Construction Defect Ordinances

WHEREAS, existing Colorado law concerning construction defects needs a major overhaul to reduce litigations risks to developers while maintaining consumer protections…

So begins the pre-amble to Littleton’s ordinance attempting local construction defect litigation reform.

Many cities along the Front Range are suffering from a lack of owner-occupied multifamily development, particularly near regional transportation hubs.  The unwillingness to develop multifamily projects is largely blamed on the toxic climate spawned from construction defect litigation under the Colorado Construction Defect Action Reform Act (“CCDARA”).  After what was perceived as a significant failure of the Colorado General Assembly to pass meaningful reforms in 2013 and 2014, a number of cities took it upon themselves to tackle the chilling effect of construction defect litigation.

Aurora, Commerce City, Lakewood, Littleton, and Lone Tree have all enacted ordinances in an effort to encourage the development of owner-occupied attached housing in the words of Littleton to “insur[e] a sustainable and diverse mix of housing options that allow individuals to invest long-term in the community.”

Denver City Council has also advanced a proposal.  The Denver Post has reported that under the proposal, a project could not be called defective in a civil action if it was built and maintained in conformance to the building code; and building codes could be cited in a lawsuit only if they could be linked to actual damage or injury.  Also, consent from a majority of owners (as opposed to just the board) would be required to initiate a defects lawsuit.

Though I have not been able to obtain a draft of Denver’s proposal, it sounds very similar to the ordinances enacted by other cities.  The “L”s (Lakewood, Littleton, Lone Tree).

The primary tenets of these ordinances are (1) written notice of claim; (2) builder’s right to repair; (3) limitations on the ability to amend or remove construction defect arbitration clauses from declarations or by-laws; and (4) informed consent of a majority of homeowners before litigation can be initiated.

However, more than one year since Lakewood passed its ordinance, the Denver Business Journal reports that no applications have yet been filed to construct an owner-occupied condominium project.

While the ordinances are an optimistic step in the right direction, the ordinances merely alter “first steps” in the notification phase of defect litigation.  None truly protect builders from the aggressive damages and attorney fees provisions of state law – nor is it likely Courts would allow local ordinances to restrict owners from remedies available under state law.