Every year, Colorado legislators pledge to tackle construction defects reform, and every year it doesn’t happen.
Democrats and Republicans swear THIS IS THE YEAR, and there’s a bill with bipartisan sponsorship from state House and Senate leadership that focuses not on construction liability directly but on the cost of insurance that builders have to carry as a result of the law.
The bill’s primary sponsors are Speaker of the House Crisanta Duran, a Denver Democrat, and Senate President Kevin Grantham, a Cañon City Republican. Co-sponsors are Assistant Minority Leader Cole Wist, a Centennial Republican, in the House and Sen. Angela Williams, a Denver Democrat, in the Senate.
The construction defects law made it easier to for homeowners to sue over shoddy construction. The poster child for construction defects is the Beauvallon in Golden Triangle, whose developers were found liable for $17 million in repairs.
Why is this such a big deal?
When it got easier for homeowners to sue, the insurance that developers and builders had to carry got a lot more expensive. Colorado’s construction defects law has been widely blamed for killing the condo market. Condos accounted for just 4 percent of new home starts in Denver in 2016, compared to 23 percent a decade ago. In turn, the lack of condo development has implications for affordable housing, particularly for first-time homebuyers of modest means looking to break into the market.
Changing this law wouldn’t directly help with affordable housing for lower-income people and renters, but it could increase the overall housing supply and move some renters into homeownership, reducing pressure on the rental market. That’s all assuming a construction defects fix would draw condo developers back. Local laws in a number of communities, including Denver and Lakewood, haven’t had that effect yet.
Construction defects reform has been a top priority for (some) lawmakers for several sessions in a row now, but it’s been a tough nut to crack because advocates and (some) lawmakers also want to preserve the ability of homeowners to sue if the builder really did something egregious.
The new proposal this session skirts the more contentious questions by targeting insurance rates.
“By targeting insurance rates we’re addressing the problem without reducing consumers’ right to protect the property that they spent their life’s savings to buy,” Duran said in her remarks opening the first day of the 2017 legislative session.
The bill would allow insurers to go to court through an expedited process to have defense costs assigned equitably among the liability insurers who are required to defend a defect claim.
Previous efforts at construction defects reform sought to put disputes through arbitration or mediation and would have required a majority of homeowners in a condo or homeowners association to approve legal action over defects.