For years now, construction defects reform has been a top priority for city officials, for affordable housing advocates, for builders and developers, and for years, it hasn’t happened.
The way to make progress on construction defects reform is through narrowly focused bills that tackle specific issues, state Sen. Angela Williams said Friday as she prepared to introduce one more such narrow bill to the suite of construction defects bills before the legislature this session.
Williams’ bill, SB 157, Construction Defect Actions Notice Vote Approval, would add informed consent and voting requirements before a homeowners’ association could proceed with a lawsuit over construction defects. Theoretically, it would reduce the number of lawsuits by putting up additional barriers while still preserving the right to sue.
“I think it’s fair, and I think it’s balanced,” Williams said. “And with the legislature looking at construction defects, I think we need to look at the rights of homeowners.”
The Denver Democrat described the issue as a “thicket” that won’t be solved with “one big jumbo bill” that tries to tackle every issue.
Williams also tried to take the stakes down a notch. Construction defects reform has been pitched as critical to bringing more for-purchase affordable housing onto the market. Instead, she recast the issue as “attainable housing,” not “affordable.”
“We are not trying to solve affordable housing with construction defects reform,” Williams said. But getting more condos would improve the range of options for buyers at the lower end of the market.
Colorado’s construction defects law has been widely blamed for the lack of new condo construction. It’s too easy to sue over problems with construction, and that’s made insurance prohibitively expensive, the argument goes.
Some housing economists have challenged this view. They say condo construction dried up because there wasn’t demand during the recession. And millennials who would otherwise be looking to buy condos were instead delaying marriage and even moving back home.
So William is focusing on narrow legislative changes like an informed consent bill and a bill with bipartisan support that would create a process for assigning liability among various subcontractors. That leaves untouched the question of binding arbitration. That’s been the big hang-up over several legislative sessions, and Kelly Brough of the Denver Metro Chamber said her coalition still considers informed consent and alternative dispute resolution — binding arbitration — as the twin pillars of meaningful reform.
“We are going to want to see both of those steps taken,” she said. “They’re fair, and they make sense.”
“Whether those are passed in one bill or two bills, I try not to be too picky about,” she added. “Here’s what I trust: When a coalition as diverse as the one we’ve put together says we know these will work and be fair, I know that will work.”
Brough said she believes SB 156, which includes alternative dispute resolution requirements, could pass if it could get a floor vote.
“Our hope is that we have leadership this year that will say let the legislators have a chance for a full vote and let the bills be heard,” she said.
But homeowners’ advocates like Build Our Homes Right are sure to fight tooth and nail against arbitration requirements. Developers already hold the upper hand, and homeowners need the ability to take cases to trial, they argue.
Here are the construction defects bills:
SB 45, Construction Defect Claim Allocation Of Defense Costs, has bipartisan support, including from leadership in both chambers. Senate President Kevin Grantham is the Republican sponsor in the Senate and Speaker of the House Crisanta Duran is the Democratic sponsor in the House. It creates a process through which a judge would assign various degrees of liability to subcontractors, rather than the main builder hitting up the various subcontractors and those folks having their own legal battles. The idea is that this would create more certainty around liability and bring down insurance costs, which supposedly are the big barrier to condo development. As Colorado Politics reported, a lot of people in the construction industry aren’t happy about it and think it avoids the real issue, which is lawsuits. It passed out of the Senate Business, Labor and Technology Committee on a 6-1 vote, but it will probably need some changes to make it into law.
SB 155, Statutory Definition of Construction Defect, would amend the definition of construction defects in existing law. It’s set to be heard by the Senate Business, Labor and Technology Committee on Feb. 27.
SB 156, Homeowners’ Association Construction Defect Lawsuit Approval Timelines, requires mediation or arbitration for construction defects disputes and doesn’t allow homeowners’ associations to amend their governing documents to change that. Homeowners’ advocates don’t like that because often the developer plays a big role in writing those governing documents. This is similar to bills that have been introduced and failed in previous sessions. Groups that represent homeowners’ interests are adamantly opposed to alternative dispute resolution requirements because they believe that process often favors developers and builders. This bill is scheduled to be heard in the Senate Business, Labor and Technology Committee Feb. 27.
SB 157, Construction Defect Actions Notice Vote Approval, would require that HOAs provide notice to unit owners of an intent to sue, along with disclosure of the costs and risks of such an action, and then requires a 180-day voting period during which a majority of the unit owners must approve the lawsuit for it to proceed. If a builder or developer still owns some of the units, that entity wouldn’t get a vote. The idea here is that it preserves the ability to sue, but with additional requirements, there would be fewer lawsuits. A hearing has not been scheduled yet.
- HB 1169, Construction Defect Litigation Builder’s Right To Repair, would allow a builder to fix a problem or offer a monetary settlement before a homeowner could pursue damages. This bill has a lot of Republican sponsors, but it’s been assigned to the House State, Veterans and Military Affairs Committee, the “kill” committee for bills that don’t have the support of Democratic leadership. A hearing has been scheduled for March 1.