After more than four years of negotiations on construction litigation reform, HB-1279 sponsored by Representatives Garnett (D-Denver), and Saine (R-Firestone) and Senators Tate (R-Centennial) and Guzman (D-Denver), has passed through both the House and Senate unanimously and is now on its way to the Governor. We expect the Governor to sign it into law.
This informed consent compromise bill does nothing to stand in the way of individual owners who have a legitimate construction issue from seeking a legal remedy. It protects homeowners by ensuring they are aware of a potential lawsuit that could impact selling or refinancing their home and tightens up voting procedures so a majority of homeowners must approve initiating a legal action against a builder rather than leaving that decision to a homeowner association board.
The compromise bill addresses several aspects:
- Tolling Period – It sets a 90 day tolling of the statute of limitations (down from the originally proposed 120 day tolling period). This delay in the time period by which a lawsuit must be filed is also clarified to establish that the tolling period can happen only once, regardless of whether there is an amendment to the notice of filing a lawsuit (notice of claim). Previously there was ambiguity about whether attorneys could continue restarting the tolling period based on an amended claim.
- Voting/ballot integrity – A list of voters/unit owners must be shared with anyone served with the notice of claim (builders, contractors, architects, etc.). Further, there is only one vote per unit owner and they can only vote one time. This prevents the HOA Board from reviewing votes before the close of the voting period and then trying to change the minds of those that voted against pursuing litigation.
- Applicability – The bill language clarifies that the bill applies to all HOA’s, both pre and post 1992, when the Colorado Common Interest Ownership Act (CCIOA) was enacted.
- Definition of “Affiliate” – In the voting exclusions section the original bill ambiguously referred to affiliates of the development party as excluded from voting on commencing litigation. The final version of the bill tightens up the definition of who is considered an affiliate – someone that has a controlling interest in one of the development parties, or their spouse.
- Common elements – The introduced version precluded a vote if the defects claimed are on a common element (non-residential unit), for example a clubhouse or pool. The final version of the bill says that any remedies to repair that do not exceed $50,000 where the HOA is paying for the repairs do not require a vote. Any common element claim greater than $50,000 on a common element would require a vote. This was one of CAR’s biggest issues since any litigation, whether on a common element or on the residential units, clouds the title and can prevent unit owners from selling or refinancing their property.
- Bank-owned properties – These properties will count toward the vote if they vote. These properties were excluded in the original version of the bill.
- Non-responsive voters – These votes will not count. But the bill does allow builders/defendants to challenge in court any unit owners deemed non-responsive by the HOA board.
The Homeownership Opportunity Coalition, of which CAR is a member, believes this bill is a positive first step in the right direction to building more attainable housing for all Coloradans while also protecting homeowners and giving them a voice in whether or not to pursue litigation.
Thank you to each and every one of our members for your dedication on this critical issue, whether it was responding to our calls for action or providing your stories and insights, the time and energy you have put forward to voice your support for construction litigation reform was pivotal in helping us reach a compromise. We are excited to celebrate with you the opportunity to take the first steps in addressing this litigation issue that has plagued our building community and our housing market for the past decade.