As the Colorado Legislature begins its 2015 session, construction defect reform legislation is again at the fore. Senate Bill 177 was introduced on February 10 in an effort to spur condominium projects by providing developers new protections that would make it more difficult for homeowners associations to initiate construction defect class litigation.

Formulated as an amendment to the Colorado Common Interest Ownership Act (CIOA) rather than the Construction Defect Action Reform Act (CDARA), the primary changes that would be made by this bill are:

  • It would require a majority of unit owners in a CIOA community (other than the declarant) to vote in favor of any class-action lawsuit primarily asserting construction defect claims, rather than just a majority of the homeowners association board, as required now.
  • The homeowners association board must inform all unit owners about anticipated litigation before proceeding with it, including potential cost and impact on their ability to refinance or sell their homes.
  • Any provision requiring disputes to go to alternative conflict resolution, such as arbitration or mediation, rather than proceed in court, cannot be removed by the homeowners association board without the developer’s consent.

While developers already had the ability to include these provisions in the declaration for the planned community, this bill would establish base requirements that could not be altered unilaterally by the unit owners or association board.

It is important to note that, because Senate Bill 177 seeks to amend CIOA rather than CDARA, the proposed amendments would not affect all construction projects, only planned communities under CIOA, and, among those, primarily condominium and townhome communities.

A separate bill, Senate Bill 91, introduced on January 14, proposes to amend CDARA by reducing the statute of limitations and statute of repose to bring construction defect-related litigation. This bill would require any construction defect-related claims to be brought within one year of the date the defect physically manifests, and in no event later than four years after the date the improvement is completed. Because Senate Bill 91 proposes to amend CDARA, the amendment would directly affect all construction projects in the State of Colorado.

As with similar legislation that has failed in recent years, Senate Bills 91 and 177 are expected to generate heated debate among legislators.

On a related note, and partially in response to prior failed attempts at state legislation, two home rule municipalities, the City of Lakewood and the City of Lone Tree, have adopted local construction defect ordinances that deviate from state requirements. These ordinances include establishing time frames for notifying the builder of an alleged construction defect and allowing the builder to inspect the property and repair the problem prior to filing of a lawsuit. This divergence from state law raises questions about the power of home rule municipalities and will likely be challenged in due time.

Ballard Spahr’s Real Estate and Construction Litigation Group will continue to monitor and provide updates on these matters. For more information please contact Christopher W. Payne at 303.299.7345 or payne@ballardspahr.com, Patrick H. Pugh at 303.299.7325 or pughp@ballardspahr.com, or the member of the group with whom you work.


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