Colorado LegiSource

An informational and educational resource for the Colorado General Assembly by the Office of Legislative Legal Services.

Author: olls

  • CO Supreme Court Holding Adopts Construction Defects Policy Sticking Point

    The Colorado Supreme Court’s decision in the Vallagio case may blunt the impact of a recent, and celebrated, legislative compromise

    by Duane Gall

    Colorado is a wonderful place to live. Buying a home here, however, can be expensive and difficult. Due to the short supply and high prices of existing homes, as well as tighter credit and a slump in new construction, it’s hard to find your personal Carrington Mansion. The situation is particularly dire with regard to condominiums, which are usually the most affordable properties. Of all the multifamily dwellings sprouting up in Denver and elsewhere in the state, this year only about three percent are condos; the rest are apartments. That’s down from about 20 percent in 2005.

    First-time buyers suffer the most. They may earn enough, in theory, to afford a reasonable monthly mortgage payment. But if they have to wait months or years for a suitable home to come onto the market, and in the meantime continue to pay rent at ever-increasing rates, their hopes of owning a home can wither.

    Homebuilders cite the risk and cost of construction-defect litigation as a major disincentive to new home construction. With the majority of new homes (whether detached or condo) being in planned communities that are developed by a single company, any construction defect that is identified in one unit will likely be found in others—resulting in a multiplicity of lawsuits or even a class action.

    Notably, the traditional barriers to a “class action” may not apply to a planned community because the executive board of a unit owners’ association (HOA) is authorized under Colorado law to sue “on behalf of . . . two or more unit owners on matters affecting the common interest community.” (Section 38-33.3-302(1)(d), C.R.S.)

    Builders say that the risk of litigation, including actions instituted by HOAs, increases their insurance premiums and other related costs by $20,000 or more per unit—pricing first-time buyers out of the market and inducing builders to construct apartments rather than condos.

    In seeking to promote affordable new home construction, the Colorado General Assembly has tended to focus on deterring, or at least delaying, such lawsuits.

    In 2001, the Construction Defect Actions Reform Act (“CDARA”) prohibited courts from awarding punitive damages and imposed prerequisites to the filing of a lawsuit against a construction professional. The prerequisites include giving the construction professional advance notice, a detailed list of the alleged defects, and an opportunity to remedy the defects or offer a settlement. If the parties cannot agree within a specified period, the lawsuit can proceed.

    A subsequent amendment to CDARA, dubbed the “Homeowner Protection Act of 2007,” clarified that a contractual waiver of the claimant’s rights under CDARA or under the Colorado Consumer Protection Act (“CCPA”) would not be effective.

    But further significant legislative action stalled, mainly over the details of whether and how to limit the ability of an HOA’s executive board to sue a builder. For example, in 2014, S.B. 14-220 would have required a board to provide to all of its unit owners advance notice and disclosure of the projected costs, duration, and financial impact of any proposed litigation, and then obtain the written consent of a majority of the unit owners before proceeding. The bill also would have invalidated any attempt by the unit owners to change the association’s governing documents, in accordance with existing law, to remove a clause requiring arbitration or mediation of a construction-defect claim against a builder.

    This latter provision, the “arbitration piece,” was cited as the poison pill for S.B. 14-220. Opponents successfully argued that it would give builders carte blanche to write self-serving, binding arbitration clauses into the DNA of every new condo or subdivision, knowing that they would never have to face a court trial for alleged construction defects—even if the claim was well-founded, and even if the unit owners voted to eliminate this restriction on their legal rights concerning what was now their property.

    Other legislative attempts at compromise failed along similar lines: One or more elements of each proposed bargain proved either too pro-builder or too permissive of expensive lawsuits.

    In the 2017 session, however, the General Assembly broke the logjam with a successful deal. H.B. 17-1279 omitted the “arbitration piece” and codified acceptable procedures for the notice, disclosure, and ratification vote requirements of S.B. 14-220. The issue seemed settled, at least for the moment. But was it?

    Governor Hickenlooper signed the hard-won compromise into law on May 23, 2017. Two weeks later, on June 5, in Vallagio at Inverness Residential Condominium Association, Inc., v. Metropolitan Homes, Inc., the Colorado Supreme Court essentially adopted as law the “arbitration piece” that the General Assembly had struggled with for four years and finally rejected.

    To be fair, the Court did not flatly assert that a binding arbitration clause could never be removed by an HOA. But it did allow the defendant builder to control the amendment process in a way that achieved the same result.

