Hancock proposes Denver construction-defect reform

Denver Mayor Michael Hancock proposed his Bill (BR15-0811) to the Denver City Council. According to the memorandum accompanying the Bill, condominium construction in the Denver metropolitan area comprises less than 4% of all new owner-occupied housing. While high-rise apartment construction in Denver is booming, very little high-rise condominium construction is occurring. Mayor Hancock believes that the dearth in condominium construction is a direct result of recent trends in construction defect litigation brought by some condominium homeowners associations against homebuilders.

According to Hancock and his homebuilder supporters, the costs and risks associated with high-rise condominium projects have made the construction of these projects prohibitive, except at the very highest price point. Thus, the availability and the affordability of condominiums in Denver has been dramatically impacted, and potential home buyers seeking to invest in a new home in Denver’s urban environment are left with few choices in the market place. Hancock’s bill was heard and adopted by the Business Development Committee on October 27, 2015.

If passed when the full council meets on November 16th, the Bill amends the Denver Revised Municipal Code by adding a new Article XII to Chapter 10 concerning construction defect claims in common interest communities.

In a nutshell, the amendment limits the manner in which technical building code violations can be used in construction defect litigation, it supports covenants that require alternative dispute resolution of construction defect claims and requires informed consent of a majority of condo owners before construction defect litigation.

If the measure passes on November 16th, the City of Denver would join Aurora, Commerce City, Lakewood, Littleton and Lone Tree with local ordinances that conflict with state law.

State lawmakers have repeatedly denied such legislation because, unlike local city councils, the State Legislature often listen to the policy arguments from both builder’s lobbyists and homeowner advocates. Mayor Hancock, instead, has closed the doors of public comment on this controversial local ordinance that is backed by his biggest donors, Colorado homebuilders.

More detail:

1. Limits the manner in which technical building code violations can be used in construction defect litigation.

• Address the manner in which Denver building codes may or may not be used in construction defect claims arising under any statutory or common law cause of action.
• Building code violations may only be cause for action if linked to actual damage or injury or risk thereof. No “strict liability” claims.
• Denver’s codes represent the standard for construction. Other codes/standards may not be applied in litigation

2. It supports covenants that require alternative dispute resolution of construction defect claims

• Codify the holding in Vallagio: where covenants in a common interest community require Alternative Dispute Resolution (arbitration or mediation) for construction defect claims, the covenant cannot be unilaterally eliminated by the Home Owners Association.
• Advises a buyer of the terms under which a builder was willing to build and sell product and holds that the covenant permanently governs procedure for future claims

3. It requires informed consent of a majority of condo owners before construction defect litigation

• Informed consent of a majority of homeowners in a common interest community and majority vote requirement before litigation can be pursued.
• Similar to a component of SB 15-177 that enjoyed bipartisan support in the Colorado Senate
• Excludes developer-owned units in the vote

Source: https://www.denvergov.org/sirepub/mtgviewer.aspx?meetid=2580&doctype=AGENDA

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