Zombie Bills: Is Fourth Time A Charm For Construction Defects?

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Photo: Condominiums in Lakewood (AP Photo)
Workers completing the facades on a row of condominiums in the Denver area.

After three straight unsuccessful campaigns, lawmakers from both parties will try again next year to make it harder for condominium owners to sue builders over defects.

Condo starts lag behind other housing development in the state and the lawmakers believe creating a less litigious atmosphere will spur new projects and help alleviate the state's affordable housing problem. Last year's bill died in a House committee after passing the Senate.

Since then, some local governments, including in Denver, have passed their own versions of the legislation. But Rep. Brian DelGrosso, R-Loveland, the House minority leader, said a statewide bill is needed to reconcile conflicts between state and local laws.

He said a bipartisan coalition of lawmakers, along with business groups and affordable housing advocates, who supported the legislation last year, is growing larger.

"A lot of groups that normally don't play nice together were arm in arm on this bill," DelGrosso told Colorado Matters host Ryan Warner.

Condos are more affordable than single-family homes for retirees and young families, he said, adding that the threat of litigation makes developers less likely to build them.

"The way the laws are set up now right now, with the threat of costly litigation, the reality is that developers are not building this product in the state."

His bill would bar homeowners' association boards from suing developers on behalf of all its members. It would require a vote among homeowners before litigation could continue. In cases where the developer still owned most of the units, the developer would not be allowed to vote.

"We've seen ... where the HOA gets into costly litigation, and the majority of the HOA homeowners have no idea until all of a sudden at the very end they get a bill for litigation costs," he said.

The bill would also encourage disputes between homeowners and developers to be worked out in arbitration, the idea being that such a process is less costly than a lawsuit. However, some argue that arbitration can be just as expensive as a trial -- if not more so.

"If you have a panel of three arbiters, the cost the association bears for that comes off the top of the settlement," said Molly Foley-Healy, who represents homeowners in arbitration, during a hearing at the Capitol last year.

Others aren't sure that the threat of litigation is what is keeping new condos from being built. In July, the Wall Street Journal reported that tough new regulations for condo mortgages and other factors were to blame for sluggish condo starts across the country.

DelGross admitted that his bill wouldn't be a magic pill. But he said the threat of litigation is a factor.

"I don't know if we'd see an overall boom [in condo construction if the bill passes]," he said. "But the reality is, when you talk to developers and ask 'Why is this product not there?' They highlight this."

The legislative session starts Jan. 13.