Colorado has on its books a jumble of laws that address shoddy construction of multi-family residential units and what redress owners have available to correct the problem. The conversation, ongoing since 2007 and escalating since 2010, is a complex interplay between individual owners of units in a larger development with shared property, builders, insurance companies, affordable housing advocates and urban planners. At issue is the liability builders assume when embarking on a condominium project, insurance companies’ capitalization of that liability, and the remedies that condo owners can deploy when the workmanship on their development is not up to muster. The state has attempted several times to strike a balance that encourages more condo construction, but it has failed; tired of waiting for the Legislature, several municipalities have adopted their own construction defects ordinances and Durango is studying a law of its own. There are valid arguments for adopting such a measure, but also significant questions about its efficacy.
The central premise among advocates on the public policy side of construction defects reform is that the relative ease with which homeowners’ associations can sue builders for poor construction has brought new condominium projects to a screeching halt across the state – though the Denver metro area bears the brunt of the problem. The reason: Insurance companies, fearing liability for poor workmanship, frivolous lawsuits, or both, have jacked up rates or refused to insure condo projects and builders are left without the resources or desire to tackle these multi-family endeavors, choosing instead to invest in high-density projects occupied by renters, not owners. The problem, from urban planners’ and affordable housing advocates’ perspective, is a dearth of attainable homes for first-time buyers: Condos are the go-to housing stock for that demographic.
The problem is understandable, as are the nightmare scenarios that have fueled homeowners’, builders’ and insurers’ reticence to find a compromise. Homeowners would prefer to retain their right to litigate, particularly in the case of deplorable conditions and a builder unwilling to remedy them. Builders do not want to be subject to constant and costly litigation, and insurance companies do not want to be on the hook for any more than the bare minimum.
Lawmakers and planners would like to find a compromise that protects all parties, with the added bonus of bringing back the condominium market in a state where housing is in short supply and fetches top dollar. Durango’s proposed ordinance intends to do just that, by laying out a protocol through which condominium owners, their homeowners’ associations and builders can settle disputes over construction defects – through mediation and arbitration first, and litigation only when initial efforts fail and only with the majority of homeowners’ approval. There is nothing objectionable about pursuing a less-costly resolution of construction defects cases and the city is right to encourage it.
Whether doing so will have the magic-bullet effect of bringing condominium projects to Durango in droves is another question entirely. Similar ordinances in other communities – primarily along the Front Range, where the housing crunch is at least as pronounced as the local shortage – have failed to unleash the desired condo torrent. Given the high cost of land in Durango and its limited availability, it is difficult to envision a local construction defects ordinance having a marked effect on housing stock.
The Legislature continues its efforts to find a way to balance the valid yet opposing interests that make construction defects cases so challenging. Durango should participate in and advise that endeavor.
