Senate Bill 156

Mayors campaign for construction defects bill

SB 156 would require third-party arbitration for condo lawsuits, requires majority consent for an HOA lawsuit

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While mayors around the metro area are backing a state legislative effort restricting construction defects lawsuits that they say discourage the building of attainable housing — such as condominiums and townhomes — critics say it would take away a homeowner's right to use the court system.

Senate Bill 156 would require homeowner associations to obtain the written consent of a majority of owners in the association before filing a defects lawsuit, as well as disclose the projected cost of the claim and enter into third-party arbitration.

According to the Homeownership Opportunity Alliance, a group favoring the bill, as few as two homeowners can file a class action lawsuit on behalf of an HOA.

State Rep. Cole Wist, R-Centennial, who is sponsoring the bill in the House, said the status quo has prevented condos from being built.

“In 2005, condos comprised 20 percent of the metro Denver new housing market,” he said. “While lawyers made money, today that number has plummeted to 2 percent.”

Supporters of construction defects reform say the lack of attainable home purchase options also drives up rental costs as more people who want to buy a home opt to stay in apartments.

A press conference was held by supporters of the bill at the Capitol on Feb. 27 before the bill went before the Senate Business, Labor and Technology Committee, which passed it 5-2.

Mayors from around the metro area attended the conference, including Adam Paul of Lakewood, Heidi Williams of Thornton, Cathy Noon of Centennial, Jackie Millet of Lone Tree, Marc Williams of Arvada, Herb Atchison of Westminster and Daniel Dick of Federal Heights.

Paul said that he had envisioned owner-occupied housing surrounding the Lakewood's seven light rail stations.

“At those seven stops right now, what we've seen is apartments, apartments and apartments,” he said.

Millet said that over the last 10 years, 2,000 housing units have been built in Lone Tree, but only 93 have been for-sale condos.

“The entry-level home just doesn't exist in our community and I think that's a shame,” she said.

But critics of SB 156 say there is no proof that construction defects lawsuits are behind the lack of entry-level condos.

A group opposing the construction defect reform efforts, Build Our Homes Right, says the bill would shift private arbitration costs to homeowners, although their taxes support the court system.

Build Our Homes Right Chairman Jonathan Harris said that arbitration gives the power to developers rather than homeowners.

Shortly after buying his condo in Denver in 2004, he said he noticed water leaking around doors and window.

“They did some patches, and it would rain again and they'd do more patches,” he said.

His condo board finally settled a lawsuit against the developer, builder and architecture firm in 2012 for an undisclosed amount.

“I understand we need condominiums," he said. “But I don't think we need poor-quality condominiums.”

Peg Rudden, 68, a condo owner who favors SB 156, said that she has medical bills to pay and has been unable to apply for a home equity line of credit on her Centennial condo, which is nearly paid off, due to ongoing litigation.

“I was not aware of a lock on my home,” she said, staing she was denied the line of credit due to the litigation against the builder of her condo. “I was not aware of the construction defects.”

SB 156 is similar to ordinances passed in several municipalities around the metro area in recent years, including those in Denver, Littleton, Lakewood, Lone Tree, Parker, Westminster, Centennial, Castle Rock, Wheat Ridge and Arvada.

But Noon, the Centennial mayor, said the patchwork of local laws has not solved the problem, leaving developers wary.

“Do you come in, in an industry and in a state, that you have left years ago, and come in and do one project in the city of Centennial, under one set of rules, and one project in Lone Tree, and one in Arvada?” she said.

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