fact it defrauded you in the first place.
- You may have legal claims other than those for breach of warranty (such as negligence claims) that may offer you additional remedies not available under your warranty. These other remedies may solve your home’s problem, while the remedies afforded by your warranty may merely cover it up.
- Many 10-year “structural” warranties are written so unfairly that obvious structural problems within a home are routinely denied. These sorts of knee-jerk claim denials can be fought and sometimes overturned.
- Many builders and warranty companies hire so-called “independent” engineers to analyze home problems and suggest repairs. No fair-minded person could fairly characterize these engineers as independent when most of their earnings come from the building industry. These engineers are aware that if they recommend necessary repairs that are “too expensive” from the builder’s standpoint, they might see fewer referrals. Most so-called independent engineers have, in the past, refused to release to – or discuss with – homeowners their investigation results without the builder’s permission. Under the Construction Defect Action Reform Act of 2003, however, the disclosure of such investigative results is mandatory under most circumstances.
There are many other reasons why the existence of a written warranty might not solve all the problems affecting your home and why your builder’s investigation might be biased.
However, such warranties, when issued by honest builders who apply them in a fair manner, can provide a reasonably fast and efficient method to deal with typical home problems. Too often, however, builders don’t adequately staff their warranty departments and don’t respond in a timely fashion to complaints. In some cases, when builders see their warranty “reserves” (i.e., money set aside for future warranty claims) being depleted by an unexpectedly high incidence of problems, claim processing delays and claim denials increase.
When a builder tells you what your legal rights are, remember that the builder is not a construction defects lawyer, and that the builder is viewing these issues through the lens of self-interest.
- Homeowners’ legal rights against those responsible for construction defects arise from many sources, and the written warranty some builders provide is just one of those sources. Among the many legal theories that homeowners might rely on are: “Tort” claims, such as negligent construction, supervision, coordination and quality control; accidental or fraudulent misrepresentation or non-disclosure; and, violation of building codes and other applicable standards.
- Contract claims, such as breach of a written contract; breach of an oral promise; breach of express, written warranties; and, breach of implied warranty (i.e., unwritten warranties concerning homes and land imposed by Colorado courts as a matter of law).
- Statutory claims, such as violation of Colorado’s Consumer Protection Act; violation of Colorado's Soils Disclosure Statute; violation of Colorado's Common Interest Ownership Act; and, violation of the federal Interstate Land Sales Full Disclosure Act.
- Equitable claims, such as rescission (i.e., the “undoing” of a contract due to misrepresentation), and restitution.
Sometimes, your insurance policy, or a third-party 2-10 structural warranty, may cover a loss.
Even if the only claim available to you is in a written warranty, the builder doesn’t have the last word on whether you can recover under that warranty: the courts or an arbitrator usually decides the answer to that question.
Also, just because your problem has continued beyond the warranty period doesn’t necessarily mean you can’t bring the claim.
If you gave notice of the problem during the warranty period and the builder failed to resolve the problem, or assured you the problem would eventually stabilize, or made repairs that did not solve the problem, you may still be able to obtain relief under the warranty even beyond the warranty period.
In addition, standardized clauses in purchase contracts and warranty documents restricting your rights to just the written warranty may be void or of limited effect due to statute (i.e., written laws passed by the legislature), misrepresentation, or the failure of the remedies provided for in the warranty to provide any effective relief. Colorado’s Homeowner Protection Act of 2007 voids many contract disclaimers and liability limitations.
Our experience has been that homeowners are ultimately reasonable, but that if matters involving their home have reached the point where they feel the need to seek out a lawyer or are consider filing a lawsuit, the problem is not trivial and could involve a defect that demands investigation and professional consultation.
In one case, the Colorado Court of Appeals said that a “defect” is something that spoils the appearance of or causes weakness or failure in an improvement to real property. Courts also have found that a defect is an inherent fault or flaw, or a want or absence of something necessary for completeness, perfection, or adequacy in form or function. Under Colorado's Defect Action Reform Act, a defect likely includes any constructed condition that leads to:
- Actual damage to real or personal property.
- Actual loss of use of property.
