On October 13, 2014, Lakewood’s City Council passed Ordinance O-2014-21, which reforms the process for handling construction defect claims on condominium projects in the City of Lakewood. The ordinance has three primary goals: 1) to give builders a real right to repair alleged defects; 2) to prevent homeowners’ associations (“HOAs”) from removing arbitration provisions in condominium declarations; and 3) to require HOAs to obtain informed consent from condominium owners before initiating construction defect actions.

The City Council heard nearly two hours of public comment both in favor of and against the ordinance. The ordinance elicited strong support from community leaders, construction trade organizations, and business leaders and strong opposition from some homeowners and community associations. Lakewood Mayor Bob Murphy supported the ordinance.

Ultimately, the City Council approved the ordinance 7 to 4 with some amendments. The primary concern voiced by City Council members voting against the ordinance was that residential construction defects should be addressed by the Colorado General Assembly, and some felt the City of Lakewood does not have authority to enact the ordinance. The ordinance may face legal challenges on this basis.

As enacted, the ordinance applies only to multi-family residences and features the following key provisions:

• Builders have the right to propose repairs after notice from the HOA or owners of alleged defects. Owners may object to the proposed repairs but may not prevent the builder from conducting the repairs. After repairs are completed, if the HOA or owners think the repairs are inadequate, they can then assert a defect action.
• Provisions in HOA declarations, bylaws, or rules and regulations requiring alternative dispute resolution (mediation or arbitration) cannot be amended as to existing construction defects;
• HOAs must give their members information regarding the cost of a defect action, the estimated cost of repair, the anticipated impact of an action on the marketability of their units, the anticipated length of any action, and other matters, and then get a majority of owners to vote in favor of commencing an action.

Other municipalities have expressed interest in following Lakewood’s lead. The Denver Post reported on October 19 that officials in Brighton, Broomfield, Centennial, and Lone Tree are considering similar ordinances. This grass-roots approach to reform also may lead the Colorado General Assembly to address construction defect reform in the 2015 session.