A bill designed to increase the construction of condominiums in Colorado advanced this week with several amendments intended to balance the interests of builders and homebuyers. House Bill 1272 seeks to address the state’s declining condo development, which has been hampered by construction defect laws. These laws, according to proponents of the bill, have discouraged developers due to the risk of expensive lawsuits and liabilities.

The legislation, which passed its first committee hearing on Tuesday in a 12-1 vote, represents a second attempt in two years by state lawmakers to alter the state’s construction defect laws. A report from the Colorado Common Sense Institute in February 2024 found that the number of active condo developers in the state had fallen by 84% from 2007 to 2022. The report attributes this decline to the high risk of costly litigation developers face under the state’s current defect laws.

The Goal: Reducing Risk for Builders While Protecting Homebuyers

The bill aims to mitigate the risk of lawsuits by offering more protection for builders, including granting them immunity in certain situations. The changes to the law are viewed as a way to incentivize condo construction, which could boost the availability of middle-income housing. Supporters of the bill, including Gov. Jared Polis, believe that the legislation will help address Colorado's growing housing crisis by making it easier to build affordable homes.

“For the last 20 years, the cost to own a home has continued to climb out of reach for too many Coloradans,” said Rep. Shannon Bird, D-Westminster, the sponsor of House Bill 1272. “Condos have been historically the most affordable homeownership opportunity,” she continued. “The bill before you incentivizes construction of higher quality homes with warranties and creates a faster, less expensive process for homeowners to resolve problems that might occur.”

Key Provisions of the Bill

Under the provisions of the bill, builders would be required to have third-party inspectors review the construction of homes throughout the process, ensuring that standards are met. Additionally, builders would be required to provide warranties on various parts of the home, ranging from one year for workmanship to six years for major structural elements.

In exchange for these added protections, builders would be granted immunity from lawsuits in some cases. However, homeowners would still have the ability to sue in situations involving issues that affect a home's functionality or pose safety risks. Homeowners would first be required to attempt to resolve the issue with the builder before filing a lawsuit.

Concerns from Homeowners Advocacy Groups

Despite the amendments, the bill has faced significant opposition from homeowner advocacy groups who believe it doesn't go far enough in protecting homebuyers from defective construction. Build Our Homes Right, a group that advocates for stronger homeowner protections, held a press conference earlier this week to highlight the consequences of construction defects. Homeowners shared their experiences of battling builders in lengthy and costly lawsuits.

One such homeowner, Kathy Eckert, shared the emotional toll of dealing with defects in her Fraser property. After her home was built in 2017, Eckert encountered multiple issues, including flooding in the garage due to poor grading, a back deck that was improperly attached, and black mold in the basement. She explained that her builder “refused to fix obvious problems,” leaving her with no choice but to file a lawsuit. “Buying a home is usually the biggest investment people will make in their lifetime, and our laws need to protect homeowners — especially those who are working and middle class,” she said.

Amendments to the Bill Address Some Concerns

In response to the concerns raised by homeowners' groups, Rep. Jennifer Bacon, D-Denver, introduced an alternative bill with more robust protections for homeowners, which was eventually withdrawn after negotiations. Some of the proposals from Bacon's bill, including changes to the certificate of occupancy provision and raising the threshold for homeowners associations to file claims, were incorporated into House Bill 1272.

One key change was the removal of a provision that would have given builders protection during litigation as long as they secured a certificate of occupancy from a local government. Another amendment ensures that builders cannot include language in contracts that contradicts state law, particularly with regard to the threshold for homeowners associations to file a claim. Currently, HOA boards need a simple majority to approve litigation over defective construction, but House Bill 1272 would raise that threshold to 65%.

Rep. Bacon is continuing to push for additional changes to the bill, including one that would alter the statute of limitations for homeowners to file lawsuits. Under her proposed changes, the clock would begin when the homeowner discovers the defect, rather than when it first occurs.

The Debate Over Builder Immunity and Homeowner Protections

Despite these revisions, Build Our Homes Right remains concerned about the level of immunity offered to builders. They want to see more stringent requirements regarding who can act as a third-party inspector and are pushing for further protections for homeowners.

“It is an exchange between homeowners’ rights and what builders will do, and that’s why it makes people nervous,” Rep. Bacon said. “So that’s why we’ve been working with (bill supporters), and I do believe that’s why they’ve been open to talking with us.”

House Bill 1272, now a more balanced version with additional safeguards for homeowners, is expected to continue to evolve as it moves forward. The bill’s prime sponsors — Rep. Shannon Bird, Rep. Andrew Boesnecker, D-Fort Collins, and Senators Dylan Roberts and James Coleman — hope to garner broad support in both chambers of the legislature to address Colorado's housing crisis while balancing the interests of builders and homebuyers. The bill will now head to the House floor for a full vote.

Looking Ahead: Finding Middle Ground

As the legislation moves forward, the goal is to ensure that Colorado can increase its supply of affordable condominiums while maintaining necessary protections for homebuyers. Both sides of the debate remain committed to finding solutions that foster growth in the housing sector while also ensuring that homeowners are not left vulnerable to construction defects.

Originally reported by Robert Tann in The Aspen Times.