Sweet Victory

Two major wins for condominium developers reduce the threat of construction defects claims in Colorado

By: Lino Lipinsky De Orlov, J. Stephen Berry and Kathryn Maynard Guinn

For the past several years, development in the metro Denver area has rapidly grown in all but one area: condominiums. While builders cannot put up apartments quickly enough, condominiums comprise less than three percent of the new housing market in metro Denver, compared to twenty percent a decade ago.

For many in the construction community, the reason for this stagnation is simple. Up until now, it has been all too easy for homeowners associations to file frivolous construction defects lawsuits, even over the objections of the actual residents of the building.

For many developers and their insurers, the risk of a lawsuit simply wasn’t worth it. Further, insurance for developers, contractors, architects and engineers became more expensive, unless work on condominiums was specifically excluded from coverage.

Now, in two back-to-back victories for developers, that is all changing. First, on May 4, the Colorado General Assembly passed House Bill 17-1279, which signifi cantly reduces the threat of frivolous construction defects lawsuits by requiring condominium boards to receive the consent of the residents in the building — after the residents have had a chance to hear from the developer — before they can file a construction defects lawsuit. Second, on June 5, the Colorado Supreme Court issued Vallagio at Inverness Residential Condominium Association v. Metropolitan Homes, Inc., which held that developers can contract for arbitration provisions that cannot be removed without their consent. These two developments are both major victories for the development community in Colorado, and should signifi cantly reduce the litigation risk faced by condominium developers and their insurers.

To read this story and other complete articles featured in the July 24, 2017 print edition of Law Week Colorado, copies are available for purchase online.