Centerpiece construction defect bill assigned to ‘kill committee’

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The hammer appears to have come down on a centerpiece construction defect bill after the measure was assigned to a so-called “kill committee” in the House.

But the likely demise of Senate Bill 156 opens the door for the development of a new construction defect effort, which is coming in the form of fresh legislation.

After passing the Republican-controlled Senate last week, 23-12, Senate Bill 156 was assigned to the House State, Veterans and Military Affairs Committee on Wednesday, a committee used by the majority party to end unfavorable legislation.

Speaker Crisanta Duran, D-Denver, has maintained that homeowners should have a right to a jury trial in addressing construction defect disputes. Senate Bill 156 would require arbitration or mediation before filing suit.

It also would require a homeowners association to obtain written approval from a majority of unit owners in order to move forward with litigation. Associations would have to give notice to members of an intent to sue, along with disclosures around the estimated cost of a lawsuit.

Duran says she is interested in finding common ground on requiring a vote and informed consent. But she has concerns with requiring arbitration or mediation before a lawsuit is filed.

Stakeholders – including homebuilders, local elected officials and business leaders – knew that Duran had her issues, but they had hoped Senate Bill 156 would have been assigned to a business committee, rather than a committee used to kill unfavorable bills.

“After a strong bipartisan vote in the Senate the bill will now go through a pretend hearing in the House,” said Mike Kopp, a former state senator who is president and chief executive of the business group Colorado Concern. “It really betrays a shocking indifference to the 40 metro mayors – representing 3 million Coloradans – who asked for one simple thing: a fair hearing so the local reforms could be voted on by the full House of Representatives for the first time ever.”

“It is unfortunate when an issue of great concern to over 3 million residents is denied a fair shot of being heard on the floor of the people’s House,” added Lakewood Mayor Adam Paul, with the Metro Mayors Caucus, a member of the Homeownership Opportunity Alliance, which has been leading efforts to curb defect lawsuits.

“The real losers today are average hardworking Coloradans with a dream of buying a home. They are the ones left, yet again, with nothing.”

Duran, however, maintains that the bill will receive a fair hearing.

“Going to the State Affairs committee will ensure that it is well vetted,” Duran told Colorado Politics. “We’re continuing our work to also try and find common ground on different issues. I have said that I would like to find common ground as it relates to the threshold of homeowners engaging in litigation and also informed consent. We’re continuing to work. It’s early.”

Construction defect litigation reform has emerged as one of the most critical issues facing the legislature this year. Duran highlighted it in her opening day remarks, as did Senate President Kevin Grantham R-Canon City. Gov. John Hickenlooper, a Democrat, also underscored the issue in his State of the State address.

Rep. Cole Wist, R-Centennial, who has been leading defect talks for Republicans in the House, and who was a sponsor of Senate Bill 156, expressed disappointment on Wednesday.

“We all know what it means when a bill goes to that committee …” Wist said. “The disappointing thing about this getting sent to the kill committee is that we don’t get it to the floor for discussion.”

But Wist is optimistic that the legislature will succeed with meaningful defect reform this year, highlighting that he is working on another bipartisan bill with Reps. Alec Garnett, D-Denver, and Lori Saine, R-Firestone.

The bill would look similar to an effort that died in the legislature on Monday, Senate Bill 157, which would have required a majority of homeowners in an association to approve a lawsuit and also required disclosure to homeowners of a proposed suit.

Homeowners groups had supported the bill, underscoring the informed consent component of the measure while also allowing for ltiigation. Some viewed it as a compromise because the bill included a majority vote, something homeowners had opposed in the past.

But that bill faced its own political turmoil, as Sen. Angela Williams, D-Denver, decided to proceed with the measure on her own, abandoning a stakeholder group that had been working on the legislation.

Wist and his coalition are in many ways picking up where Senate Bill 157 left off.

The new measure that is expected to be introduced in the coming days would also address informed consent, as well as the majority vote component.

But it would not aggressively prohibit developers from influencing the vote by limiting the amount and type of contact that a builder subject to a lawsuit can have with homeowners. Senate Bill 157 sought to limit that communication.

Meanwhile, legislative leaders – including Duran and Grantham – hold out hope for another measure, Senate Bill 45, which aims at equitably dividing litigation defense costs. It has the potential to lower insurance rates, which would decrease costs for developers, potentially spurring development.

But the bill is opposed by the very groups it is intended to help, including developers.

Another more partisan defect bill, House Bill 1169, died in the House State, Veterans and Military Affairs Committee earlier this month. The bill would have clarified that a developer has the right to receive notice concerning a proposed defect lawsuit, and that the developer could inspect the property and then decide to repair the defect or settle before the association files a lawsuit.

Yet another bill, Senate Bill 155, would define “construction defect” in state law. Homeowners are concerned that the bill would give developers immunity from having to repair defects by excluding claims for defects creating a risk of bodily injury or a threat to life, health or safety. The fear is that developers could walk away from construction mistakes because the defect hadn’t yet caused injury or damage. That bill still hadn’t been scheduled for a hearing Wednesday.

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