- Bodily injury or wrongful death.
- A risk of bodily injury or death to, or a threat to the life, health, or safety of, the occupants of the residential real property.
Colorado has not adopted a bright-line test for what construction defects may or may not be the subject of suit. However, any construction element (window, roof, exterior finish system (e.g,. stucco or siding), floor, foundation, water system, etc.) that isn’t reasonably constructed to serve its purpose probably will provide the basis for a claim. In the case of “common interest” condominium and townhome developments, these construction elements can include development roadways, underground utilities, and other, similar “common areas” and “common elements.”
Construction defect claims generally fall into five, broad categories:
- Building Envelope Failures.
A home’s building envelope, or enclosure, includes all the building components that separate the indoors from the outdoors. Building envelopes include the exterior walls, foundation, roof, windows and doors, and must provide weather protection against rain and snow, water vapor, air infiltration, dust, wind, and temperature differentials. Additionally, to avoid premature deterioration or other, more serious problems, the building envelope should not permit moisture to become trapped inside the walls, roof or attic. Leaking and prematurely deteriorating roofs and walls, window and door systems, and degraded or rotted flooring and siding due to improper construction methods or application are just some of the examples of building envelope systems that have failed on a massive scale. Significant problems have been identified with many real and artificial stucco installations in Colorado as well.
- Soils and Slope Instability and Geologic Hazard Problems.
Colorado's expansive and collapsing soils, and its many hillside and mountainous communities, present significant challenges to builders and developers. Adequate, timely and full disclosure of the risks associated with these conditions, as well as disclosure of the various construction techniques employed (or that could have been, but were not, employed) in the construction of a home to deal with these conditions, is appropriate. Because Colorado’s building industry exerts enormous economic influence over the engineers it uses, review of the soils report and recommendations specific to your home by an engineer of your own choosing may be prudent. Sometimes, a builder’s soils engineer determines that it may not be “cost-beneficial” for the builder to use a certain construction technique that will better solve a problem presented by site conditions, without a serious analysis of the ultimate, future cost to the homeowner due to the failure to use this technique, and without full disclosure of the risk of not using the alternate construction method.
- Building Material and Product Failures.
From time to time, structural components and building materials fail due to errors in the design and/or manufacturing process, and sometimes it is due to the interaction of the components or materials with environmental conditions. Prematurely deteriorating roof shingles, fiber cement siding, composite decking, window and door systems, and plumbing, and defective residential solar panels and air conditioning units, are just some of the examples of building materials and products that have failed on a massive scale. Sometimes new (and cheaper) building products are rushed to the market with an eye towards saving the builder and home-buying public money, but before adequate laboratory and field testing and quality control has been employed.
- Design Errors.
Structures and systems are sometimes designed so that, as a practical matter, they don’t work or don’t work adequately. This can include the deficient design of septic, heating, sanitary, plumbing, ventilation, roof, building envelope, and irrigation systems, as well as flooring systems, among other parts of a home.
- Poor Workmanship.
Perhaps the most common homeowner complaint is poor workmanship, especially in a seller’s market, where home construction has trouble keeping up with demand, and unqualified, inexperienced, or unsupervised laborers or “low-ball bid” subcontractors are sometimes employed. Most reputable builders recognize that some poor workmanship can find its way into a home and, as a result, these builders allow homeowners to develop remedial work “punch lists” for the builder to perform before closing, and for a reasonable period afterwards, often as part of a limited warranty.
Colorado courts long ago rejected privity requirements with regard to many claims. That is, the requirement that the owner of the home, townhome or condominium be a party to contract with the person they’re suing for damages due to construction defects. And, in some cases, even though you aren’t a party to the contract or warranty, the original owner’s rights may have been assigned or are otherwise transferable to you under the law.
Under the right circumstances, homeowners may be able to assert misrepresentation and concealment claims even if they are secondary purchasers and never dealt with or spoke to the original builder or seller of their home, such as where the builder or seller fails to disclose important, unfavorable information about the home’s construction or the soils underlying the home at the time of sale. If you live in a town home or condominium community, your homeowner association may have rights it can exercise on your behalf or for your benefit.
