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WSHB Update – Anticipated Legislation to Affect Construction in Colorado

April 7, 2014

In response to Colorado’s lack of new owner-occupied, multi-family housing (i.e. condominiums) being built, it appears legislation will be introduced that, if passed into law, may affect not only how condominiums are developed, but may affect the entire landscape of construction defect litigation.

Condominiums are important as they are lower priced housing options for younger purchasers and older residents looking to downsize. However, while most metro areas report that twenty to twenty-five percent of new housing stock are condominiums, they make up only two percent of the housing stock in Colorado. Fear of litigation may be the reason.

John Batug, senior vice president and regional manager of Wells Fargo’s community banking real estate group, recently said the reason Denver is expected to see a record number of new apartments in 2014, but little condominium development, is because of construction defect litigation.

Celeste Tanner, the director of real estate for the Opus Group of Denver, which is currently constructing a large apartment complex, agrees with Mr. Batug. She said her company would like to build condominiums, but is hesitant to do so because of the potential for litigation.

In response to these concerns, State Senator Jessie Ulibarri plans on introducing new legislation before the end of the current legislative session. “It is my full intention to introduce a bill this year that will increase owner-occupied, multi-family housing,” said Ulibarri.

In addition, Lakewood Mayor Bob Murphy said city and business leaders would like to see two particular changes to Colorado’s construction defect laws: (1) they want to require a super-majority of owners of common interest communities to have to agree to legal action before a lawsuit is filed, and (2) they want a requirement to attempt some sort of alternative dispute resolution before a suit can be filed.

However, Ulibarri said he believes it would be “very difficult” to get the Colorado legislature to approve a super-majority provision, and an alternative dispute requirement would also be controversial. Advocates for homeowners are concerned such provisions would weaken laws designed to protect homeowners.

With this in mind, Ulibarri said he is looking at whether measures like financial incentives could spur development. Financial incentives would counteract the high cost of insuring condominium developers, a side effect of the numerous construction defect lawsuits in Colorado.

The deadline to introduce new bills in Colorado is April 17, 2014. While we do not know its exact language, it appears a new bill is imminent that would change how residential construction occurs in Colorado. WSHB will continue to monitor this situation and provide updates as more information becomes available.

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