Sen. Robert Rodriguez, D-Denver, has waded into the not-so-long forgotten battle over construction defects, and a bill he's sponsoring to change the timelines for filing claims cleared the Senate Judiciary Committee Wednesday on a party-line 3-2 vote.
Senate Bill 138 is backed by Build Our Homes Right, one of the groups that supported the compromise legislation in 2017 that put an end to years of fighting over defects in new construction, particularly for condos.
Construction defects is not actually defined in state law, but it's been interpreted to mean defects like expansive soils, or leaky roofs or windows.
Rodriguez's bill would address an issue that was not part of the 2017 legislation: the statute of limitations, or the amount of time a homeowner has to file a claim for a construction defect.
Current state law sets a two-year window for homeowners to report a defect to a builder or developer once they've found it, even if they don't know it's due to construction. The statute also gives the homeowner six years after the home is built to discover the defect, for a maximum of eight years. SB 138 would extend the entire time period to a maximum of 12 years.
The bill also deals with something known as "equitable tolling." It's a legal term that says that a statute of limitations doesn't apply if the plaintiff did not discover the problem until the statute of limitations had run out.
A development in Erie has become the new poster child for the latest round of construction defects claims.
Wendy Davidson moved to Erie from Connecticut in 2013, and said she thought it would be wonderful to build a new home from top to bottom. The development she lives in was completed in 2014, and that's when homeowners began to notice problems with drainage and retaining walls. A retaining wall in her backyard collapsed and sucked her backyard into it, she said.
She wasn't alone. Lots of homes had defects, such as crawl spaces filling with soil, stairway steps cracking, settling soils and sump pumps that couldn't keep up with the water, but the statute of limitations was already running out for homeowners to file claims, she said
Roxy Seely, who lives in the same development, claimed the builders were able to "run out the clock" in order to avoid paying for fixes.
Colorado has one of the lowest statute of limitations for filing construction defects claims, witnesses claim; most states have ten years and only four have shorter time frames.
But those opposed to the bill point out that laws in every state around construction defects vary so it's not an apples-to-apples comparison, and that the bill is written so broadly that it would affect all kinds of construction, not just for homes.
This would create uncertainty for builders and developers, said construction attorney john Mill of Sherman and Howard. The equitable tolling language would basically eliminate any statute of limitations for defects, he claimed, and that would lead to more lawsuits for construction defects.
Mill refuted the testimony of the Erie witnesses, saying he'd never seen a developer "stringing people along" in his practice. "Contractors and developers are honest, hard-working good people who stand behind what they say" and that the majority fix construction problems, he said. "It's unfair for people here to tar and feather the entire industry with allegations that someone had strung people along. I don’t think that happens in great majority of situations." Remedies, such as fines, are sufficient to deal with the "few bad actors" in the industry, he said.
Rodriguez told the committee he doesn't believe the entire industry is at fault, but someone who buys and builds a brand new home "should expect it to be built right."
Other witnesses opposed to the bill claimed it would wreck the delicate compromise that put an end to years of fights at the state Capitol over construction defects.
In 2017, lawmakers who had been struggling to find a compromise came up with House Bill 1279, lauded as a "grand bargain." The law dealt primarily with condos and condo homeowner associations. It required HOA boards to obtain permission from a majority of homeowners before launching a construction defects lawsuit, and set deadlines for HOA boards to convene meetings and provide notifications.
Developers promised that the changes contained in the law would lead to more building of affordable housing, especially the condo market, which was almost non-existent after the Great Recession. Homeowner coalitions claimed the slowdown in construction was because of the economy; builders and developers claimed it was because of lawsuits over construction defects, which they said were too easy to file.
Kathie Barstnar of NAIOP Colorado, a commercial real estate association, told the Senate Judiciary Committee Wednesday that the 2017 compromise was the result of hours of negotiations, but that the end result was unanimous passage in the House and Senate. Their goal was to "protect all consumers by ensuring the bill's impact would never interfere with a homeowners right to seek a legal remedy, and that the bill would make a difference." Barstnar said that combined with a Supreme Court decision in 2017 known as Vallagio, home construction starts have rebounded from 2017 levels, when condo construction — the most affordable housing available -- were 2% of housing starts. That's increased six-fold since then, she said.
"The legislature spoke loud and clear" in 2017, but SB 138 will destroy that delicate balance, she warned.
Sen. Jack Tate, R-Centennial, was one of the architects of the 2017 legislation. He told Colorado Politics Thursday that he was concerned with the possibility that "well-intentioned policies could increase uncertainty and risk," and that could lead to higher home prices or reduce the supply of affordable for-sale housing. "We passed important legislation in 2017 to help thaw affordable condo development," Tate said, "and I do not want to see that progress upended." He pledged to work with bill sponsors to find a solution to the problems they're trying to address.
The bill is now awaiting action from the full Senate, but it does not yet have a House sponsor. In 2017, the construction defects bill was carried in the House by now-House Majority Leader Alec Garnett of Denver, along with then-Rep. Cole Wist, R-Centennial.