Beginning of the 2020 Colorado Legislative Session: Here We Go Again

By David M. McLain

The 2020 Colorado legislative session started on Wednesday, January 8^th.  It seems like there will be plenty of issues this year to which home builders will want to pay close attention.  On January 13^th, Senators Fenberg, Foote, and Jackson sponsored SB 20-093, known as the “Consumer and Employee Dispute Resolution Fairness Act.”  

For certain consumer and employment arbitrations, the act:

• Prohibits the waiver of standards for and challenges for evident partiality prior to a claim being filed and requires any waiver of such provisions after the claim is filed to be in writing;
• Provides that the right of a party to challenge an arbitrator based on evident partiality is waived if not raised within a reasonable time of learning of the information leading to the challenge but that such right is not waived if caused by the opposing party;
• Establishes ethical standards for arbitrators; and
• Requires specified public disclosures by arbitration services providers but includes protections for certain confidential information.

The bill also requires an individual arbitrator for certain consumer and employment arbitrations to make additional disclosures of information that might affect the arbitrator's impartiality.

The bill specifies how attorney fees and other reasonable expenses are to be awarded if a court vacates an award because of an arbitrator's evident partiality or failure to make required disclosures and clarifies when appeals of orders may be made in consumer and employee arbitrations.

The bill also provides that for a standard form contract involving a consumer or employee:

• Specified terms are unenforceable as against public policy;
• Including an unenforceable term constitutes a deceptive trade practice under the "Colorado Consumer Protection Act"; and
• How certain cost-shifting provisions are to be interpreted.

http://leg.colorado.gov/bills/sb20-093

It remains to be seen what amendments are made to the bill, which has been set for its first hearing in the Senate Judiciary Committee at 1:30 pm on January 29^th.  Obviously, the home building industry should be very wary of any attempt to prohibit the resolution of construction defect claims by binding arbitration.  Stay tuned as there will be plenty of discussions regarding SB 20-093.

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On January 8^th, Representatives Valdez and Gonzales sponsored HB 20-1046, which, among other things, restricts retainage to no more than 5% on certain private projects.  The bill was assigned to the House Business Affairs & Labor Committee, and is calendared for its first hearing on January 28^th.  The legislative website provides the following description of the bill.

In a construction contract of at least $150,000, the bill requires:

• A property owner to make partial payments to the contractor of any amount due under the contract at the end of each calendar month or as soon as practicable after the end of the month;
• A property owner to pay the contractor at least 95% of the value of satisfactorily completed work;
• A property owner to pay the withheld percentage within 60 days after the contract is completed satisfactorily;
• A contractor to pay a subcontractor for work performed under a subcontract within 30 calendar days after receiving payment for the work, not including a withheld percentage not to exceed 5%;
• A subcontractor to pay any supplier, subcontractor, or laborer who provided goods, materials, labor, or equipment to the subcontractor within 30 calendar days after receiving payment under the subcontract; and
• A subcontractor to submit to the contractor a list of the suppliers, sub-subcontractors, and laborers who provided goods, materials, labor, or equipment to the subcontractor for the work.

The bill does not apply to contracts with public entities or to a contract concerning one multi-family dwelling of no more than 4 units or one single-family dwelling. A person who fails to make a required payment must pay 1.5% interest per month until the debt is fully paid. In a lawsuit to enforce the bill, the prevailing party is awarded attorney fees and costs.

http://leg.colorado.gov/bills/hb20-1046

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On January 17^th, Representatives Valdez and Weissman introduced HB 20-1155, which was assigned to the House Energy & Environment Committee, but is not yet on the calendar for hearing. 

Current law requires a home builder to offer to a buyer of a new home one of the following:

• A solar panel system or a solar thermal system;
• To prewire or preplumb the home for these systems; or
• A chase or conduit to wire or plumb the home for these systems in the future.

Section 1 of the bill changes this to require that the home builder offer each of these options.

Section 2 requires a home builder to offer one of the following options to a buyer of a newly constructed residence:

• An electric vehicle charging system;
• Upgrades of wiring to accommodate future installation of an electric vehicle charging system; or
• A 208- to 240-volt alternating current plug-in located in a place accessible to a motor vehicle parking area.

Section 2 also requires the home builder to offer electric heating options. These requirements apply to both traditional detached, single-family homes and buildings that contain owner-occupied condominium units.

http://leg.colorado.gov/sites/default/files/documents/2020A/bills/2020a_1155_01.pdf

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An even bigger threat to the ability to provide affordable or attainable housing in Colorado may not come from the Legislature, but in the form of Initiative 122.  Ed Sealover wrote a recent article in the Denver Business Journal stating:

Jefferson County slow-growth activist Daniel Hayes will begin collecting signatures later this month for a proposed ballot initiative that would limit growth in Front Range counties from Weld down to Colorado Springs to no more than 1.3% per year, with everything over 1% reserved specifically for affordable or senior housing. Initiative 122, if it were to make it onto the November ballot and then receive voter approval, would allow smaller cities and counties to enact such a rule as well, and the law could not be rescinded until 2023 and only then by local citizen initiative.

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But a Common Sense Policy Roundtable study on the impact of a similar measure that Hayes filed in 2018 but never collected signatures for found that the proposal could reduce housing units in the affected counties by some 50% — as much as 240,000 units — over the next decade and cost the state between 35,000 and 55,000 jobs per year due to the lack of construction. Cities that have growth limits in place — including Boulder and Golden, where Hayes authored the 1995 growth cap — have median housing sales prices 1.5 to 2.5 times higher than the rest of the metro Denver area, and such acceleration in the cost of limited housing is likely to happen throughout most of the Front Range if Initiative 122, the report said.

https://www.bizjournals.com/denver/news/2020/01/08/colorado-legislative-session-2020.html

Both Democrats and Republicans at the Colorado Legislature recognize the devastating affect that this initiative would have on Colorado’s economy.  It will be interesting to watch what they do to ameliorate the effect that the recent growth in Colorado have had on infrastructure, roads, schools, etc., recognizing that if they do nothing, increased resentment about growth may make it more likely that the initiative will ultimately pass.

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The 2020 legislative session in Colorado appears to be off to a roaring start, and will likely have more impact on Colorado’s construction industry than in the last few years.  More to follow…

For additional information or about construction defect litigation in Colorado, generally, you can reach David McLain by telephone at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.