Colorado House Bill 17-1279 – A Misguided Attempt at Construction Defect Reform

On March 17th, House Bill 17-1279,  concerning the requirement that a unit owners’ association obtain approval through a vote of unit owners before filing a construction defect action, was introduced and assigned to the House State, Veterans, and Military Affairs Committee.  The bill is currently scheduled for its first committee hearing on March 29^th, at 1:30 in the afternoon.  While, on its face, this appears to be a step in the right direction towards instituting “informed consent” before an HOA can file a construction defect action, the bill actually restricts the ability of developer to include more stringent requirements in the declaration of covenants, conditions, and restrictions for an association, thereby lowing the threshold of “consent” required to institute an action.

House Bill 17-1279 would amend C.R.S. § 38-33.3-303.5 to require an association’s executive board to mail or deliver written notice of the anticipated commencement of a construction defect action to each unit owner and to call a meeting of the unit owners to consider whether to bring such an action.  Any construction professional against which a claim may attend the unit owners’ meeting and have an opportunity to address the unit owners and may include an offer to remedy any defect in accordance with C.R.S. § 13-20-803.5(3).  The conclusion of the meeting would initiate a 120-day voting period, during which period the running of any applicable statutes of limitation or repose would be tolled.  Pursuant to this bill, an executive board may only institute a construction defect action only if authorized by a simple majority of the unit owners, not including: 1) any unit owned by any construction professional, or affiliate of a construction professional, involved in the design, construction, or repair of any portion of the project; 2) any unit owned by a banking institution; 3) any unit owned in which no defects are alleged to exist, and/or 4) any unit owned by an individual deemed “nonresponsive.”    

While this may seem helpful in curbing construction defect litigation, it is actually a step in the wrong direction.  Currently, under Colorado’s Common Interest Ownership Act, a developer may include a language in an HOA’s declaration requiring that the association provide owners with certain information about a proposed construction defect action, and requiring the approval of 67% of the unit owners, with no restrictions on which unit owners’ votes actually count towards the total.

Additionally, the bill extends the voting period from 60 days, as set forth in C.R.S. § 7–127–107, to 120 days.  Currently, any time spent by an association to gather votes necessary to proceed with a construction defect action does not toll the running of any applicable statutes of limitation or repose, where HB 1279 would provide for such tolling. 

I fail to see how those in the Colorado Legislature actually believe that reducing the owner consent level from the 67% a declaration can currently require to a simple majority, excluding the votes of numerous categories of owners, and extending the statutes of limitation and repose will do anything to cool the litigious environment when it comes to condominiums and townhomes.  Making it easier for an association to bring a claim is certainly not the answer, and will do nothing to spur future construction of for sale multi-family housing.

To learn more about House Bill 17-1279, you can reach David McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com