November 20, 2015
On November 16, 2015, the Denver City Council held the first reading of a construction defect ordinance designed to reinvigorate stagnant condominium development in Denver.
The ordinance includes several provisions that should reduce the litigation risk previously inherent in new condo development projects. For example, under the new ordinance, “technical” building code violations will not give rise to an actionable claim against the building developer or contractor unless such violation causes actual damage to the property. Accordingly, claims for strict liability or negligence per se based on code violations with no evidence of actual damage are prohibited.
The ordinance also requires consent from a majority of unit owners prior to commencing formal construction defect lawsuits. And, recognizing Colorado’s public policy favoring the enforceability of arbitration provisions, the measure demands that condo owners comply with housing contract provisions that require private arbitration rather than state court litigation. The ordinance goes on to state that the HOA cannot modify or eliminate an arbitration provision without the developer’s consent.
This ordinance has strong support from community leaders, construction trade organizations, and business leaders who believe that Denver should follow in the footsteps of nine other Front Range cities that have already passed similar defect reform laws. Yet, opposition from some homeowners and community associations is expected and some have voiced concerns that the new ordinance would infringe on homeowners’ abilities to address grievances in courts and would not include any guarantees that builders would actually start putting up more affordable housing. The final reading of the ordinance is scheduled for November 23, 2015 and will be open to further public comment, consider amendments, before the City Council holds a final vote.