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The Chicken-and-Egg Problem of Senate Bill 177: Condo Development or Affordable Housing?


Ed Sealover with the Denver Business Journal reports that a bipartisan group of state lawmakers introduced a construction-defects reform bill in the Colorado legislature in the second week of February. Supporters of the bill hope to overcome two recent failures with a win during the upcoming session.

What is the purpose of Senate Bill 177?

Those Who Support and Those Who Oppose

Apparently, it's a little too easy to sue a builder over construction defects. But, as Sealover points out, supporters of the bill are framing this as an affordable housing issue. Opponents, on the other hand, frame it as a business issue, wherein Senate Bill 177 benefits condominium developers at the expense of homeowners associations and the homeowners themselves.

To quote portions of State Sen. Jessie Ulibarri's speech shortly after the bill's introduction (Ulibarri is part of the bipartisan group that introduced the legislation):

"My generation has been impacted in different scales than most. My generation has seen their American dream deferred because of high student debt, other costs incurred when we went through the recession, and now they're at a point where they'd like to start their life." (Ulibarri said this in reference to the Millennial generation.) "How do folks move out of poverty and into the middle class? Usually through home ownership. Building up an asset. That's why we need to see the supply increase of more affordable owner-occupied housing."

By easing the law a little for builders, who generally claim that they're reluctant to enter the owner-occupied market for fear of facing lawsuits over construction defects, more condos will get built. According to Ulibarri, this will lead to more owner-occupied dwellings (as opposed to expensive rental apartments) and an overall increase in affordable housing in Colorado.

Easing Builders' Fear of Lawsuits with Two Provisions

Hence, as shown in the Denver Business Journal's prior report on the bill, Senate Bill 177 includes provisions that make it more difficult to bring construction-defect claims.

These are:

  1. A majority of owners in a condominium complex, as Sealover reports, would be required to approve a class action suit against a builder (as opposed to a majority of board members of the homeowners association). This would likely make it more difficult to bring a class action suit in the first place.
  2. A homeowner association would not be able, on its own, to decide to overrule a requirement that disputes be resolved through binding arbitration, which is generally a builder's preferred method of dispute resolution, in contrast to the rather unpredictable avenue of trial in front of a judge and jury.

These two provisions together would likely ease builders' fears, but it remains to be seen what impact this will have on homeowners associations and the homeowners governed by HOAs. It's a chicken-and-egg problem. If builders won't build condos for fear of lawsuits, the high price of the rental market will persist. And when it comes to the relative ease (or not) of making a construction-defect claim, there won't be many claims to make.

Full-Scale HOA Representation with Ciancio Ciancio Brown, P.C.

The Denver lawyers of Ciancio Ciancio Brown, P.C., represent HOAs and community management companies in all areas of legal representation, including general counsel, collections, specialized construction-defect litigation, and mediation/arbitration services. To learn more, please visit our page on HOA representation.

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