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Two Bills Could Reform Construction Defect Laws

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Two proposed bills might overhaul legislation regarding construction defects

The Colorado legislature is considering two different bills that take aim at the state’s Construction Defect Action Reform Act.

House Bill 24-1230 would extend the timeline in which a homeowner can bring a construction defect lawsuit against a builder—known as a statute of repose—from six to 10 years. It also would allow homeowners who are in the same neighborhood or development, even if they don’t have a homeowners’ association, to bring a claim against a builder together.

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Just four states have a shorter statute of repose than Colorado. Supporters of the bill say the goal is to encourage builders to work problems out with homeowners, honoring warranties and correcting defects to keep the cases from going to court.

The bill’s detractors say it will increase costs for builders and potentially slow down or reduce construction—at a time when the state is facing a housing shortage. In particular, they point to a provision in the bill that would require builders to pay homeowners a 6% pre-judgement interest on claims.

The second bill, Senate Bill 24-106, is focused on increasing condo stock in Colorado. The bill would give builders the ability to settle with homeowners outside of court and/or by fixing the problem. Homeowners could also choose a third party at the builder’s expense to fix the issue. 

Related: Colorado’s Construction Industry Faces Expanded Risk from Controversial Consumer Protection Bill

Supporters, which include builders and several municipal governments, say the bill will help decrease the frequency of court claims involving condo construction and lower insurance costs. They say it could help the state provide more affordable housing options for buyers, since condos tend to be less expensive than single-family homes.

Insurance can raise the price of a condo by tens of thousands of dollars, proponents of the bill say, which has led many builders to focus on single-family homes or multi-family rentals in recent years. According to research from the Common Sense Institute, insurance costs for condos are now 5.5% of a project’s hard costs, which is more than triple that of a multifamily rental construction project.

Opponents of the bill, however, say the bill will weaken consumer protections. For example, the bill requires two-thirds of condo complex owners to sign on for any lawsuit against a builder; currently, the requirement is just 50 percent.

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