Lawmakers, stakeholders say persistence, high stakes led to breakthrough on construction defects bill
Author: Ernest Luning - April 19, 2017 - Updated: May 8, 2017
Officials say they’re hopeful a breakthrough compromise reached on construction defects legislation as Tuesday night turned to Wednesday will thaw Colorado’s frozen condominium market and help resolve the state’s housing crisis.
Calling the agreement a “psychic win,” Gov. John Hickenlooper said Wednesday at a Capitol news conference that he expects builders to respond favorably, and quickly.
“I think there’s such a pent-up demand for condominiums, you’re going to see a lot of developers say, ‘Now I’m going to do it.’ As more developers do it, I think you will see a wave of development,” the governor said.
A spokesman for a coalition of builders, business groups and affordable housing advocates cautioned that the market might not explode out of the gate but nonetheless expressed optimism that the deal reached overnight is a strong step in the right direction.
A House committee appeared to agree, waving House Bill 1279 ahead on a unanimous vote later Wednesday after adopting amendments reflecting the deal.
The bill’s House sponsors — Assistant House Majority Leader Alec Garnett, D-Denver, House Minority Whip Lori Saine, R-Dacono, and key co-sponsor Assistant House Minority Leader Cole Wist, R-Centennial — had delayed the bill’s scheduled hearing three times over the past month because stakeholders were at odds over key elements of the legislation. (The bill’s prime sponsors in the Senate are Senate Minority Leader Lucia Guzman, D-Denver, and state Sen. Jack Tate, R-Centennial.)
The bill requires a majority of condominium owners to approve initiating legal proceedings for flawed construction but only after the development’s board distributes a report on expected costs of proposed litigation and a notice that a lawsuit can impair the ability to sell condos until it’s resolved.
According to the compromise, the period to conduct an election goes from 120 days to 90 days, during which time the clock stops running on the statute of limitations to identify and file complaints over construction problems. That pause — known as tolling — had been the primary sticking point between the builders and groups representing homeowners and their legal advocates.
“It’s transparent, it’s fair, it allows both sides to present a case,” Garnett said at the news conference, stressing that requiring “informed consent” creates a whole new climate for developers who have feared building condo projects in Colorado because of the risk of protracted, multi-million dollar lawsuits.
Wist said it was important to keep in mind that there are two distinct elements involved in the bill’s “informed consent” structure.
Under existing law, he pointed out, a majority of a homeowners’ association board can initiate a lawsuit without having to inform unit owners what it involves or get their approval.
“The decisive shift here is that responsibility, that authority is now vested in the homeowners, not the board,” Wist said.
Colorado Concern President Mike Kopp, a former Senate minority leader and co-chair of the Homeownership Opportunity Alliance, a key negotiator at the table, said the HOA coalition members support the bill and believe it will help spur moribund condo development in Colorado, although he notes that more might be needed before the market is flourishing.
“I consider this bill to be equivalent to a standing triple,” Kopp told The Colorado Statesman after the governor, bill sponsors and stakeholders addressed the news media. “You’re not quite home, but you’re almost home. I believe that builders will view this as a positive step forward in a sense that they now have an added layer of protection that they did not have before, and they will see that homeowners have an added right that they did not have in state law before.”
Kopp added that a friend of his often cites the book “All I Really Need to Know I Learned in Kindergarten,” and then offered a favorite quote: “‘Talk to people,’” he said. “This meeting with the homeowners will occur, and you’ll have plaintiffs and you’ll have builders, and they’ll be working it out in front of the homeowners. That is a greatly improved situation. I do believe it will start us in the right direction.”
He said he expects to see some results after the legislation passes and builders can assess its impact but suggested that the market might not start booming right away.
“This is a wildly complex area of policy, and there are any number of policy levers you can attempt to pull,” Kopp said. “Possibly next year or in years to come, we’ll be down here continuing to do work on it. It won’t be a mystery to us — we will see if we get response to this or not. The market may not respond in the eight-month period between now and the start of the next session. Markets are complex things. This could take a while to study and observe, but I’m hopeful that by next year we’ll have a look at it and we’ll see if some adjustments are needed.”
Saine, who noted she’s been working on the problem for two years, said she wouldn’t be surprised if condo construction bumped up quickly.
“It could be right away,” she told The Statesman. “People have been waiting so long for this, and businesses have to operate in an environment of confidence. This will certainly provide that. It’ll provide a process where both sides can see what the election results were, it’ll be fair and transparent, so there’s less brinksmanship. We’re hoping to see something right away and clarify that this is one of the largest solutions that we’ve had in the last 10 years.”
Describing the lengthy negotiations that nearly derailed at several points throughout the day Tuesday, Saine said lawmakers and stakeholders kept the goal in sight and pressed on.
“Every time we got to an impasse, both sides would say, ‘This is the closest we’ve ever come.’ And at the next impasse, it was, ‘This is the closest we’ve ever come.’ Multiply that times 15 and that takes you to late last night,” she said with a determined smile. “And last night, I think we decided we were really talking about the same thing — we just didn’t know it, we were just talking over each other, especially on the tolling issue. That was an important breakthrough to understand we were describing the same problem, we were just describing it in different terms.”
Reaching that conclusion — seeing the end in sight — spurred negotiations on to a compromise, she said.
“Construction defects law is extremely complicated, even for the people who do it every single day, so after reaching an agreement that we were agreeing on the same thing, we said, ‘Now let’s put it into language we can put into law to make it clear for folks.’ This will make sure we can thaw this market so builders can build and homeowners can finally get this vote on this important issue to protect them. A lot of these homeowners have been in financial house arrest for years while some of this litigation has gone on that they never voted on.”
Garnett acknowledged that he was nervous — “but it was a nervous optimism,” he said — Tuesday afternoon that a compromise would remain elusive and credited his fellow lawmakers with forging ahead and finding agreement.
“We knew we were very close,” he said. “It’s a testament to what our bipartisan group said at the beginning of session, which is that we were going to lock arms and move forward, no matter what happened. And to the stakeholders who spoke here today, their willingness to come back to the table time and time again and listen.”
Wist agreed and said he believed the enormity of the problem —condominiums make up just 2 percent of new housing in the state — would bring the sides together.
“There was never a doubt in my mind that we would get here, largely because the stakes were too high for us to fail,” he said.