When the topic of this article was first proposed to me, it took me some time to figure out how to describe a successful construction defect suit. At the end of the day, construction defect suits are really about damage control, i.e., minimizing the loss, and avoiding a runaway jury verdict or an unreasonably high arbitration award. For the vast majority of cases, there will not be an outcome the builder views as a win.
The reason for this doomsday outlook stems from Colorado’s implied warranty. When a builder builds and sells a home, it impliedly warrants, among other things, that it complies with the applicable building codes. Colorado courts have likened the breach of implied warranty claim to strict liability for construction defects.
The problem with this standard is that it is unreasonably high. New homes are designed by humans, built by humans, of natural and imperfect materials, in the elements, over a period of months. Given this variability, it is unrealistic to expect that any home will technically comply with some litigation expert’s interpretation of every code. There is no such thing as perfect construction, yet that is the standard for new homes in Colorado. Given that plaintiffs’ attorneys will spend thousands to tens of thousands of dollars per home to identify technical code violations, it is certain that they will be able to identify at least some defects. Once the defects are identified, there is blood in the water and the sharks start circling the builder.
It is for this reason that I would say that with rare exception, there is no “successful” construction defect suit. The biggest win for any builder is a resolution that does not involve attorneys. I have told clients since the beginning of my practice 20 years ago that happy homeowners do not call attorneys. Builders should go to great lengths to keep the homeowners happy, during the warranty period and beyond. Remember that your warranty period does not limit your homeowners’ ability to bring construction defect suits. Continue working with your homeowners to resolve legitimate problems through the entirety of Colorado’s statute of repose, which you should consider to be eight years after substantial completion. I can assure you that the time and money invested in keeping your homeowners from calling an attorney will pale in comparison to the time and money you will spend if they bring a construction defect action.
Even if you cannot keep your homeowners from calling a plaintiffs’ attorney, there is still one more opportunity to fend off a construction defect action. Colorado’s notice of claim process requires that, prior to suing you, a homeowner provide you a list of defects and opportunities to inspect the home and offer repairs. Do not let this opportunity pass you by. While the notice of claim process has had limited effect in fending off claims in multifamily projects, it has had a much higher success rate in the single-family home setting. Even if you do not hire an attorney to help you through this process, which you should, you should at least consult with a litigation defense expert to advise you which repairs will give you the best chance of resolving the issue pre-suit.