Under Colorado's Consumer Protection Act, if you can establish by clear and convincing evidence that a prohibited deceptive trade, sales or advertising practice intentionally, willfully, fraudulently or knowingly caused you injury, you may be entitled to recover triple damages and attorney fees against the person or persons responsible.
Changes in the law after the Construction Defect Action Reform Acts of 2001 and 2003 require homeowners to allow their builder or developer “one last chance” to make things right. Unfortunately, if the builder or developer technically satisfies this “right to offer a cure” process, even though it doesn’t fix the problem, it obtains complete immunity from treble damages under Colorado’s Consumer Protection Act despite the fact it defrauded you in the first place.
Our firm’s philosophy, however, is that the most reasonable goal in a homeowner lawsuit is to obtain a recovery that makes the homeowner whole, and that those interested in pursuing litigation just to secure triple damages are mistaken in their goals and are pursuing litigation for the wrong reasons.
This may be true, but arbitration before a neutral, professional and experienced arbitrator (preferably a former judge) may, under some circumstances, allow you to obtain a fair resolution of your claim. Unfortunately, too many arbitration provisions result in an unfair resolution of your claim.
Our firm has been actively involved in trying to educate Colorado homeowners and townhome/
condominium owners about the pitfalls of some forms of arbitration and the use of some arbitration services. We believe standardized arbitration clauses that require homeowners to waive their right to a jury trial and their right to most avenues of appeal, and often requiring homeowners to submit their claims to an arbitration service that is biased in favor of builders and developers, are unconscionable.
Some of the more serious problems that have developed regarding arbitration include the following:
- The Unfairness of a Pre-Dispute, “Boilerplate” Waiver of a Consumer’s Right to a Jury Trial. Almost all businesses now require consumers to waive their right to a jury trial up front in purchase or service contracts, before a dispute has even arisen and the consumer or homeowner knows what the nature and significance of the dispute is, and whether arbitration makes sense or whether a jury trial with court-supervised discovery is more appropriate.
- The “Repeat-Player” Syndrome Favors Business Interests. Because businesses tend to be repeat customers of arbitration service companies and arbitrators, these companies tend to populate their panels with arbitrators whose philosophy is aligned with that of the business interests. For example, our firm regularly obtains lists of proposed arbitrators in our construction defect cases that consist solely of construction industry defense lawyers and industry employees.
- The Playing Field Needs to be Re-leveled. Business interests keep track of the record of various arbitrators and can either blacklist certain arbitrators whose decisions they don’t like, or favor arbitrators who’ve taken positions on important that align with theirs. After a former Court of Appeals Judge handed down a notable arbitration award in 1998 that rendered a nearly $2 million award to families our firm represented against a prominent homebuilder, no builder wanted that judge to handle any future disputes. The building industry hurt that judge’s livelihood. Every other arbitrator in town now fears the consequences of ruling against building industry interests. Consumers don’t have access to the same kind of historical information regarding an arbitrator’s track record that business interests do.
- Some Arbitrations Have Become More Expensive Than Litigation. Today’s arbitration system can be more expensive than litigation. Consumers usually must pay half the expense of the arbitrator, plus the administrative costs and filing fees. These administrative costs and filing fees can easily equal $3,000-$5,000 in a typical single-family home case involving structural problems. Compare these figures to the usual court filing fee of less than $420. Most arbitrators charge between $150 and $300 an hour for their time. Since some leading arbitration service companies require three arbitrators, a one-day hearing (eight hours) can cost between $3,600 and $7,200. Even a small case will cost a consumer many times what it would have cost to bring the matter before Colorado’s small claims or county courts.
- The Little Guy Gets Hurt Under Current Law. If several homeowners or consumers have the same problem (for example, they believe they were overcharged $100 a year for a particular service), they could all join together in one lawsuit to obtain a refund from the service provider, and share the cost of that lawsuit. This ability to share makes it economical for them to pursue recovery of the refund; without it, they’d have to file separate suits and it would cost each consumer more money to pursue this refund than they could hope to recover. Because business interests win by adopting a “divide and conquer” philosophy, they insist on separate arbitration proceedings.
