This year’s construction defects bill may have died in the state Legislature, but housing developers ended up gaining a bit of what they wanted last week in the form of a court decision.

The day after the 2015 General Assembly adjourned, the Colorado Court of Appeals ruled against a condominium association that had filed a construction defects lawsuit against a developer after voting unilaterally to remove a section from the bylaws mandating arbitration before suing.

That section had required the developer, Metro Inverness, to sign off on any changes to the bylaws, but the Vallagio at Inverness condominium association had removed the arbitration provision with a 67 percent vote of the owners.

“Based on the declaration’s plain language, we conclude that amendments to the declaration’s arbitration agreement required Metro Inverness’ consent,” said the three-judge panel in an opinion written by Chief Judge Alan Loeb.

The decision sets a helpful precedent for housing developers, who argue that condo construction is grinding to a halt as a result of lawsuits filed by owners’ associations alleging defects, but the ruling is unlikely to stop municipalities from plowing ahead with their own reforms.

Local officials grappling with an increasingly short supply of affordable housing are moving to boost condominium building by keeping squabbles out of court following the defeat of Senate Bill 177, the construction defects bill killed in the House State, Veterans and Military Affairs Committee on a 6-5 vote.

The bill would have required a homeowners’ association to engage in mediation and/or binding arbitration before filing a lawsuit. Before such a claim, the HOA would have also had to obtain the written consent of a majority of its owners and disclose the costs involved, the impact on the units’ value, and the “anticipated duration of the construction defect claim and the likelihood of success.”

State Rep. Joe Salazar, D-Westminster, who represented the swing vote, rejected the bill in part because it gave no guarantee that making it more difficult to file such lawsuits would result in an increase in housing in the $150,000 to $200,000 range.

That argument frustrates supporters of construction defects reform such as Dennis Polk, an attorney with Holley Albertson & Polk in Lakewood.

“If the problem is there’s not going to be any assurance of affordable housing, that misses the fundamental predicate that I’m talking about,” Polk said. “If no one is willing to build it, affordable or not, it doesn’t matter.”

Critics blame the condominium chokehold on a 2005 state law that they say tipped the balance too heavily in the favor of litigation. After years of debate in the state legislature, Lakewood became the first municipality to act on its own with an ordinance passed in September giving builders a “right to repair” and requiring an HOA to obtain the support of a majority of owners, not just the board, before suing.

Since then, a rash of city councils have followed suit, starting with the Parker Town Council, which passed an ordinance in November requiring binding arbitration for certain claims.

The Lone Tree City Council followed in February with an ordinance modeled on Lakewood’s, as did the Littleton City Council, which passed a similar measure earlier this month, days after the House committee killed SB 177.

Other municipalities expected to tackle the issue in the near future include Arvada and Longmont.

“We’re still going to see municipalities get involved with this,” said Polk. “Frankly, they’re frustrated with the state Legislature, and the impetus to do that isn’t going to go away.”

Consumer-protection advocates have argued that proposals such as SB 177 would encourage shoddy workmanship by making it tougher to file lawsuits, and that other factors such as insurance rates have discouraged condominium construction.

The Metro Denver Economic Development Corporation reports that the percentage of affordable condominiums and townhouses in Colorado new-construction housing has fallen from 23 to 4 percent, while one study says “up to 85 percent of Colorado’s condo projects have faced lawsuits alleging construction defects,” according to the Urban Land Institute Colorado.

– valrichardson17@gmail.com