What is the Takeaway From the Construction Defect Law Ruling in Colorado?

ConstructionBig news recently came out of the Colorado Legislature in terms of construction defects. Ed Sealover of the Denver Business Journal reports on this in a recent article titled “Construction-defects reform bill dies in Colorado Legislature.”

Sealover writes, “Senate Bill 177 — an idea of one senator which had gained the backing of a 55-organization business/nonprofit coalition — died because backers could not convince six Democrats that increasing the difficulty in filing a class-action defects lawsuit also would increase the portfolio of affordable housing in the Denver area. A hearing on Senate Bill 177 lasted five hours and involved the testimony of 41 witnesses. But the bill truly died about two-thirds of the way through the session when the swing vote on the House State, Veterans and Military Affairs Committee — Democratic Rep. Joe Salazar of Thornton — said he could see no guarantees that the bill would increase affordable housing, and that would hurt some homeowners. ‘This tilts access to justice primarily toward developers and builders at the sake of owners,’ Salazar said after listening to the similar words of a homeowners-association attorney. ‘And that’s a pretty big deal.’”

Stephanie Paige Ogburn of KUNC provides some analysis on the decision in a recent article titled “Would Construction Defects Reform Have Helped Colorado’s Housing Crunch?” Ogburn writes, “Beyond developer support, affordable housing advocates had thrown their weight behind the bill. They say that threats of litigation and high insurance premiums have led to a slowdown in condo construction and an associated crunch in more affordable condo units. The Denver Post quoted Denver Mayor Michael Hancock as saying ‘Construction defects are severely slowing the construction of for-sale, affordable housing.’ While there is no doubt that the Front Range has a shortage of affordable housing, a change to the construction defects law may not have provided a fix. Here’s the argument that links construction defects to a lack of affordable housing. Since the passing of Colorado’s construction defects law in 2001, developers say lawsuits over defects have increased. So have liability insurance premiums for developers building condos. This has had a chilling effect on condo construction, developers say. Rapid Front Range growth and slow construction coming out of the recession means fewer single family homes are available, so those prices are driven up, and there are few condos to fill in the gaps. This leads to a market with few unaffordable properties for entry-level buyers. But not everyone buys this argument.”

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