Construction Litigation Reform Deal is Reached!

Colorado Construction Defect Law Statute Limitations Revised

HB 1279 Construction Defect Actions Notice Vote Approval from the

We are excited to announce that a compromise on construction litigation reform was reached early Wednesday April 19, 2017 regarding the  HB-1279.  This bill is sponsored by Representatives Garnett (D-Denver), and Saine (R-Firestone) and Senators Tate (R-Centennial) and Guzman (D-Denver). The bill was heard in the House State Affairs committee Wednesday afternoon where all six amendments that were agreed upon between stakeholders to reach a compromise were adopted.   The bill also passed on second reading today in the House with one minor technical amendment. HB 1279 now has one final vote in the House before it goes over to the Senate for their consideration.

This has been a long process of negotiation over the course of many years and the discussions began early in the legislative session this year with six different bills addressing the subject of construction litigation reform. No one thinks the compromise bill is perfect, but that is the hallmark of true compromise when everyone involved comes away from the table wanting a little bit more than the final product.

This compromise bill is backed by the Homeownership Opportunity Alliance as an informed consent bill that is a good first step towards encouraging builders and developers to start building again while protecting the legal rights of individual homeowners. Nothing in HB 1279 stands in the way of individual owners who have a legitimate construction issue from seeking a legal remedy.

Additionally, this bill protects homeowners by ensuring they are aware of a potential lawsuit that could impact selling or refinancing their home and tightens up voting procedures so a majority of homeowners must approve the initiation of a legal action against a builder rather than leaving that decision to the homeowner association board.

The bill does several things:

  • Tolling Period – It sets a 90 day tolling of the statute of limitations (down from the originally proposed 120 day tolling period). This delay in the time period by which a lawsuit must be filed is also clarified to establish that the tolling period can happen only once, regardless of whether there is an amendment to the notice of filing a lawsuit (notice of claim).  Previously there was ambiguity about whether attorneys could continue restarting the tolling period based on an amended claim.
  • Voting/ballot integrity – A list of voters/unit owners must be shared with anyone served with the notice of claim (builders, contractors, architects, etc.). Further, there is only one vote per unit owner and they can only vote one time.  This prevents the HOA Board from reviewing votes before the close of the voting period and then trying to change the minds of those that voted against pursuing litigation.
  • Applicability – The bill language was cleaned up to clarify that the bill applies to all HOA’s, both pre and post 1992, when the Colorado Common Interest Ownership Act (CCIOA) was enacted.
  • Definition of “Affiliate” – In the voting exclusions section the original bill ambiguously referred to affiliates of the development party as excluded from voting on commencing litigation.  The current version of the bill tightens up the definition of who is considered an affiliate – someone that has a controlling interest in one of the development parties, or their spouse.
  • Common elements – The introduced version precluded a vote if the defects claimed are on a common element (non-residential unit), for example the clubhouse or pool.  The current version of the bill says that any remedies to repair that do not exceed $50,000 where the HOA is paying for the repairs do not require a vote.  Any common element claim greater than $50,000 on a common element would require a vote. This was one of our biggest issues for our members since any litigation, whether on a common element or on the residential units, clouds the title and can prevent unit owners from selling or refinancing their property.
  • Bank-owned properties – These properties will count toward the vote if they vote.  These properties were excluded in the original version of the bill.
  • Non-responsive voters – This is one area where the stakeholders could not reach complete agreement. These non-responsive votes will not count.  But the bill does allow builders/defendants to challenge in court any unit owners deemed non-responsive by the HOA board.

The HOA coalition, of which CAR is a member, believes this bill is a positive step in the right direction to building more attainable product for all Coloradans while also protecting homeowners and giving them a voice in whether or not to pursue litigation.  Thank you to each and every one of our members for your dedication on this critical issue through our calls for action and all the time and energy you have put forward to voice your support for construction litigation reform.  We will surely have more to report as the bill continues through the legislative process and CAR continues to advocate on behalf of our members.

Senate Bill 17-215: Sunset Licensed Real Estate Brokers & Subdivision Developers

SB17-215, sponsored by Senator Kevin Priola (R-Henderson) and Representative Matt Gray (D-Westminster) passed on second reading in the House today.  The bill will next go to a final vote in the House before it must go back to the Senate for the Senators to review the amendments that were added in the House. As amended, the bill adds a definition of standard forms used in real estate transactions and it gives the Real Estate Commission the flexibility to promulgate rules that determine the methods by which brokers can demonstrate their knowledge and experience to become supervising brokers. SB 215 continues the Division of Real Estate, the Real Estate Commission, and the regulation of real estate brokers and subdivision developers until 2026.

The bill amends the current provisions on referral fees to conform to the requirements of federal law. It further consolidates the various cash funds used for several licensing functions and programs administered by the Division of Real Estate into a single cash fund.

Additionally, the bill would allow broker licenses to expire uniformly on December 31 rather than requiring licensees to apply for renewal at various times throughout the year on their individual anniversary dates and defines “conviction” to include deferred judgments and deferred sentences, in provisions listing factors the Commission may consider when determining whether to discipline a licensee.

Moreover, the bill modifies the composition of the Commission to require that one of the three licensee members be a broker with experience and an active practice in property management. Finally, the bill retains the license reinstatement fees at their current level, and changes the effective date of the bill to June 30, 2017.

CAR supports this bill and has been actively involved in the process since the beginning of the legislative session to define the components of the legislation that will continue to regulate our members in the future. Continue reading future editions of the Capitol Connection to stay apprised about the Sunset Bill and CAR’s work on your behalf.

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