In a bid to spur condominium construction in Colorado, a group of state lawmakers introduced a bill Monday aimed at reducing lawsuits over construction errors by narrowing when they can be filed and by giving builders and homeowners an avenue to make repairs faster and without going to court.
Senate Bill 106, the so-called construction defects measure, is a major part of the affordable housing debate at the Colorado Capitol this year.
Proponents of easing Colorado’s construction defects laws, including Gov. Jared Polis, see the change as a way to persuade builders to construct more homes that middle-income Coloradans can afford. The median sale price of a single-family home in Colorado was about $625,000 in November, according to Redfin, while the median sale price of a condo was about $450,000.
“This bill is not going to fix the entire problem and we know that going in,” said Sen. Rachel Zenzinger, an Arvada Democrat and one of the lead sponsors of the measure. But she argued the legislation will make it easier for builders to get insured for condo projects, which they say is their biggest hurdle.
Opponents, however, fear it will leave homeowners more susceptible to shoddy construction.
“If there’s quality housing,” said Jonathan Harris, chair of the group Build Our Homes Right, which opposes the measure, “there’s no reason to do this.”
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Construction defects legislation has been a political third rail in Colorado for years. The last major change to the state’s construction defects laws was made in 2017. But rising housing costs and the failure of other affordable housing measures has thrust the issue back to the forefront.
Additionally, apartment building construction has outpaced condo-building projects in Colorado since 2008.
From 2018 to 2022, condo construction in the Denver metro area fell to about 600 new units per year, down 80% from the five-year period from 2002 to 2006, when an average of 3,000 new units were built per year, according to data gathered by Zonda.
But it’s not just Colorado. Condo construction is at a historic low across the U.S., according to the Urban Institute, a policy think tank based in Washington, D.C.
Conversely, Build Our Homes Right is backing a measure that would make it easier for homeowners to sue builders for construction errors, including by extending the statute of limitations for when a claim can be brought to 10 years from six and starting the limitation at when a homeowner identifies the underlying cause of a construction error instead of its symptoms.
That legislation appears likely to be vetoed if it makes it to the governor’s desk.
Details of the bill
The most meaningful part of Senate Bill 106 seeks to prohibit construction defects claims for technical building code violations that don’t affect the habitability of a home — like roofing nails that are spaced too close together or too far apart but that don’t cause a leak or weaken a structure.
Zenzinger said if there’s no “harm or damage … we kind of feel like the liability has already been addressed.”
The measure would restrict a homeowner from bringing a lawsuit unless a building code violation presents an “imminent and unreasonable” threat to health or safety or risk of bodily harm or death. The claim could also be brought if the violation causes “actual damage to real or personal property,” “actual loss of the use of real or personal property” or injury or death.
“We’re not diminishing standards,” she said. “Standards are the standards and we want them to be met. And if they’re not met and something happens and your window caves in, there’s actual damage to your property that is improperly installed, there is a defect and you deserve a pathway to get it remedied as quickly as possible.”
Secondarily, the measure would require that an HOA get the informed consent of 67% of its member-owners before filing a construction defects lawsuit, up from a majority of voting owners. The bill would also limit the circumstances under which an HOA could bring a claim for errors affecting common areas and/or multiple units. It would force the association, when bringing suits regarding errors that affect multiple units but not common areas, to have “a fiduciary duty to act in the best interest of each unit owner, separate and apart from any interest the association may have in the matter.”
Finally, the bill would create a “right to remedy” under which a builder could offer a homeowner a plan to fix the error — or have another contractor fix the error. The homeowner could accept the offer or reject it and pursue a lawsuit.
If the offer is accepted, the homeowner would waive their right to sue unless they wanted to bring a claim about the remedial work.
“This isn’t forced arbitration,” Zenzinger said. “This is another pathway, an alternative pathway, that we think will provide meaningful relief.”
Harris, a condo owner in Denver who battled for years with the company that built his unit, worries that raising the HOA threshold for when a lawsuit can be filed would be too stringent. He thinks getting the consent of out-of-state owners will be very difficult.
“Even getting homeowners to an annual HOA meeting is almost impossible,” he said.
He also feels the proposed changes around when a construction defects lawsuit can be brought would make it too difficult for homeowners to hold builders accountable. Additionally, he worries that the right-to-remedy provision will lead to poor repairs.
An uncertain path toward becoming law
It’s unclear whether Senate Bill 106 will have enough support to clear the legislature, particularly the House, which has a more liberal bent.
“It’s a charged issue,” said Sen. James Coleman, a Denver Democrat who is Zenzinger’s co-lead sponsor of the bill in the Senate.
He said he signed onto the bill because he knows Colorado needs more housing and because he thinks the measure strikes the right balance between incentivizing more condo construction and protecting homeowners.
Rep. Shannon Bird, D-Westminster, is the bill’s main sponsor in the House.
The measure was introduced in the Senate with 10 cosponsors, six of them Republicans. Eighteen “yes” votes are needed in the chamber for the measure to advance to the House, where the legislation already has 10 cosponsors. But 33 “yes” votes are needed in the House to send the bill to the governor’s desk.
And that’s not to mention the gantlet of committees the measure must make it through, too.
While Polis has voiced support for easing Colorado’s construction defects laws, he hasn’t endorsed Senate Bill 106.
“The governor has said many times that he is committed to looking at any solutions that actually reduce housing costs for Coloradans, and knows there isn’t one solution alone that will lower costs,” said Shelby Wieman, a Polis spokeswoman. “We will review all housing bills as they move through the legislative process, and the governor is supportive of efforts, including construction defects reform, to make it less costly to build new condos and homes.”
Zenzinger said trial lawyers, builders, the insurance industry and governor’s office were among the groups consulted as the bill was drafted.
“I feel really good about the coalition that we’ve put together,” she said.
Dave Davia, chair of the Homeownership Opportunity Alliance, which supports the measure, said his organization is “open to conversations on how to improve the bill” in order to get it passed. The alliance includes homebuilders, local governments, real estate agents, and business and housing groups.
“We are open to working with anybody who has thoughts and comments,” said Davia, who is also the CEO of the Rocky Mountain Mechanical Contractors Association and the incoming CEO of Colorado Concern, a nonprofit representing business leaders in the state.
Senate Bill 106 was assigned to the Senate Local Government & Housing Committee. Its first hearing hasn’t been scheduled yet.
The legislative session ends May 8.