- Big Business is Beginning to Run the Arbitration Business. Businesses have been setting up their own, affiliated arbitration service companies and populating their panels of arbitrators with people from their own industry.
- The Current System Doesn’t Effectively Uncover Arbitrator Bias and Prejudice Up Front: Such a Process Would Save Time and Money. Under the current system, there’s no process in place that compel arbitrators and arbitration service providers to affirmatively disclose all potential biases. Instead, the parties are required to wait until they have spent substantial time, money and resources on an arbitration tainted by an arbitrator who is biased, and then file a second suit in the District Court to try to get the decision overturned.
- Arbitrators Should be Required to Follow the Law. Colorado doesn’t require arbitrators to follow or apply the law, even important consumer-protection laws.
- Market Forces Will Not Solve the Unfairness Presented by Arbitration to the Typical Consumer. Some argue that market forces will prevent businesses from benefiting from arbitration clauses at the expense of the ordinary consumer. This argument ignores the reality that most consumers don’t appreciate the legal ramifications of agreeing to arbitrate disputes and waiving their right to a jury trial before the dispute has even arisen, and that an informed decision cannot occur until after the dispute has arisen and the nature of the dispute and the amount at issue is known.
- We need an arbitration system where the fundamental rights of everyone are protected, ensuring that: (a) homeowners and consumers aren’t required to waive their right to a jury trial or to go to court before the nature of the dispute and the amount at issue is known; and, (b) procedures are put in place ensuring that arbitrators are fair and impartial, and will follow and enforce Colorado law.
It’s important that homeowners and consumers can believe that whatever forum hears their grievances, those grievances will be taken seriously, that the laws of Colorado will be applied, and that the decision-maker will be fair and impartial. Today’s arbitration system is being distorted and manipulated by business interests that are better organized, more powerful, more sophisticated, and better financed than ordinary consumers.
Colorado construction defect attorneys Scott F. Sullan and Ronald M. Sandgrund worked closely with state legislators in attempting to craft and pass the Arbitration Fairness Act in 1999. Although this legislation was defeated, Scott and Ron remained closely involved in the Colorado legislature’s review and adoption of significant amendments to Colorado’s Uniform Arbitration Act in 2004, giving voice to the needs and concerns of Colorado’s home buyers and other consumers.
“Integration clauses” are frequently hidden in purchase contracts, which make it difficult for homeowners to obtain relief for misleading statements made by salespeople. Some unscrupulous builders or their salespeople use these clauses to allow them to say one thing, but to contradict that in the fine print of the written contract. Colorado’s Homeowner Protection Act of 2007 voids many contract disclaimers and liability limitations.
Colorado courts won’t necessarily turn a blind eye to such practices, and relief often can be found, sometimes under Colorado’s Consumer Protection Act. Our Denver construction defect attorneys can analyze your contract documents and the circumstances surrounding the misrepresentation or non-disclosure and help you determine whether the law allows you relief.
The time limits within which to bring a lawsuit (or demand arbitration) vary depending on who you are suing, the nature of the activity giving rise to your claim, and the legal theory you are pursuing. Some warranties and contracts have additional, and very strict, time limits for giving notice of a claim or for instituting suit. Colorado's "builder-contractor" statute of limitations and statute of repose are complicated and difficult to apply - their application depends on the precise facts underlying your claim, when the problem became known, the nature of the problem, etc. There is almost never a simple answer to the question of what is the exact date before which you must file suit or demand arbitration or be forever barred from bringing a construction defect claim in Colorado.
The various deadlines for making a claim or filing suit should be explored with a lawyer as soon as you recognize a problem. Special statutes of limitations may apply to homeowner association claims against developers who appointed members to the board of directors of the homeowner association, and some of these time limits may be extended beyond when "declarant control" ends.
Because there are various laws which limit the amount of time within which certain kinds of claims must be filed in court, or with certain regulatory or administrative agencies, or within which written notice of a claim or demand for arbitration must be given as required by statute or contract, or else be forever barred, we urge homeowners to act promptly in finding a lawyer to help you out if you intend to pursue a claim.
