The Colorado General Assembly is considering a pair of bills which would modify the liability and exposure of homebuilders in Colorado. HB24-1230: Protections for Real Property Owners, introduced in the House of Representatives, aims to further protect homeowners by expanding the statute of repose under which a claimant can bring a construction defect claim from six to ten years. Conversely, SB24-106: Right to Remedy Construction Defects, introduced in the Senate, aims to restrict the types of claims that a claimant can bring under the procedures outlined in Colorado’s Construction Defect Action Reform Act (“CDARA”). While neither bill is finalized, both have passed their house of origin and seem to be moving for passage through their respective next chamber. Both should remain on Colorado homebuilders’ radar as the legislative session wraps up this May. The following discusses the most current versions of these bills as of May 2, 2024.

Currently, property owners who intend to file a construction defect lawsuit against a homebuilder or similar construction professional must do so within the timeframes afforded by Colorado’s statute of limitations and statute of repose, two and six years, respectively. While the clock on the statute of limitations begins to tick when the defect is noticed, the statute of repose period is triggered upon “substantial completion” of the “improvement to real property.” Substantial completion occurs when a construction project is sufficiently complete, and the owner can use the building for its intended purpose.

HB24-1230 presents increased risk to Colorado homebuilders for potential defect claims. First, it seeks to expand the current statute of repose period from six years to ten years after substantial completion. Second, it makes it a violation of the Colorado Consumer Protection Act (“CCPA”) for homebuilders to obtain or attempt to obtain any express waivers of or limitations on the legal rights or remedies under CDARA or the CCPA. Third, it seeks to void contract provisions that limit a property owner’s right to bring or join a legal action with one or more claimants against a construction professional. This has the practical effect of allowing similarly situated homeowners, e.g., homeowners on the same street experiencing the same construction defect, to bring a claim together even if they are not members of a formal homeowner association. Additionally, for all residential construction defect claims, the bill aims to award prejudgment interest to the prevailing claimant, above and beyond actual damages, at a rate of 6% per annum from the later of the date construction is finished or title is transferred to the owner through the date of mailing of claimant’s first notice of claim under CDARA; and 8% per annual thereafter. Under HB24-1230, any provision in a common interest community’s declaration or governing documents that imposes different or additional requirements than is permitted under Colorado’s construction defect laws, would be void. This bill was approved in the House on April 4, 2024, and is awaiting its second reading before the Senate.

SB24-106, on the other hand, may limit exposure to liabilities facing Colorado homebuilders, with the hopes to incentivize the construction of condominiums in the state. The bill aims to decrease insurance cost on new condominiums, which is significantly more expensive than insurance costs for multifamily rental home projects, increase the volume of new condominium construction, increase available condominium units in Colorado, and increase access to more affordable for-purchase housing options in Colorado. In furtherance of these goals, the bill: (i) modifies and adds additional procedures under which the executive board of a condominium can bring a construction defect action, including increasing the required number of voting owners in favor of the action from a majority of the owners to at least 60% of the votes in the association; (ii) requires that a unit owner voting in favor of proceeding with a construction defect action must acknowledge in writing that the unit owner has received all required disclosures under CDARA and that the unit owner is aware of the unit owner’s obligation under Colorado law to disclose known defects upon sale of the unit; and (iii) modifies when a claimant is barred from bringing a claim seeking damages for a construction defect where the builder fails to construct an improvement to real property in compliance with the building codes or industry standard. Such a claim can only be asserted where the failure to construct such improvement causes actual damage, actual loss, bodily injury or wrongful death, verifiable danger to the occupants of the residential real property, or an actual failure or lack of capacity of a building component to perform the intended function or purpose of the building component. The bill further states that if an association takes an action in accordance with these previously described procedures, that each claim brought on behalf of a unit owner is subject to each defense that the unit owner would be subject to, if the unit owner had brought the claim themselves. SB24-106 was approved by the Senate on April 11, 2024 and introduced to the House of Representatives’ Transportation, Housing & Local Government Committee on May 1, 2024. The Second Regular Session of the 74th Colorado General Assembly is scheduled to adjourn on May 8, 2024.

Colorado construction professionals should continue to keep a close eye on these bills and further guidance from the legislature, and in the meantime, they may want to develop strategies with their construction attorney with regard to these proposed changes.