May 24, 2017
New Colorado Condo Law a Step in the Right Direction

On May 23, Colorado Governor John Hickenlooper signed into law a bill that won’t eliminate all factors contributing to a litigious environment for developers and buyers of attached housing in Colorado, yet is widely recognized as a step in the right direction.

The bill requires that homeowners association boards obtain the informed consent of unit owners before filing a construction defect lawsuit. After four years of unsuccessful legislative efforts at the state level, a myriad of local ordinances and a half dozen other bills that were introduced in the General Assembly this year but ultimately stalled, the House and Senate unanimously approved HB 1279 in late April and early May.

Condominiums have historically represented about 25 percent of all building permits in the Denver metro area, but currently represent only about 3 percent.

HB 1279, which was sponsored in the House by Representatives Alec Garnett (D-Denver) and Lori Saine (R-Firestone), requires that homeowners association boards satisfy certain prerequisites before filing a lawsuit against a developer including:
  • Notifying all unit owners and the developer and contractors of the proposed lawsuit and relevant information, considerations and potential costs
  • Holding a meeting to enable the board and the developer to present relevant facts and arguments and, if desired by the developer, propose a remedy
  • Obtaining a majority vote by the unit owners approving the lawsuit within 90 days after the meeting, which majority threshold includes and excludes certain votes based on language of the bill

The bill does not address the issue of whether unit owners can be required to submit construction defect claims to binding arbitration as an alternative to a jury trial. According to a current Colorado Court of Appeals’ decision, unit owners may not remove an arbitration clause from their association documents without the consent of the developer, although that decision is currently being reviewed by the Colorado Supreme Court in Vallagio v. Metropolitan Homes.

In addition to receiving strong support in the General Assembly and the Governor’s office, HB 1279 received widespread support from civic, nonprofit and trade organizations, such as the Metro Denver Economic Development Corporation, the Homeownership Opportunity Alliance, Colorado Concern, the Community Associations Institute and Build Our Homes Right.

Several related bills that were intended to address high insurance premiums for condominiums, alternative dispute resolution and to define construction defect damages were not advanced in the General Assembly.

If you would like more information on HB 1279 and how it affects the development of condominiums, planned communities and other attached housing, please contact Mike Strand or Amy Hansen in Polsinelli’s Real Estate Development practice.