Two bills recently introduced in the Colorado Senate propose to change Colorado’s construction defect claims process.

If passed, Senate Bill 15-177 would amend Colorado’s Common Interest Ownership Act, C.R.S. § 38-33.3-101 et seq., to encourage alternative dispute resolution and require more transparency in construction defect litigation involving condominium developments. The second bill, Senate Bill 15-091, would shorten the time period for bringing construction defect claims.

The aim of Senate Bill 15-177 is to encourage early resolution of construction defect disputes and, if that’s not possible, to get more construction defect claims into arbitration instead of court. To that end, it requires homeowners associations to mediate construction defect claims, and it encourages alternative dispute resolution by rendering ineffective any amendment to condominium declarations that changes or removes a mandatory arbitration provision applicable to construction defect claims.

The bill would also require condominium associations to provide specific information to their members about the potential consequences asserting defect claims may have on their asset. That information includes the anticipated cost of pursuing claims, how the association will fund the action, the impact the action may have on the value and marketability of their condos, the anticipated duration of the action, and the likelihood of success. The bill would also require a majority vote of all condominium owners to approve a construction defect action.

Senate Bill 15-091 would cut in half the amount of time a party has to bring construction defect claims. Currently, claims must be brought within 6 years of substantial completion of the project, unless the defect is discovered in year 5 or 6. In that case, the claimant has 2 years after discovery of the physical manifestations of the defect to bring suit. SB 15-091 would reduce to 3 years the time in which a suit may be brought, unless the defect is discovered in year 3, in which case an additional year after discovery to bring suit is permitted. If successful, Colorado would have one of the shortest statutes of repose in the country.

Sherman & Howard predicts the Republican controlled Senate will pass Senate Bill 15-177, however the Democratic controlled House of Representatives will likely postpone any action on the bill indefinitely without bringing it up for a vote. We predict Senate Bill 15-091 will fail in the Senate, or may be postponed indefinitely without a vote. The legislative session ends on May 6, 2015. Senate Bill 15-177 has both significant support and significant opposition, so the bill’s ultimate fate is uncertain. Sherman & Howard will continue to monitor these bills in the General Assembly and will provide updates on significant legislative developments.