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Elusive compromise on construction defect reform legislation is reached

April 19, 2017 Updated: April 19, 2017 at 7:01 pm

A grand compromise reached late Tuesday night on construction defect litigation reform paved the way for a measure to sail through its first hearing Wednesday.

By Wednesday afternoon, legislative leaders and bill sponsors were ready to declare victory, suggesting that meaningful construction defect reform is inevitable. A bipartisan group of lawmakers and stakeholders celebrated at a news conference in the Capitol.

"It shows that there is more power in collaboration than competition when we stop demonizing one another and listen to what we have to say," said House Speaker Crisanta Duran, D-Denver.

The looming success marks significant progress from last month when sponsors of the measure essentially declared an impasse. Up through Tuesday afternoon bill sponsors were worried that talks would once again fall apart and a bill would fail, which has been the case for five years in the legislature.

"The nervousness had this optimistic light at the end of the tunnel," explained Rep. Alec Garnett, D-Denver, a sponsor of the legislation at the center of the compromise.

House Bill 1279 is also sponsored by Rep. Lori Saine, R-Firestone, and has co-sponsorship from House Assistant Republican Leader Cole Wist of Centennial and Duran. In the Senate it is sponsored by Democratic Leader Lucia Guzman of Denver and Sen. Jack Tate of Centennial.

"This is about protecting consumers, empowering homeowners and making sure that we finally reduce the risk to instill some confidence for people to break ground on attainable housing across the state of Colorado," Garnett said.

House Bill 1279 would require a majority of homeowners in an association to approve a lawsuit and provide disclosure to homeowners of a proposed suit.

The bill passed the House State, Veterans and Military Affairs Committee on a unanimous vote. It now heads to the House floor for debate.

The effort was partly held up by a few short words in the legislation, which addresses a pause in the time homeowners have to file a lawsuit under a statute of limitations. The clock would pause up to a 90-day voting and disclosure period as a homeowners' association decides whether to file a lawsuit.

The original bill started with a 120-day period, but lawmakers amended it on Wednesday to honor the terms of the compromise. Developers had issues with the provision, which is what led the Homeownership Opportunity Alliance's policy committee to initially oppose the bipartisan bill, along with a handful of other concerns on the voting process.

"We probably irritated folks that we were negotiating with by our insistence that we choose something beneficial that can actually move the ball forward," said Mike Kopp, a former state senator who is president and chief executive of the business group Colorado Concern, which is a member of the Homeownership Opportunity Alliance.

Successful passage of a construction defect reform effort would hand legislative leaders a major win this session, as both sides of the aisle in both chambers and the governor made it a priority.

"Oh, happy day!" said a jubilant Gov. John Hickenlooper, a Democrat. "It really does show that if people are willing to listen hard enough to the other side and stick with it and then listen even harder than they had before, you can solve problems."

The bill - as with all construction defect measures - aims at spurring housing development by relaxing concerns from developers over expensive lawsuits. Hickenlooper said the victory is almost psychological for homebuilders.

"We're going to see a lot of developers say this may not be perfect, but now I'm going to do it, and as more developers do that, I think we will see a wave of new development," the governor said.

The conversation had to balance the concerns of homeowners who demanded a right to go to trial in the event of shoddy construction. Those homeowners and associations have come around.

"Even though this bill this year isn't our ideal solution ... we believe it does strike a balance and that it is fair to homeowners, their communities, builders and developers," said Suzanne Leff, spokeswoman for the Community Associations Institute, which represents homeowners' associations.

A separate defect effort also remains alive in the legislature. Senate Bill 45 aims at equitably dividing litigation defense costs. The idea is to lower insurance rates, which would decrease costs for developers.

The bill is sponsored by Duran and Senate President Kevin Grantham, R-Canon City. But it is opposed by the very groups it is intended to help, including developers. The legislation has been awaiting a hearing in the Senate Appropriations Committee since early February and its fate is uncertain.

Another effort, Senate Bill 156, has seen concerns from Duran and faces a precarious future. That bill would require arbitration or mediation before filing suit and has the support of developers. It is scheduled for a hearing Thursday in the House State, Veterans and Military Affairs Committee.

Yet another measure, Senate Bill 155, would define "construction defect" in state law. Homeowners are concerned that the bill would give developers immunity from having to repair defects, and so the bill faces a tough battle ahead. It was scheduled for a hearing on Wednesday afternoon in the Senate Business, Labor and Technology Committee, but a vote was delayed.

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