Construction Defects Compromise Redux: Oh Lordy, Kumbaya

Denver’s Beauvallon, a construction-defects horror story.

As the Denver Business Journal’s Ed Sealover reports, a hammed-up drama that most ordinary people couldn’t care less about, the years-long campaign by condominium builders to shield themselves as much as possible from legal liability over defects in their construction, is nearing a possible solution after numerous fits and starts this session:

After four years of failed negotiations, business leaders and Democratic Colorado legislators finally have reached an agreement to move forward a bill that will reform construction-defects law with the aim of jump-starting what is largely a non-existent condominium construction market…

Just three weeks ago, Rep. Alec Garnett, the Denver Democrat leading negotiations with reform backers, announced that talks had hit a major impasse over demands from business leaders that the statute of limitations on discovering purported defects not be extended by as much as six months while condo owners vote on whether to proceed with a lawsuit.

However, a variety of interest groups agreed late Tuesday to reduce the time frame for extending the statute of limitations by just 90 days while narrowing the types of homeowners that could not vote in the election and defining more specifically how that election will occur, said Mike Kopp, the president and CEO of Colorado Concern who had a lead role in the negotiations…

Condominiums now make up less than 3 percent of the new housing stock in Colorado, and builders say they are unwilling to build because current law makes it too easy for just a small group of homeowners association board members to file multi-million-dollar defects lawsuits.

The change that brought parties back to the table on House Bill 17-1279 isn’t a dealbreaker for either side, and this bill preserves the right of condo owners to file suit instead of being forced into binding arbitration to resolve their claims. The position of homeowners’ groups and attorneys who represent homeowners in construction defects claims was always that preserving legal rights for homeowners is their hard limit. What this bill does do is put the decision in the hands of homeowners directly via an election instead of HOA boards, and requires notification of homeowners that a lawsuit might affect their ability to quickly sell their property.

Everyone agrees that Colorado needs more affordable housing, and suburban cities want to make the most of new trends like transit-oriented development. Although builders want to place the blame solely on being made to stand behind their work, there are more complicated market forces in play–as well as politics, since in recent years it’s arguable that builders had a straightforward political motive for not pursuing condo projects.

If the final bill passes with this latest compromise, all parties seem prepared to live with it–and in theory, new condo starts should pick up. Democrats led by Rep. Alec Garnett deserve credit for not abandoning their principles while working hard to get a deal that will finally put this inside-baseball issue to rest.

As for the public, they couldn’t care less–but if their condo’s roof starts leaking, they expect it to be fixed.

8 Community Comments, Facebook Comments

  1. allyncooper says:

    I quit working for two home builders because of substandard work performed by subcontractors. And I will name names.

    Shea Homes – the work the framing contractor did was so deficient the Jefferson County Building Dept. threatened to "red tag" the entire project. Among other things, roof sheathing was not nailed off and serious structural defects were not corrected. Shea Homes management did nothing to address the issues or replace the framing contractor.

    American Concert Homes (actually a Canadian company formerly operating under the name B-Corp). The project was the multifamily Water Tower project developed by the Arvada Urban Redevelopment Authority (AURA). The drywall subcontractor, Front Range Drywall, hired undocumented workers who were not supervised and repeatedly installed the drywall party walls between units improperly. Operating as B-Corp at the Centennial project in Littleton, B-Corp was sued by homeowners and awarded a $700,000 judgment for the very same construction defect issue. Despite this history, American Concert Homes refused to fire Front Range Drywall and the defective installations continued building after building.

     

  2. Pseudonymous says:

    Dear Democrats,

    Please stop boning us in your rush to slobber all over the cash-laden phalli of your corporate pals.  The system works fine.  Builders have, and will always, build what makes them the best return.  Prices will be, and have always been, based on market comps, not builder insurance rates.  All that will come of decreased insurance costs, if there are any, is increased builder profits.  All that comes of strengthening builders is weakening customers.

    Please stop.  This is the same nonsense you jagoffs try to pull every year with the payday lenders.  Stop saying you're trying to protect the regular guy, while loading up sacks of cash for these businesses (and maybe hoping the wind picks up a few stray bills and blows them your way), and solve some actual problems.

  3. Conserv. Head Banger says:

    Whole discussion reminds me of when I moved to Colorado in April, 1981. Eventually, I started looking for something to buy. A good friend said something like: "you're paying rent on an apartment with minimal soundproofing, but you can walk away after 30 days. Why get stuck in a cardboard condo with similar soundproofing issues that you can't walk away from?" 

    Sound advice. I saved up and finally bought a solidly built Hutchinson house in 1995. 

    • allyncooper says:

      The lack of sound control was the issue in the B-Corp litigation. Some of the testimony was about hearing couples having sex in the next unit. There are specific ways party wall assemblies are constructed to achieve a desired STC rating (sound transmission control) and plaintiff's were able to establish the party walls did not meet the desired STC rating because of improper installation.

  4. ohwilleke says:

    Construction defect litigation is not what has driven low rates of condominium formation. It is the economics of selling v. renting when interest rates are low and rents are high, allowing for a big spread between the two that makes apartments more profitable than condominiums.

    There is an easy way to put more condominiums on the market if it is profitable to do so. It is cheap and easy to convert an existing apartment building whose lack of construction defects has been established to condos. A decade and a half ago, when condos had a much larger market share – there were a lot of such conversions in metro Denver. If the economics were there, but construction defects were an issue, we'd seem them again.

    Enacting legislation to solve a problem that doesn't exist isn't doing us any favors. It is purely pandering to a fake problem. Colorado already has strict limits on construction defect litigation. We don't need more incentives for builders to cut corners.

  5. VoyageurVoyageur says:

    A soliid point, ohwilleke, but many apartments lack the high end features that purpose built condos can incorporate.  The litigation cost is a real problem, albeit seldom the decisive factor.   

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