As to your builder and its subcontractors, engineers, and architect, you may only have the lesser of two years from the date you, or any former owner, first noticed a problem with your home, or six years from the date of substantial completion of your home, to bring a formal claim against those you believe to be responsible for the problem. If the problem first arose during the fifth or sixth year following "substantial completion" of the home, you may have two years from that date to sue. Some courts have found that the date of "substantial completion" of the home is the same date the certificate of occupancy was issued, not later, such as when your home was first sold. It is possible that the lawyer you consult with may determine that a theory of recovery exists which may allow you to sue beyond these deadlines. (See FAQ No. 17 for information on 2015 legislation considered by Colorado’s General Assembly intended to substantially shorten the statutes of limitations and repose applicable to single-family home owner construction defect claims.)
In addition, you may only have a year within which to file suit on some unique claims (for example, certain kinds of claims brought under Colorado's Common Interest Ownership Act), and some claims against governmental entities require that a special notice of claim be delivered within six months of the date of the injury, damage or loss. In 2003, the Colorado legislature passed the Construction Defect Action Reform Act of 2003 ("CDARA II"). Firm attorneys Scott Sullan and Ron Sandgrund were significantly involved in shaping this body of laws in an effort to render it more even-handed and fair to homeowners. CDARA II imposes a mandatory "Notice of Claim" procedure that homeowners and builders must follow before a homeowner or homeowner association can file suit on a construction defect. Because of the complexity of this law, and the serious consequences that can occur if the Notice of Claim process is not properly followed, consultation with a lawyer is advisable.
Colorado's Homeowner Protection Act of 2007 may void a builder's attempt to improperly shorten the suit limitation deadline.
Depending on the legal theories you pursue, different recoveries or damages may be permitted.
Among the different kinds of money damages and other relief you may be able to recover are (although many of these recoveries have been lost or limited by changes in the law following passage of the Construction Defect Action Reform Acts of 2001 and 2003):
• actual and compensatory damages, including the past and future costs of repairing and restoring your damaged home, and any contents damaged due to the defect (such as carpet and furniture damage due to leaking windows);
• loss of income if you work out of your home and your income stream has been impaired due to the defect;
• fees and expenses of consulting experts (including engineering and construction costs incurred in inspecting your home or townhome/condominium, analyzing the problems with your home or townhome/condominium, and determining the cause of those problems and the repairs needed to reasonably, permanently remedy those problems);
• diminution in value of your home or townhome/condominium, including "stigma" damages; past and future costs of repairing your home and restoring it to the condition warranted, represented and/or promised by your builder;
• compensation for your loss of the use and enjoyment of your home, and for your annoyance, inconvenience, aggravation, and discomfort;
• compensation for the expense of appraisal fees, storage charges, and cleaning costs;
• compensation for the reasonable cost of rental or similar housing during periods of repair or eviction;
• under limited circumstances, exemplary or punitive damages, which damages are intended to punish a defendant and deter particularly malicious or reckless conduct in the future;
• statutory monetary penalties, such as may be available under Colorado's Soils Disclosure Statute;
• pre-judgment and post-judgment interest on your damages as permitted by law;
• treble damages pursuant to Colorado's Consumer Protection Act; and,
• attorney fees and costs pursuant to statute (such as Colorado's Consumer Protection Act and Common Interest Ownership Act or the federal Interstate Land Sales Full Disclosure Act ), contract or, in rare instances, another legal theory.
Included among the different kinds of equitable relief you may be entitled to obtain is rescission of the sale of your home, whereby purchase monies are returned to you and the home is given back to the builder.
Changes in the law following passage of the Construction Defect Action Reform Acts of 2001 ("CDARA I") and 2003 ("CDARA II") now require homeowners to allow their builder or developer "one last chance" to make things right. If the builder or developer simply participates in this "right to offer to cure" process, the builder or developer may obtain immunity from treble damages under Colorado’s Consumer Protection Act despite the fact the defect may not be adequately and permanently repaired and despite the fact the builder or developer may have defrauded the homeowner. Sadly, even if the builder ignores its customers’ complaints and fails to participate in this process at all, these new laws still deny all Colorado property owners rights and remedies they have benefited from for many decades.
