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Colorado lawmakers gear up for construction-defects reform in 2015

By John Aguilar

The Denver Post

Supporters of a change to a Colorado law blamed for slowing condominium construction to a trickle are hopeful 2015 will be the year they succeed.

Lawmakers have tried for the past two years to reform Colorado's construction-defects law, which developers complain makes building condos too fraught with legal liability.

Both times, the legislature came up empty.

But that could change in the new legislative session, which begins Wednesday. Supporters of reforming Colorado's law say a new Lakewood ordinance, designed to spur condo building in that city, is apt to serve as the impetus for passing a bill, as other cities eye similar ordinances.

"A patchwork around the state on this issue is not the way to go," said Rep. Brian DelGrosso, R-Loveland, who was part of the reform effort in the last session. "Hopefully, the Lakewood measure will spur the conversation this year."

According to the market research firm Metrostudy, condos accounted for more than 20 percent of all housing starts — or more than 4,000 units — in late 2005 but only 3 percent through the first three quarters of 2014.

Just last month, Denver Mayor Michael Hancock said reforming the law was his top legislative priority.

"Right to repair"A key concern for builders is that Colorado law lets the majority of a homeowners association board, rather than a majority of the homeowners, decide whether to sue over construction defects. The law also allows home owners to reject a fix offered by a builder even before the builder does the work.

Builders say the law is particularly troublesome for condos because so many home owners live under one roof, complicating legal action.

In October, Lakewood took matters into its own hands by passing an ordinance making it tougher for homeowners living in multi-family developments to sue over defects, like leaky windows, cracked concrete and bad drainage.

The city's measure gives builders a "right to repair" faulty work before facing legal action and requires that a majority of home owners approve legal action before it is taken.

Nancy Stockton, president of the homeowners association at the Vallagio at Inverness in Arapahoe County, said following Lakewood's example statewide would only make it that much harder to hold builders accountable for the quality of their work.

"I think it would be a license for builders to cut corners and be even more lax in their construction," said Stockton, whose community is in litigation over alleged defects. "The dispute process is already onerous."

John Stovall, a resident at Denver's Penterra Plaza, said it took a lawsuit seeking $20 million to get a $10.5 million settlement from the developer to fix the 24-story building's problems.

He said initial efforts to get the problems fixed were inadequate, leading to the litigation and then months where homeowners were besieged by workers fixing windows and pushing wheelbarrows of bricks through their high-end units to address subpar mortar work.

"They had to go through each unit multiple times," Stovall said. "It went on for essentially two years. These are people's homes."

But builders, and increasingly municipal leaders, say in many cases homeowners associations and trial lawyers are just looking for any opportunity to exploit honest and fixable mistakes.

The accompanying spike in the cost of insurance policies for condo projects has deterred many builders from taking on the work in Colorado, they say.

Justin McClure, a principal with Louisville-based DELO, said getting a loan for condo construction is tough because lenders are worried about the project getting tangled up in legal action.

DELO is sitting on a 46-acre parcel in Erie and a 20-acre parcel in Longmont, both of which McClure said would be perfect for condos.

"A lot of my building partners have ended up in litigation," he said. "It's just not worth taking on that type of liability."


Background Photo Credit: Kasia Broussalian © 2015