    Here is the background: In 2007, defendant Metro Inverness, LLC—the developer, a/k/a the “declarant,” as defined in the Colorado Common Interest Ownership Act (“CCIOA”)—recorded the necessary declaration and plat maps to construct the Vallagio at Inverness planned community near I-25 and Dry Creek Road. The declaration contained procedures for future amendments to the community’s governing documents after control of the community was transferred from the declarant to the purchasers (unit owners) and the HOA. Generally, amendments could be made by an affirmative vote of 67% of the unit owners, in accordance with CCIOA. But this was subject to two exceptions:

    1. Until a specified date (now long past), any change required the declarant’s consent; and
    2. In perpetuity, any change to the dispute-resolution procedures governing claims against the declarant for construction defects, including the requirement for binding arbitration, required the declarant’s written consent.

    In essence, Metro Inverness, LLC, granted itself the same right by contract that S.B. 14-220 would have granted by statute, had the bill passed. When the HOA discovered what it considered construction defects and sought to sue Metro, it obtained the affirmative votes of 67% of the unit owners to remove the arbitration clause. Needless to say, Metro did not consent.

    At trial, Metro moved to dismiss the case, arguing that the removal of the arbitration clause was invalid without Metro’s written consent. The HOA maintained that the consent requirement conflicted with CCIOA, which establishes the sole and exclusive procedure for amending a declaration. Specifically, section 38-33.3-217 (1)(a)(I), C.R.S., requires only “the affirmative vote or agreement of unit owners of units to which more than fifty percent of the votes in the association are allocated or any larger percentage, not to exceed sixty-seven percent, that the declaration specifies. Any provision in the declaration that purports to specify a percentage larger than sixty-seven percent is hereby declared void as contrary to public policy, … “. (Emphasis added.)

    The trial judge agreed with the HOA and refused to dismiss the case. However, Metro appealed and won on this point. The Colorado Supreme Court focused on the term “percentage” and cited other provisions of CCIOA placing non-percentage-based conditions on the ratification of an amendment. Therefore, the Court implied, Metro’s addition of its own non-percentage-based conditions in this case did not violate CCIOA and the Court gave it legal effect.

    It’s tempting here to quote Robert Burns’s well-known line, “The best-laid schemes o’ mice an’ men gang aft a-gley.” What is not so well known is the context of that line, made clear in the title of the poem in which it appears: “To A Mouse, On Turning Her Up In Her Nest With The Plow.” Our Supreme Court, dutifully plowing in the fields of litigation, has inadvertently scattered the General Assembly’s meticulous creation, the compromise called H.B. 17-1279. Will the General Assembly now abandon the site and let nature reclaim it? Or dig in again and rebuild?

  • We’ve Moved! – New URL

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    All of our content is still here, and any old links will automatically redirect you to the new address. Email subscriptions should also continue without any action required on your part. Please use the feedback form to let us know of any trouble you may experience with the transition. Thank you for reading LegiSource!

  • National Commission Recommends Five New Uniform Laws

    by Thomas Morris

    The National Conference of Commissioners on Uniform State Laws (NCCUSL), established in 1892, consists of commissioners appointed by all 50 states, the District of Columbia, the U.S. Virgin Islands, and Puerto Rico. NCCUSL promotes uniformity for state laws in which uniformity is desirable and practicable by developing proposed uniform legislation that can be adopted by the various state legislatures. (more…)

  • With the End of Session, Focus Shifts to Publishing Statutes

    by Kathy Zambrano and Richard Sweetman

    With the close of the 2012 Regular Legislative Session, and the First Extraordinary Legislative Session of 2012, the question now is, “What changes did the General Assembly make to the law of Colorado?” To answer this question, the OLLS is well on the way to publishing the bills enacted during the legislative session and republishing the Colorado Revised Statutes (C.R.S.). Each summer, the OLLS organizes the bills passed in the preceding legislative session and publishes them as the Session Laws. The Office also incorporates the enacted changes into the statutory database and republishes the C.R.S. by the fall of each year. (more…)

  • Need a Hint? Tips For Legislators

    by Nate Carr

    Most of us appreciate getting a few pointers every now and then. With the start of a new legislative session, you might find it interesting to learn some of the advice given to your predecessors 111 years ago in the Colorado Legislative Manual – 1901 edition:

    1)    Avoid personalities in debates.

    2)    Do not crowd through too many bills.

    3)    Watch your bills and keep pushing them forward at all times.