Homeowner and property rights representatives have joined together in an effort to restore the rights stripped away by CDARA II, seeking to restore the status quo and leveling the playing field between property owners and those builders who fail to construct real property improvements in a good and workmanlike manner.
Generally, anyone who suffers a legal injury recognized by the law can sue those responsible for causing the injury. Exactly who can sue and for what kinds of damages depends on whether the individual unit or a common element has suffered damage, what steps are necessary to repair the damage to ensure it does not occur again, and the specific language of the homeowner's Purchase Contract and his or her association's governing documents, such as the Declaration of Covenants and HOA Bylaws.
Original and later owners of a home or townhome/condominium generally all have rights of some kind under the law. Often, the homeowner association will join with individual unit owners in the suit; sometimes the homeowner association will sue on behalf of or for the benefit of the individual unit owners, particularly if an identical construction defect is repeated from one unit to the next, or if the defect affects a "common element" owned and used by the homeowner association and the individual unit owners. Careful analysis and investigation must be made into the nature of the problem, potentially applicable suit deadlines, and the need for the joinder of individual unit owners and the homeowner association in one lawsuit.
Sometimes the homeowner association is still controlled by the developer. This factor can add another layer of issues that a lawyer must analyze because of the complicated legal issues that may arise under these circumstances.
In many ways, and sometimes significantly. This area of the law is very confusing. Some legal rights and claims may only be available to the townhome/condominium unit owner's homeowner association, and not the unit owner himself or herself.
On the other hand, other legal rights and claims may only be available to the townhome/condominium unit owner and not the association. And, sometimes, it is advisable for an individual townhome/condominium unit owner and his or her homeowner association to join together in a single lawsuit; in some cases, such joinder may be required by the court.
Your lawyer needs to help you make the right choices as to who should bring suit and who should be sued if you are forced to file a lawsuit.
If the problem with your home is due to the fault of someone in addition to or other than the builder, you may be able to bring claims against that person. These other parties may include:
• the builder’s subcontractors (e.g., a subcontractor who fails to obtain the proper grade around your home);
• engineers (e.g., for specifying an incorrect foundation system); or
• architects (e.g., for providing deficient drawings or specifications).
If the problem involves a faulty product (e.g., windows that leak, bricks that spall, or shingles that blister, crack, and fail prematurely), then recovery may possibly be obtained against the manufacturer and/or supplier of that product under Colorado's product liability laws or for violation of the federal Magnuson-Moss Warranty Act.
A "class action" is a lawsuit brought by a small group of people in their own name, individually, and in the name of other persons similarly situated, "representatively," such as on behalf of persons facing similar construction defect problems. When forty people join together in a lawsuit, this is not a class action. If two people join in a lawsuit, and sue on behalf of themselves and forty other people similarly situated, this is a class action.
While a lawsuit alleging "class action" claims can be filed based on general and still unproven allegations, a lengthy and complicated "class certification" procedure generally must follow, during which certification process proof supporting the factual and legal basis for the class claims must be presented to a Judge. Only if the Judge certifies the case as a class action can the class action claims proceed. There are both significant advantages and disadvantages to class action lawsuits. Every case must be evaluated on its specific facts before the decision is made whether to file a class action, as well as the later decision whether to seek class certification.
In 2005, Congress amended the country's class action laws to curb class action lawsuit abuses.
Although these new laws were well intended and badly needed, they contain provisions that now can abused by lawsuit defendants. These new laws, coupled with Colorado's Construction Defect Action Reform Acts of 2001 and 2003, have made it more difficult for homeowners to join together in a class action. If a formal class action is not advisable, it may make sense for a large group of homeowners or townhome/condominium owners in a neighborhood or development to get together and retain one law firm to represent them, sometimes known as a "collective action." Great cost-savings often can be achieved, and the strength of a group of homeowners standing together against a builder can be dramatic.
