A proposed bill to extend the number of years homeowners could file lawsuits based on alleged construction defects in new construction could have dire consequences on affordable housing opportunities for Coloradans looking to enter homeownership.
Colorado Sen. Robert Rodriguez, D-Denver, introduced legislation this week that would increase the statutory limitation period for actions based on construction defects from six years to 10 years. The bill, first reported by Denver Business Journal’s Ed Sealover, would essentially reverse any progress made by 2017 legislation signed by Gov. John Hickenlooper that made it more difficult for homeowner associations to sue builders for construction defects in condominium developments and single-family homes.
Before that 2017 legislation, developers stayed away from condo projects in Denver due to the number of lawsuits that piled up. That legislation required a majority of property owners — not HOA board members — to opt to file a construction defect lawsuit. Subsequent legal rulings gave developers even more confidence in condo developments, spurring a number of new projects.
By extending the statute by four years, homeowners would have more time to wait for defects to pop up, according to the proposed bill, putting more risk on developers pursuing projects like condominium towers in the city.
As a result, Dennis Polk, a Lakewood attorney with Holley, Albertson & Polk law firm, says the proposed legislation would “effectively eliminate any prospect of affordable housing in Colorado.”
“This bill would effectively eliminate any statute of limitations or statute of repose with respect to construction in Colorado,” he said in an email to Denver High-Rise Living. “There is virtually no other activity in Colorado that would be subject to this type of statute.”
The bill also includes new tolling provisions. Depending on how the bill is interpreted, Matt Rork, an attorney with Fairfield & Woods, said it could be argued that exposure to contractors could essentially be indefinite — a nightmare when securing insurance.
“How will you get insurance for that?” Rork said. “No one is going to insure until the end of time. It’s bad enough already in getting insurance on construction projects.”
Many policies today, Polk added, have sunset limitations that are triggered by the existing statute of limitations.
“The insurance market is already very tight in this state,” he said. “If this is adopted there will be very few insurers willing to write insurance in this market.”
Proponents of the bill argue homeowners — especially condo owners — need more time to find construction defects.
Rork questions that argument.
“We hear from politicians that we need more affordable housing, yet here is a proposed law that directly refutes the claim that they want more affordable homes,” he said. “It’s hypocritical.”
Sealover reported that within seven months of the 2017 legislation being signed into law, 12 new affordable condo developments totaling 1,200 units were announced or broke ground across metro Denver.