    4)    Read section 40 of article V of the state constitution.

    5)    Be as regular as possible in attendance. It is the watchful and attentive member who advances legislation.

    6)    Endeavor to be present at roll call at the morning session and listen to the reading of the journal, that action on your measures and your own movements be correctly recorded. If the journal as read is in error, ask to have it corrected.

    7)    After your measure has been considered in committee of the whole, ask the clerk to permit you to see that all amendments and alterations are properly incorporated into your measure.

    8)    On the last day of session, have all surplus stationary and supplies in your desk or committee room collected and turned over to the secretary of state, for use at the next session. This is both law and practical economy.

    9)    The legislative session closes at midnight on the ninetieth day. It has sometimes been the practice to stop the clock, and proceed with business beyond that hour, but this can be prevented by simply entering a protest for record on the journal.

    Words of wisdom written long ago can be as useful now, in many respects, as they were back then. Although stopping the clock to proceed with business beyond the constitutionally mandated time for sine die probably would not be tolerated today.

  • The OLLS: We Are Here To Help With More Than Bill and Amendment Drafting

    by Dan Cartin

    You may recall from your New Member Orientation experience the presentation by the OLLS on the variety of services we can provide for you in addition to your bill and amendment drafting needs. Hopefully, you have used the OLLS attorneys and legislative assistants during your time in the General Assembly to access these ancillary services. As the 2012 session begins, we want to remind you of the availability of these materials and services and of some limitations on what we can provide you due to the OLLS’ nonpartisan role. (more…)

  • Delayed Bills 101

    by Patti Dahlberg

    Joint Rules 23 and 24 limit the number of bill requests a legislator may submit as well as the deadlines for moving bills through the legislative process. The expectation is that all bill requests and bills will adhere to these limitations and deadlines. However, on occasion, a legislator may need to seek delayed bill authorization for a bill request or a bill that will not meet these limitations or deadlines. (more…)

  • The session is about to start – how much longer do I have to request my bills?

    Your first three bill requests, which are intended to meet the early bill introduction deadlines, had to be submitted by December 1, 2011. If you submitted only three bill requests at that time, you can request two more bills. You must submit these last two bill requests to the OLLS on or before Monday, January 16, 2012, unless the General Assembly decides that it will not meet on that day, since it is Martin Luther King, Jr. Day. If that happens, the deadline for submitting your last two bill requests to the OLLS is Tuesday, January 17, 2012.

    If you submitted four bill requests by December 1, you can submit one more request, but if you submitted five bill requests by December 1, you cannot submit any more bill requests unless you withdraw, or kill, one of the bill requests you already have in. If you have already requested more than three bills, and you have three bills that will meet the early introduction deadlines, you can replace up to two bill requests with new bill requests so long as you submit them to the OLLS on or before Monday, January 16, 2012, or Tuesday, January 17, 2012, if the General Assembly does not meet on Martin Luther King, Jr. Day.

  • Can another member add my name as a sponsor on his or her bill without my permission?

    No. Your name will not go onto any bill unless the OLLS has received your permission to be added as a joint prime sponsor, an additional sponsor, or as the opposite house prime sponsor. The procedure for getting your permission is called “sponsor verification.” If the sponsor of a bill or a lobbyist tells the OLLS that you will sponsor the bill, you will most likely receive a call, an e-mail, or a personal visit form a member of the OLLS staff stating that the Office is trying to “verify” you as a sponsor on Member A’s bill. You are then free to say yes or no. Or, after you tell Member A or the lobbyist that you will be a sponsor on the bill, you can call or email the OLLS verifying that you will be a sponsor. After we confirm your sponsorship with Member A, we will add your name to the bill.

    You may ask to see a copy of the bill before you agree to become a sponsor. The OLLS will then get permission from Member A to give you a copy. If you still can’t decide whether to become a sponsor, you should probably talk directly with Member A.

  • To Prime or to Joint Prime

    by Patti Dahlberg

    Every introduced bill has at least one prime sponsor, but many bills introduced in the  Colorado General Assembly have joint prime (or co-prime) sponsors. There are many good reasons to either add a joint prime sponsor to a bill or to be added as a joint prime sponsor to a bill.

    In fact, there are enough good reasons for joint prime sponsorship that both the House and Senate changed their respective rules a few years ago to allow a legislator to sign on as a joint prime sponsor without first getting Leadership’s approval . . . so long as the bill does not need delayed bill approval. (more…)