Unfortunately, many builders and developers now insert arbitration clauses in their contracts in an effort to destroy the ability of property owners to join forces in a class action or collective action.
Adopting such a "divide and conquer" philosophy has proven very effective for the building industry. For other problems related to arbitration clauses, see FAQ No. 7, "My builder tells me that if I do not like the way it is responding to my complaints there is an arbitration clause in my purchase contract that requires me to arbitrate my claims, and that I have given up my right to a jury trial. Is this true?"
A lawsuit intended to obtain money from negligent builders to fix construction defects should have no greater affect on property values than the existence of those defects already has had on property values, since it is likely that the owner of a home or other real property is required to disclose to prospective purchasers the existence of known defects in the property, particularly "hidden" defects not readily detectable.
In the case of a townhome/condominium owner, he or she may be required to disclose the existence of defects in other portions of their development even if those defects do not physically affect his or her home because all owners may share financial responsibility for the cost of repairing the defects. Such disclosure is just as likely to affect an owner's ability to sell his or her home as the existence of a lawsuit directed at getting those defects repaired.
Some believe that a homeowner who has or whose homeowner association has taken legal action to get defects repaired has a more saleable home than an owner who has not taken these steps.
Colorado's Common Interest Ownership Act, which governs most townhome/condominium and other multi-family developments, requires additional disclosures.
Consultation with a competent real estate broker can provide additional insights into the answer to this question.
If you are the owner of a single-family home, bring with you all paperwork relating to: the marketing and sale of your home; the closing on your home; any problems with or repairs to your home; warranty booklets and enrollment forms; any home inspection reports and property disclosure statements; your homeowners' insurance policy; all soils and engineering reports; any construction drawings or specifications; and all correspondence between you and the developer/builder and any contractors.
If you are an owner of a condominium or townhome, then in addition to the materials just described, also bring your homeowner association's Declaration of Covenants, Bylaws, and Rules and Regulations, and any correspondence between you and your homeowner association.
If you are a homeowner association board member, then in addition to all the materials described above, bring everything you have relating to the developer’s turnover of board control to the unit owners, as well as all board minutes pre- and post- turnover, and all correspondence with the developer-declarant relating to any construction defects.
If you are not the original purchaser of your home, then bring any paperwork the person you bought from gave to you; all your closing documents; and, any other documents that appear to relate to the problem at hand.
Changes in the law following passage of the Construction Defect Action Reform Acts of 2001 and 2003 (“CDARA”) rewrote the rules of the game for builders, developers, contractors, design professionals, and homeowners. Among other things, these laws provide the following:
• Homeowners are required to allow their builder or developer "one last chance" to make things right. Simply if the builder or developer "participates" in this "right to offer a cure," the builder or developer may obtain immunity from treble damages under Colorado’s Consumer Protection Act. Unfortunately, even if the builder or developer committed consumer fraud during the original sales transaction, and even if the builder or developer ignores its customers’ complaints after sale, these laws strip Colorado property owners of rights and remedies they enjoyed for many decades in Colorado if the builder or developer participates in this "right to offer a cure," despite the fact no repairs are made and insufficient money is offered to a homeowner.
• The Homeowner Protection Act of 2007 (“HPA”) clarified and amended two subsections of CDARA. The primary purpose of the HPA was to render void any pre-dispute waiver of and many limitations on a residential property owner’s or homeowner association’s ability to recover the damages permitted by CDARA or Colorado’s Consumer Protection Act. Thus, among other things, the HPA prevents a builder from contractually limiting a homeowner or homeowner association’s time to sue for a for a construction defect to a period shorter than provided by the statue or limitations or repose applicable to each claim asserted.
Our firm’s attorneys have testified before Colorado's legislature against proposed anti-consumer and anti-homeowner legislation. They are working to support homeowner rights and due process legislation intended to minimize the evils of the current construction defect and arbitration systems in Colorado.
If you have had an unsatisfactory experience with construction defects or arbitration, or want to join the fight to push back against efforts to take away homeowner rights, we can help you get involved. Please e-mail us (CD@burgsimpson.com) your comments and indicate whether you would be willing to testify before the legislature on these issues if necessary.