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May 05, 2023 11:14 AM UTC

Again With the Construction Defects Reform Nonsense?

  • by: Colorado Pols
This argument is so old and so dumb that it requires an ancient meme photo.

As the 2023 legislative session winds to a close (Monday is Sine Die), lawmakers from both political parties are starting to think about priorities for 2024. Among the issues that have come up for discussion lately is the idea of another round of legislation dealing with one of the all-time bullshit arguments in Colorado: Construction defects reform.

If you’re unfamiliar with the phrase, “construction defects reform” is basically about protecting developers from being sued when their new apartments or condominiums start leaking water (or worse).

The Colorado Sun has more details today in its “Unaffiliated” newsletter:

One of the lead sponsors of the land-use bill pending in the Colorado legislature hinted this week that there are state lawmakers looking into taking on what’s considered by the construction industry as one of the holy grails of housing policy: construction defects.

One of the holy grails for housing policy? Um, no. Construction defects reform may be the “holy grail” for contractors and builders who don’t want to worry about shoddy construction coming back to bite them in the ass later, but it doesn’t do anything to help anyone else.

Contractors say Colorado liability laws around construction defects — basically issues that arise after a home is built —are hampering their ability to increase housing stock because they push insurance costs high and stoke concerns about litigation. Those anxieties especially come into play for condominium construction. [Pols emphasis]

The Colorado Contractors Association and Colorado Association of Homebuilders both told The Colorado Sun earlier this year that while the land-use changes in Senate Bill 213 would help spur more housing construction, construction defects policy must be changed to really unleash the measure’s potential.

The legislature tackled construction defects laws in 2017, but the associations say it wasn’t enough.

“Without construction defects reform, it’s still going to be a tough sell to build multi-unit condos in Colorado because there is so much risk,” said Tony Milo, who leads the Colorado Contractors Association. [Pols emphasis]

Beauvallon, a Denver construction-defect horror story.

Without construction defects reform we can’t build more housing! The problem with this argument is that you can easily refute these claims merely by opening your eyes.

Don’t believe us? Take a drive around the Metro Denver area today and see if you can find a large plot of land where apartments or condos are NOT being built literally at this very moment.

Go ahead, we’ll wait…

…Contractors and builders have been whining that condo construction had “dried up” for at least the last decade. In 2017, developers managed to coax a pretty good deal out of lawmakers, but then they walked away from the table because they wanted more; ultimately a compromise was worked out, albeit one that developers immediately claimed was not good enough. As we wrote in this space in May 2017:

The compromise legislation approved this year requires a majority of homeowners to initiate legal action, not the HOA board–and requires homeowners be informed about the potential effect of litigation on the ability to sell their properties. For homeowner groups and lawyers who represent them, that’s as far as they see the need to go. Opponents of the homebuilders in this fight argue that the real solution is for developers and builders to stand by their work–avoiding construction defects to begin with, and fixing problems in good faith quickly when they occur.

With all of this in mind, it’s revealing that builder lobbyists are already declaring their intention to return next year to push the same bills that died this year. It’s long been suspected that builders are misusing Colorado’s hot housing market to extract concessions from lawmakers, and blaming liability over construction defects for many other factors that have led to a shortage of affordable housing in this state. After years of complaining, now even after a bipartisan compromise has passed, it’s time to ask the question: is anything short of stripping homeowners of their legal rights to protect their biggest investment going to make the developers happy?

Because if not, maybe it’s time to tell them enough is enough.

In 2023, builders are STILL claiming that they can’t build more housing [pause for laughter] because of concerns about lawsuits related to poor construction — such as the horror show that was the Beauvallon building in Denver. The serious answer in response is pretty simple: If you don’t want to get sued, then don’t do shoddy work.

Construction defects reform is not really about housing policy; developers got some of what they wanted in the 2017 bill, but that ended up doing nothing to make housing more affordable in the Denver area. The only thing that construction defects reform does is make more money for developers by shielding them from potential lawsuits. It’s a great deal for them; not so much for anyone else.

It was silly in 2017 when developers were claiming that they couldn’t build more housing unless lawmakers passed a bill to help them. It’s completely absurd that they are making THE SAME ARGUMENT six years later, particularly when you can’t throw a rock in the Denver area without hitting some new type of development.

If this is an actual problem for regular people, developers at least need to come up with a different argument that passes the eye test. Until then, legislators from both political parties need to stop listening to the same old nonsense.


8 thoughts on “Again With the Construction Defects Reform Nonsense?

  1. There might be some truth to that developers would be more willing to build condos if construction defect laws are loosened or gutted, but we'd have to suspend being two-sided in a policy discussion to let that happen.

    The rest of the story – condo owners who probably have to take out long-term mortgages, and their HOAs paid for with condo owner dues, could be left somewhere along the lines of shit-out-of-luck if there are major construction problems discovered in the early going. Plus, Colorado construction defect laws are already among the least onerous among states – maybe not at the absolute bottom but nowhere near the top.

    The moral – do-goody-good legislators ought to be more careful about buying the booshit and becoming developer dupes.

    1. My simplistic take: Why can't we let the market decide? For most industries, if the manufacturers produce a defective product, they are liable. If they want to protect themselves from the uncertainty of that liability, they get insurance and include that cost in the cost of production, which is passed along to the consumer.

      Why does the "anti-regulation" crowd want to interfere with the market? 

      1. Correct me if wrong, but I'm fairly sure there is insurance now for construction defects and such claims.

        I'm sort of agnostic as to whether defects should be settled by things like warranties or insurance, compared to lawsuits. Really not a fan of litigation if it's possible to avoid.

        But a condo owner could be stuck with real problems if defects aren't resolved. That includes probable cost out of pocket or out of their HOA to pay for stuff, and then the difficulty of selling if the problem isn't rectified. I think there is some public interest in making sure ordinary homeowners aren't left holding a property that's not worth a reasonable semblance of what they're paying big monthly bills for. And I know there's risk in any transaction.

        1. In which case you get to hire an attorney to sue an insurance company for improper claim denial and non-payment, instead of hiring an attorney to sue a shoddy builder for non-performance . . .

          . . . It's good to be a shyster!  Being a home buyer, not so much.

            1. It’s been the same timeless truth for thousands of years:  A home-buyer and his money are soon well parted.

  2. Construction defect "reform" is no more about building housing than med mal "reform" was about healthcare availability. It's all about decreasing insurer payouts. So it is, so it always was, so shall it always be. Litigation "reform" = welfare for the insurance industry. Same as it ever was.

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