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Colorado Supreme court sides with builders in arbitration over construction defects

June 5, 2017 Updated: June 6, 2017 at 9:52 am
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photo - DENVER, CO - APRIL 21: Construction continues on a 334 unit condo building project, called The Coloradan, west of Union Station on April 21, 2017 in Denver, Colorado. (Photo by RJ Sangosti/The Denver Post)
DENVER, CO - APRIL 21: Construction continues on a 334 unit condo building project, called The Coloradan, west of Union Station on April 21, 2017 in Denver, Colorado. (Photo by RJ Sangosti/The Denver Post) 

The Colorado Supreme Court told plaintiffs in a lawsuit over alleged construction defects that they can't change the rules, because binding arbitration is, well, binding.

In a decision announced Monday, the state's high court ruled 5-2 in favor of Metro Homes, the builder being sued by Vallagio at Inverness Residential Condo Association, the development of condominiums and restaurants south of the Tech Center in Arapahoe County.

The Supreme Court upheld a 2015 Court of Appeals ruling, which had overturned a decision from Denver District Court that sided with the condo association.

More than two-thirds of the Villagio residents voted in 2013 to remove the 6-year-old arbitration clause from their agreement, but without the builder joining into that deal. The association then sued Metro.

The builder objected, citing the binding arbitration clause in its agreement on construction defects disputes. To change that agreement, Metro alleged the association needed its consent. The majority on the Supreme Court agreed.

Colorado lawmakers have wrestled with construction litigation in each of the last four sessions. Attempts to require binding arbitration have come and gone each year, including this year's Senate Bill 156, which passed the Republican-led Senate and was killed on a party-line vote by Democrats on a House committee in April.

Lawmakers, instead, passed legislation that would require the majority of residents in a homeowner's association - and not just to board - to agree to sue, and only after a meeting with the builder to try to work out a compromise. Residents also would be informed about the cost of a lawsuit and its effect on their ability to sell or refinance while the suit is pending. The governor signed it into law on May 23.

House Bill 1279, however, stops short of binding arbitration.

Build Our Homes Right, a Colorado group that pushed back on legislative efforts to curb residents ability to sue, said the ruling amounted to giving developers "permanent veto power" over members of a homeowners' association.

"Honestly, I feel sucker-punched right now because I've always thought the court system was here to protect citizens' basic legal rights," Jonathan Harris, chairman of Build Our Homes Right, said in a statement about the ruling. "The court just decided that deep pocketed developers have the right to steamroll over homeowners in order to shirk their responsibility for producing shoddy homes."

Colorado Politics reached out to Palumbo Lawyers, which represented Metro Homes, and is awaiting an interview or a statement. This story will be updated if that happens.

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