Lawmakers introduce bipartisan compromise bill to tackle construction defects issues
Author: Ernest Luning - March 17, 2017 - Updated: March 20, 2017
A bipartisan group of legislators introduced a compromise bill late Friday aimed at encouraging developers to build condominium projects while preserving the right of homeowners to have their day in court.
The legislation arrives at the end of a week that saw a Democratic-sponsored bill and a Republican-sponsored bill covering much of the same territory both run aground, stoking outrage and frustration that the Legislature might be unable to resolve a problem that has vexed lawmakers for years.
House Bill 1279 incorporates provisions in common between the two ill-fated bills, and its sponsors say they’ve removed offending elements that led Senate Republicans to sink Senate Bill 157 in committee and compelled House leadership to deliver Senate Bill 156 to the chamber’s “kill committee.”
But more importantly, the new bill’s sponsors say it will accomplish enough to restore confidence in the condo market for builders while maintaining a fair process for homeowners.
The new bill’s House sponsors are Assistant Majority Leader Alec Garnett, D-Denver, and Minority Whip Lori Saine, R-Dacono, and its Senate sponsors are Minority Leader Lucia Guzman, D-Denver, and state Sen. Jack Tate, R-Centennial. (Assistant Minority Leader Cole Wist, R-Centennial, has been “intricately involved in every step,” Garnett said Friday night, “but there’s a House rule that three names cannot be in bold, or his name would be in bold.” Wist will be listed as a co-sponsor on the bill, Garnett noted.)
House Bill 1279 requires that a majority of the members of a homeowners’ association approve initiating a legal complaint for defective construction — current law allows an HOA board to initiate action on its own — and mandates certain disclosures to homeowners detailing the expected cost of pursuing a complaint and the fact they might not be able to sell their property easily during a lawsuit.
Unlike Senate Bill 156 — sponsored by state Sen. Owen Hill, R-Colorado Springs, Wist and Saine — the new bill doesn’t require HOAs to submit to binding arbitration or mediation before filing a lawsuit. And unlike Senate Bill 157 — sponsored by state Sen. Angela Williams, D-Denver, and state Rep. Jovan Melton, D-Aurora — it doesn’t allow HOAs to move ahead on complaints under $100,000 without the approval of a majority of homeowners or restrict contact between developers or builders and homeowners while a lawsuit is under consideration.
Garnett told The Colorado Statesman late Friday that lawmakers involved in putting together the compromise legislation had a good idea Senate Bills 156 and 157 wouldn’t make it past the opposing parties. “We probably knew before all that happened,” he said. “This is a work-product that has been going through negotiations for a long time.” The “foundation of the draft,” he added, was done by the end of February.
“What we all agreed on was the most important thing at some point is that we lock arms and we get something across the finish line,” he said after House Bill 1297 had been introduced. “I’m excited to put the ball on the field and start to allow the Legislature to move forward.”
“My whole goal,” he said, “is if there is a construction defect, and the homeowners want to move forward on filing a action, I wanted it to be clear and concise and for there to be a robust process, so if you’re a chair of an HOA board, you could open up the statute and it would be clear.”
By the same token, Garnett continued, “The threshold is 50 percent plus one of everyone, which is infinitely higher than just the board voting, along with that required notice and a plethora of disclosure about what it means — everyone’s going to be informed about how best to move forward. If there’s a legit construction defect, then there’s a clear path to moving forward, but people will have the opportunity to have their say, and they will be very informed before they cast their votes.”
Garnett said he’s confident both sides are bending but neither is being asked to give up too much.
“I know this issue has been going on a long time, so the trenches are really deep and people are dug into what they believe is best. I understand that. But I’ve never known anyone to get every single word they want from the Legislature. It doesn’t work like that,” he said. “I believe we have a policy that homeowners can follow, and that developers and builders will feel comfortable breaking ground.”
House Democrats cheered the bill’s debut, contending that it delivers on commitments made by House and Senate leaders on both sides of the aisle at the beginning of the legislative session. That’s when House Speaker Crisanta Duran, D-Denver, and Senate President Kevin Grantham, R-Cañon City, introduced Senate Bill 45, another piece of bipartisan legislation aimed at solving another piece of the construction defects puzzle — defining how to apportion liability among general contractors and subcontractors after lawsuits have been filed. That bill is awaiting action in the Republican-controlled Senate.
Duran said late Friday that she’s confident the compromise legislation can accomplish what has eluded previous General Assemblies.
“I hope this bill, along with Senate Bill 45 and the Colorado Supreme Court’s impending Vallagio ruling, will finally put to rest an issue that has been a bone of contention in the Colorado General Assembly for many years,” she said in a statement. “Our goal is to restore some balance to the Colorado real estate market and make housing more available.”
(Duran was referring to a case before the state’s high court — Vallagio at Inverness Residential Condominium Association, Inc. v. Metropolitan Homes, Inc., et al — which involves whether an HOA on its own can rewrite a developer’s condominium document if the document requires binding arbitration, instead of a lawsuit, to resolve construction complaints.)
Guzman, as well, said she believes the legislation balances fiercely competing interests.
“From the start, Democrats have made it clear we are committed to legislation that would encourage the construction of attainable housing without taking away homeowners’ rights,” she said in a statement. “By balancing homeowners’ ability to seek damages for defective work with provisions to shield honest businesses from bad actors, I believe this bill will tackle a major issue in the construction defects debate.”
Garnett said he thinks House Bill 1279, along with the bill sponsored by Duran and Grantham, will be enough to encourage lawsuit-shy developers to get back in the business of building condos throughout Colorado.
“If this were signed into law today, I believe in a few years — it’s going to take a couple years for the market to react — there’s going to be confidence, and it will react the right way,” he said. “There’ll be enough confidence for insurers and developers. It will be time to get those plans, blow off the dust and break ground.”