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City Targets Construction Defect Law

Monday, October 20, 2014

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Taking aim at an increasingly unpopular state law, a Colorado city has adopted an ordinance designed to reduce lawsuits over construction defects and increase development of affordable housing.

The Lakewood City Council is the first municipality to pass a measure that changes the way the 13-year-old law works, local news media report.

© iStock / kievith

The Lakewood, CO, ordinance gives condo builders the right to repair defects upon notice.

Long a hot-button issue statewide, the law allows homeowner associations to bring lawsuits over construction defects against builders of for-sale multifamily homes.

Unintended Consequences?

Originally backed by the construction and insurance industries, the 2001 Construction Defect Action Reform Act (CDARA-I) was an attempt to regulate claims and litigation in which a party is alleging construction defects. (The Colorado General Assembly passed an amended CDARA-II in 2003.)

Since then, however, builders say the law has made litigation too easy, driven up the cost of insurance, and has caused many to opt out of condo development entirely—resulting in a shortage of affordable housing in Lakewood and throughout Colorado.

Only about two percent of new housing in the state is multifamily units made for ownership, compared with 20 to 25 percent in other states, the Denver Business Journal reported in January.

Reform Efforts

There have been several unsuccessful efforts, especially recently, to change the law. In 2013, a Senate committee killed a measure that would have allowed developers to fix construction defects at transit-oriented projects before condo owners could sue them, the Business Journal noted.

In January, Denver Mayor Michael Hancock called on state lawmakers to reform the law.

In April, the Colorado Metro Mayors Caucus joined the call for change.

In May, bipartisan sponsors in the General Assembly introduced such a measure but not until the closing days of the session, and time ran out.

A ‘Right to Repair’

Lakewood’s ordinance, which passed Tuesday (Oct. 14) on a 7-4 vote, gives builders or developers the “right to repair” defects upon notice that the defects exist and encourages alternative dispute resolution, according to The Denver Post.

The ordinance also requires condominium association boards to obtain consent from a majority of the homeowners—rather than just the majority of the board—before a lawsuit is filed, The Post reported.

Denver skyline
© iStock / AmbientIdeas

The Denver metro area is suffering an affordable housing shortage, which many believe is fueled by a law that makes it easier to sue builders for construction defects.

Lakewood, located less than 10 miles outside of Denver, is the fifth largest city in Colorado.

A video of the city council’s meeting is available here. A meeting agenda packet with the ordinance may be accessed here.

Hearing Both Sides

Last week, more than 100 protesters gathered outside City Hall for hours while the council voted on the measure, calling it “anti-homeowner” and “anti-consumer,” according to The Post.

Supporters say the ordinance will help strengthen the diversity of Lakewood's housing stock and provide housing opportunities for the aging city.

Lakewood Mayor Bob Murphy voiced support for the measure, saying it addressed a number of issues plaguing the condo market in Colorado.

He said the Lakewood ordinance will “empower homeowners who are unable to refinance or sell their unit because their building is enmeshed in litigation about which they never had a say,” The Post reported.

Reports say the city’s attempt to change how the Colorado law operates will likely invite legal challenges. 


Tagged categories: Condominiums/High-Rise Residential; Contractors; Good Technical Practice; Government; Laws and litigation; Lawsuits; North America; Residential Construction

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