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Page 16 - April 5-18, 2017 COLORADO REAL ESTATE JOURNAL
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C olorado’s construc-
tion defect laws have
experienced signifi-
cant reforms dating back to 2001
when the Construction Defect
Action Reform Act, commonly
referred to as CDARA, was origi-
nally introduced. The 2017 Regu-
lar Session of the Colorado Gen-
eral Assembly is no exception to
the statute’s history. Currently,
three proposed bills provide the
potential for substantial changes
to Colorado’s construction defect
laws.
■ SB17-155: Statutory Defi-
nition of Construction Defect.
SB17-155 is a bill intended to
address the statutory definition
of “construction defect” under
CDARA. Under current Colora-
do law, “construction defect” is
not specifically defined. The only
terms defined are action, actual
damages, claimant, construction
professional and notice of claim.
The bill proposes a separate
definition of the term “construc-
tion defect” in the CDARA stat-
ute. The bill defines “construction
defect” as a defect in the design
or construction of any improve-
ment to real property that causes
damages to or the loss of use
of personal property or causes
personal injury. Notably, the bill
seeks to explicitly include actual
damages as a requirement to ini-
tiating a CDARA claim.
SB17-155 would take effect
Aug. 9, if the General Assembly
adjourns on May 10, as sched-
uled, and no referendum petition
is filed.
■ SB17-156: Homeowners’
Association Construction
Defect Lawsuit Approval Time-
lines. SB17-156 isabill concerning
the prerequisites to the author-
ity of a unit owners’ association
to pursue resolution of disputes
involving construction defects.
The bill intends to provide a swift
resolution process for homeown-
ers’ associations that are attempt-
ing to remediate construction
defects, while also shielding
homeowners from actions taken
by HOAs without the home-
owners’ consent or knowledge.
Specifically, the bill proposes
that when the governing docu-
ments of a
common in-
terest commu-
nity require
mediation or
arbitration of
a cons t ruc -
t i on de f e c t
claim and the
requirement is
later amended
or removed,
mediation or
a r b i t r a t i o n
still is required for a claim made
under CDARA.
The bill requires that an HOA
use mediation or arbitration
before a lawsuit can be filed in
cases involving construction
defects. The mediator or arbitra-
tor must be a neutral third party;
make certain disclosures before
being selected; and be qualified
in accordance with applicable
state or federal laws governing
mediation and arbitration.
In addition to submitting the
case to mediation or arbitration
before filing a lawsuit, the HOA’s
executive board must send an
advance notice to all unit own-
ers within the community that
includes a general description of
the claim, the relief sought and a
good-faith estimate of the benefits
and risks involved in a detailed
format outlined in the bill. The
HOA’s executive board must
obtain signed, written consent
from a majority of the unit own-
ers acknowledging that the owner
has received the notice required
under the bill and the owner
approves of the board’s proposed
action.
The modification of the HOA
disclosure notice would take
effect Jan. 1, 2018.
■ SB17-045:Construction
Defect Claim Allocation of
Defense Costs. SB17-045 is a
bill concerning a requirement for
equitable allocation of the costs of
defending a construction defect
claim, in which more than one
insurer has a duty to defend a
party.
This bill proposes to allow an
insurance company to request
that the court apportion certain
costs of defending the defect claim
equitably among all liability insur-
ers who have a duty to defend
against the claim. The bill requires
that the district court establish
the contribution claim within 90
days after the filing of the lawsuit.
The district court must then issue
orders that are essential to hold
an expedited evidentiary hearing.
After a final judgment is made
that resolves all claims against the
insured, any insurer may apply
to the court for a final apportion-
ment of the defense costs.
The proposed SB17-045 also
allows an insurer to move the
court to determine if other insur-
ers have a duty to defend. In the
case an insurer does have a duty
to defend the claim, the court can
order contributions prior to the
conclusion of the case. In deter-
mining the apportionment of
costs, the courts analyze a plain-
tiff’s expert reports identifying
the alleged defects, the defense
expert reports identifying the
damages, the seriousness of the
defects and a detailing of the
expected cost to repair. Pursuant
to current Colorado law, the court
conducts these hearings at the
end of the case.
SB17-045 would take effect July
1 and would apply to actions
filed on or after that date.▲
Dane Mueller,
Esq.
Senior associate,
Robinson & Henry
PC, Castle Rock
‘The bill intends
to provide a swift
resolution process
for homeowners’
associations that
are attempting
to remediate
construction defects,
while also shielding
homeowners from
actions taken by
HOAs without
the homeowners’
consent or
knowledge.’