When faced with a fork in the road, and one path leads over a cliff, the choice becomes quite simple.

In the Colorado Legislature, two bills are on opposite ends of the perennial “construction defects” debate, each offering a very clear option for lawmakers.

One of the bills provides a promising solution that would prevent the state from heading into a financial and housing crisis. A broad bipartisan effort that’s backed by Governor Jared Polis, House Bill 25-1272 offers a much-needed opportunity to jump-start the construction of affordable housing — a critical need in Colorado.

Introduced in the House by Democratic state Representatives Shannon Bird and Andrew Boesenecker, HB 25-1272 seeks to curb the litigation that has long been a major roadblock to affordable housing development, especially for modestly priced, entry-level condominiums.

On the other side, House Bill 25-1261 pushes a completely different approach that could worsen the situation. This bill would make it easier to sue homebuilders for minor or easily repairable defects, further discouraging the construction of affordable housing. It would also serve to increase the financial windfall for trial lawyers who thrive on litigation.

Given the history of the trial lawyer lobby's influence on the Democratic party, it’s no surprise that HB 25-1261 is solely backed by members of the Democratic side. This could make it seem like HB 25-1272, with its bipartisan backing, has the upper hand. However, it's important not to count out HB 25-1261 too soon, as the trial lawyer lobby has derailed similar reforms in the past.

Historically, condominiums have served as a viable option for many Coloradans looking to become homeowners, from first-time buyers to seniors living on fixed incomes. But lax state laws have enabled runaway litigation over minor construction defects, resulting in skyrocketing costs for homebuilders and, consequently, fewer affordable condos being built.

The Incentive for Litigation

Condos have become a profitable target for plaintiffs’ attorneys. A lawsuit involving multiple units in a building, even if just a few units have issues, yields significantly larger settlements compared to those involving single-family homes. As a result, homebuilders’ insurance premiums have soared, leading many builders to abandon condo projects in favor of single-family homes, which are often more expensive to buyers but less risky for developers.

A recent study from Colorado’s Common Sense Institute paints a stark picture: Condo construction has declined sharply, with development in 11 Front Range counties dropping 76% between 2018 and 2022 compared to 2002-2008. The primary culprit, according to the study, is Colorado’s lenient construction liability laws.

The Case for Reform

Certainly, remedies should be available to buyers who encounter defects in newly constructed homes, whether large or small. However, the current situation often stems not from delays or negligence by builders, but from attorneys who exploit the state’s lenient defect laws and opt for litigation rather than working out repairs with builders.

Homebuilders and most buyers would rather avoid lengthy and costly lawsuits, preferring to fix the issues directly — if the law made such an approach easier.

House Bill 25-1272 provides a solution by giving builders and buyers more opportunities to work together. Among its provisions, the bill proposes requiring a supermajority of homeowners in a condo building to approve litigation before it can proceed. It would also establish a legal presumption that a property does not have a defect if it has been issued a certificate of occupancy. Additionally, the bill would require contractors to offer repairs or provide a reason why repairs aren’t necessary before litigation can commence.

These adjustments aim to help resolve disputes without court intervention, creating a more cooperative environment between builders and buyers. The result? A win-win for all involved — except for trial lawyers, who would see fewer opportunities for big payouts.

Looking Ahead

There’s hope that HB 25-1272 will move further than last year’s failed attempt to reform construction liability laws. With Governor Polis’s backing, the bill has the potential to clear the legislative hurdles and become a significant step toward addressing Colorado’s affordable housing crisis. We trust that the governor, as both an advocate for affordable housing and a neutral party, will take the necessary actions to ensure the bill’s success.

Originally reported by The Gazatte Editorial Board.