Under Colorado House Bill 17-1279, HOA Boards Now Must Get Members’ Informed Consent Before Bringing A Construction Defect Action

by Snell & Wilmer

Last year, I wrote a post calling attention to stalled efforts in the Colorado legislature to pass  meaningful construction defect reform.  Shortly thereafter, the legislature got it done in the form of House Bill 17-1279.  This bill creates an important pre-litigation notice-and-approval process whenever an HOA initiates a construction defect action in its own name or on behalf of two or more of its members.

Before May 2017, the pre-litigation requirements that an HOA had to fulfill before bringing a construction defect claim under the Colorado Construction Defect Action Reform Act (“CDARA”) were generally minor. For example, while many declarations required majority approval from the community prior to initiation of claims, in practice, what the industry was seeing is that some HOAs were making it so that only a majority of the HOA Board had to approve bringing the claim, rather than the majority of interested unit owners.  It was also common that, even where the majority of owners were involved, they were often voting in favor of filing a lawsuit or arbitration without fully understanding the risks and costs.  This practice presented a risk to developers—it is easier to get approval from a small group than from a larger group, and it is easier to get approval when the voting owners do not fully appreciate the risks and costs inherent in filing a claim.

Colorado House Bill 17-1279, which was signed into law by Governor Hickenlooper in May 2017 and is codified at C.R.S. § 38-33.3-303.5, lessens these risks by amending the Colorado Common Interest Ownership Act (“CCIOA”) to add certain pre-litigation requirements.  Section 38-33.3-303.5 applies any time an HOA institutes a construction defect action  its own name on behalf of itself or two or more unit owners on matters affecting the common interest community.  C.R.S. §§ 38-33.3-302(1)(d), -303.5(1)(a).

These amendments directly address the “majority vote” issue. As amended, section 38-33.3-303.5 states that the HOA’s “executive board may initiate the construction defect action only if authorized within the voting period by owners of units to which a majority of votes in the association are allocated,” unless the action pertains to (1) nonresidential facilities with defects of less than $50,000 or (2) “the association is the contracting party for the performance of labor or purchase of services or materials.”  C.R.S. § 38-33.3-303.5(1)(d)(I)(A).  The section excludes several types of votes from this “majority,” including votes allocated to units owned by a development party and by banking institutions “unless a vote from such an institution is actually received,” votes “allocated to units of a product type in which no defects are alleged, in a common interest community whose declaration provides that common expense liabilities are not shared between the product types,” and votes allocated to “nonresponsive” unit owners.  C.R.S. § 38-33.3-303.5(1)(d)(III).  Nevertheless, this majority vote requirement applies “notwithstanding any provision of law or any requirement in the governing documents” of the community, so for most construction defect actions, it effectively curtails the practice of initiating construction defect actions based only on a majority vote of the HOA board.  C.R.S. § 38-33.3-303.5(1)(d)(I)(A).

The revised statute also requires significant disclosures. Before bringing a lawsuit or arbitration for construction defect claims, the HOA board must mail or deliver written notice of the anticipated construction defect action (the “Proposed Action”) to each owner and to the construction professional against whom the Proposed Action would be asserted (the “Disclosure Notice”).  The Disclosure Notice must: (1) set the date for the newly required meeting with owners (the “Meeting”) within ten to fifteen days after the Disclosure Notice, to consider the Proposed Action; and (2) make the following disclosures:[1]

  • As to the meeting itself, the Disclosure Notice must explain that:
    • The voting period begins after the Meeting, at which time the HOA will accept votes for or against proceeding with the Proposed Action;
    • The voting period ends at the earlier of 90 days after the meeting or when the HOA has received enough votes to either approve or disapprove of the Proposed Action; and
    • All impacted construction professionals are invited to the Meeting and will have the opportunity to address the owners and, if the professional so chooses (not required), they may offer a remedy in accordance with CDARA’s notice of claim process
  • As to the substance of the claims and proposed action, the Disclosure Notice must provide a description of the alleged defects with reasonable specificity, the relief sought, and a good faith estimate of the benefits and risks involved. It must disclose that:
    • The alleged defects may result in increased maintenance and repair costs or special assessments;
    • The applicable deadlines and statutes of limitations for bringing the Proposed Action;
    • That the defects may have to be disclosed to potential buyers;
    • The compensation arrangement between the attorneys and the HOA;
    • The HOA may incur legal costs up to a specified amount, in addition to attorneys’ fees and that, if the HOA does not prevail on its claims, it may have to pay these amounts;
    • A court or arbitrator could award costs and fees to the opposing party, if the HOA does not prevail, and the HOA would be responsible for those amounts;
    • There is no guarantee that any damages awarded will cover the cost of repairs;
    • Market value of the units may be adversely affected by the defects; and
    • Owners and prospective buyers could have difficulty obtaining financing because of the defects and the suit.

The purpose of the disclosures is to ensure that owners are informed and knowledgeable about the risks and basis for the Proposed Action prior to voting. Further, at least five business days before sending the Disclosure Notice, the HOA Board must send a separate notice to the construction professional, advising it of the upcoming Meeting.  The construction professional may then elect to offer a presentation at the meeting, which may include “an offer to remedy any defect in accordance with” CDARA.   C.R.S. § 38-33.3-303.5(1)(c)(II).  This provision is intended to give the construction professional enough time to prepare for the Meeting and to offer voluntary remediation.

In sum, HB 17-1279 should have two primary effects: making sure HOA members understand the potential risks and benefits of construction defect litigation, and making sure that most of the affected parties give informed consent to proceed.

[1] The specific language of the required disclosures is codified at C.R.S. § 38-33.3-303.5(1)(c)(II)-(III).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Snell & Wilmer | Attorney Advertising

Written by:

Snell & Wilmer

Snell & Wilmer on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.