Construction Defect Law
Lakewood's Challenge to Colorado's Defects Law likely to be Settled in Court
John Aguilar | The Denver Post
October 15, 2014
The next venue for Lakewood's first-of-a-kind measure challenging the state's much-debated construction-defects law could be a courtroom.
Already, various interests — lawyers, builders, municipalities — in the contentious debate over how state law is affecting the construction of new condominiums in Colorado are assessing the legal underpinnings of an ordinance approved early Tuesday morning by the City Council.
The ordinance passed 7-4 shortly after midnight at a packed meeting that featured nearly two hours of public comment. It gives developers and builders a "right to repair" defects, as opposed to facing potential litigation the moment a defect is discovered. It also requires condominium association boards to get consent from a majority of homeowners — rather than just the majority of the board — before filing suit.
Opponents of Lakewood's measure counter that it will strip homeowners of their constitutional right to a jury trial and scuttle consumer protections that allow homeowners to hold builders accountable for shoddy construction.
It's too early to tell how Lakewood's ordinance will do in court, but attorneys are without a doubt already forming arguments for and against the measure and figuring out who has standing to bring a case before a judge.
"I wouldn't be surprised if an entity or individual brings a lawsuit based on the idea that Lakewood exceeded its home rule authority," said Molly Foley-Healy, an attorney and legislative liaison for the Community Associations Institute, which advocates for homeowner association professionals. "The issue of construction defects is a statewide issue and is not unique to the city of Lakewood. State law should deal with it."
But attempts to reform Colorado's construction-defects law, which many blame for jacking up insurance premiums on new owner-occupied multi-family housing units to such high levels that few developers are willing to pursue condominium projects in the state any longer, have failed a couple of years in a row in the legislature.
"The real importance of what Lakewood has done is take a step that the General Assembly has been unable to do," said Jared Berg, a construction litigation attorney with Denver-based Sherman & Howard. "I do think there will definitely be lawsuits against this ordinance if state law doesn't change."
Berg said Lakewood is in a tough position legally, given recent judicial rulings striking down local bans on oil and gas activity passed by voters in Longmont, Lafayette and Fort Collins. Lakewood, too, would be facing the prospect of defending an ordinance that conflicts with state law, he said, a dynamic that the judges in the oil and gas cases saw in favor of the state.
"Those decisions are the precedent that anybody challenging the ordinance would look at," Berg said.
But Bruce Likoff, a real estate transaction attorney with the law firm Bryancave, said the oil and gas cases are much different than the construction defects law Lakewood is challenging. He said owners of mineral interests in Colorado have "extremely strong" protection in state law going back a century.
"There is nothing enshrined in the state constitution on (construction defects)," Likoff said.
If the argument in court, he said, can be framed as one of rightful municipal control over land use and zoning issues, Lakewood could prevail. If the judge sees the issue as one dealing with who has proper regulatory authority over homeowners associations, the state may prevail, Likoff said.
Lakewood Mayor Bob Murphy said the new ordinance, which takes effect in a month, "comfortably" fits into the city's purview over zoning and land use decisions.
He said if it has the effect of prodding the legislature to pass defects reform bills in the next session, that would be an added benefit. But in the meantime, Lakewood has every right to pass measures to bolster the diversity of its housing stock and embolden its economy, he said.
"We're a home rule city and believe we have the authority to do it," the mayor said. "We did this for Lakewood."
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SOURCE: www.denverpost.com