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Momentum builds for construction-defects reform, but critics urge caution

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Legislative leaders from both sides of the aisle believe this is the year to pass robust construction defects reform in an effort to spur affordable housing development.

Lawmakers outlined their legislative agendas Thursday at a forum hosted by the Denver Metro Chamber of Commerce. After a disappointing outcome last year on the issue, Republicans and Democrats believe they can advance a package in the upcoming session.

“We all have the same goals on this, let’s get this fixed,” said incoming Senate President Kevin Grantham, R-Canon City. “This is not a Democrat or Republican issue … If we don’t have supply, where are they going to go?”

Grantham added of negotiations, “From the talks that I’ve been hearing and been involved in, we will come to some solution.”

Discussions fell apart last year in the last days of the legislative session. Talks became so complicated that legislation was never introduced, though lawmakers did debate measures around affordable housing.

The question is whether the legislature is headed down a path that would repeat history.

Lawmakers have for at least four years attempted to pass some semblance of construction defects reform, though they have failed each time, resulting in a patchwork of local ordinances across the state.

Last session, Democrats were adamant that a package on defects reform should also include work around affordable housing. The assumption is that the fear of defects lawsuits is keeping builders from constructing affordable condominiums and townhouses.

Incoming House Speaker Crisanta Duran, D-Denver, said that when the legislature convenes next Wednesday, she expects affordable housing and defects to continue to be discussed together. But Duran is passionate about protecting consumers from shoddy construction.

“I stand strong against taking away consumer rights,” Duran said.

Homeowners believe “consumer rights” should include a jury trial, while some on the other side—including homebuilders—argue that a specialty court or administrative process would be enough to resolve defects disputes.

While it is unclear what legislation might specifically look like in the upcoming session, lawmakers believe it would again revolve around requiring a majority of all homeowners in a development to agree to a lawsuit, rather than just a simple vote by the association board.

There could be as many as 10 bills on affordable housing and construction defects, according to sources close to discussions.

Other options on the table include requiring homeowners associations to enter into mediation or arbitration before heading to court.

Molly Foley-Healy, an attorney who specializes in homeowner association laws and who participated in conversations last year, said lawmakers would be wise to act this year before local laws proliferate, potentially out of step with the direction of the state.

“The bottom line that every legislator needs to understand is that if developers are not held responsible for their defective construction, it becomes the repair responsibility of the HOA, and the only way HOAs can pay for those repairs is through the assessment they get from the owners who buy units in the HOA,” Foley-Healy said. “The poor people who didn’t realize they had purchased a defective unit are the ones who have to pay for the repairs, and that is just absolutely unconscionable.”

Success will depend on whether homeowner interests are able to reach an agreement with a coalition of business leaders, builders and local elected officials—known as the Homeownership Opportunity Alliance—which has been pushing for defects reform.

The impasse last year came after the two groups became so frustrated that they could no longer continue discussions.

“I am very hopeful that this is the year,” said Lakewood Mayor Adam Paul, with the Metro Mayors Caucus, a member of the Homeownership Opportunity Alliance.

Local elected officials and business interests worry that there are too few ownership opportunities in their communities for people looking to transition away from an apartment.

“It’s critical that we see this passed,” Paul said. “We can’t keep kicking the can down the road.”

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