DENVER - If you want to see fewer cranes in the skyline in the Denver metro area, this story is not for you.
Lawmakers have found a late-session compromise on an issue that's been contentious for years: construction defects.
The simplest way to describe the construction defects problem is that Colorado law makes it easier to sue developers for construction defects on condos and townhomes, scaring the building industry away from those multi-family structures. The rules aren't the same for apartment buildings.
On Tuesday night, in a marathon negotiation session behind closed doors, lawmakers and the building industry found a compromise on one of the bills dealing with construction defects. On Wednesday afternoon, Gov. John Hickenlooper, Denver Mayor Michael Hancock, Lakewood Mayor Adam Paul and lawmakers announced the compromise at a news conference in the Capitol foyer.
"The deal that we reached last night, should raise the cloud and allow the sun to shine down and thaw what has been a frozen marketplace," said bill sponsor Rep. Alec Garnett, D-Denver.
That compromise calls for a homeowners' association board to do the following:
- Alert unit owners and the developer of a potential lawsuit
- Schedule a meeting between unit owners and the developer to hear the HOA position and the developer position
- Have unit owners vote on whether or not to sue the developer, giving the unit owners 90 days from the meeting date
- More than half of the unit owners must approve the lawsuit for it to move forward, taking the power away from the HOA board itself
"This is a psychic victory. I think there's such a pent-up demand for condominiums that we're going to see a lot of developers say, 'Oh, this may not be perfect, but now I'm going to do it.' And as more developers do that, I think we'll see a wave of new development," said Hickenlooper.
But if this becomes law is it really going to spur condominium construction? Many apartment complexes have been or are being built on prime locations throughout the metro area. Nothing in the legislation requires home builders to construct condominiums.
A few industry insiders told us over the phone that this will not necessarily generate new condo construction.
"There isn't a guarantee, but I think the pent-up demand, especially in my district -- the youngest House district in the state of Colorado, where I have more millennials than anyone else -- the demand is so high that I think that's going to spur these folks saying condos over apartments," said Garnett.
Garnett's district covers Capitol Hill, West Washington Park, Baker and the University of Denver.
"I have three light rail stations in my district. I have folks who own land that really want to build condos, but they feel like they're going to get sued," said Garnett.
We asked what may seem like an obvious question…why don't developers build a condo without defects?
"By no means are we defending or is anyone defending bad building," said Garnett. "We've created an environment where insurance is really expensive because the feeling is the bar is too low to decide on whether or not moving forward with litigation is the right idea. The risk of actually breaking ground on new condos, means that insurance is high because there is a much higher likelihood that you'll be sued whether or not the defect is substantial enough to warrant that type of response."
The legislation passed out of its first House committee hearing immediately after the news conference on Wednesday. It still has to go through all of the House process and then the Senate before it can end up on the Governor's desk.
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