The Next Evolution in Colorado Construction Defect Litigation?

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Since the 1990s, construction defect litigation in Colorado has focused on condominiums and townhomes. By representing homeowner associations instead of individual owners, plaintiffs’ attorneys can more easily aggregate claims, thereby increasing exponentially the claimed damages.

To accomplish this, plaintiffs’ attorneys rely on Colorado’s Common Interest Ownership Act (CCIOA), which provides that an association may “institute … litigation … in its own name on behalf of itself or two or more unit owners on matters affecting the common interest community.” So long as a particular defect affects two or more condominiums or townhomes, CCIOA provides the association standing to sue in its own name to seek recovery of the cost of repairing such defects. To avoid being embroiled in construction defect litigation, many builders have shied away from building condominiums and townhomes, building only single-family homes.

Because permits pulled for condominiums and townhomes have fallen from approximately 25% in 2006 to approximately 3%, plaintiffs’ attorneys have essentially run out of multifamily HOAs to represent in construction defect litigation. To keep busy, plaintiffs’ attorneys have expanded their clientele by representing single-family homeowners, commercial property owners and others. None of these types of cases, however, allow plaintiffs’ attorneys to easily aggregate their claims.

In a new twist, the Latitude at Vista Ridge Homeowners Association in Erie filed a construction defect lawsuit claiming damages for construction defects in both common elements and in the single- family homes owned by its members. This is the first instance, of which I am aware, in which an association has sued for alleged defects in single-family homes.

The issue regarding whether the association has standing to assert such claims is being hotly contested at the trial court level, where the association has argued that Colorado law provides it standing to bring construction defect claims on behalf of its members for defects in the individual homes, “regardless of any division of ownership or maintenance responsibilities between the association and its members with respect to the project’s units and common elements.”

On Dec. 5, 2017, Judge Todd Taylor of the 19th Judicial District issued an order, siding with the association, in which he ruled that CCIOA allows the association to bring construction defect actions on behalf of the single-family homeowners for defects in their homes. If this case is not resolved through settlement, I would expect it will make its way to the appellate courts. If the law of the land is indeed that HOAs in single-family home communities can sue the builder for defects in individual homes, then plaintiffs’ attorneys will have found another way to aggregate their claims, and they will not run short of construction defect claims any time soon.  

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