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Durango City Council seeks to clear bottleneck in condominium construction

Ordinance may ease builders’ litigation risks
A for-sale sign sits next to the SOCO Condominiums at Third Street and East Eighth Avenue in 2013. The city is looking into ways to protect local builders from construction- defects lawsuits.

The city and state are taking similar paths to encourage developers to build condominiums because the threat of lawsuits and insurance costs have continuously stalled their construction for years.

But even if the city of Durango passes legislation first, it may not encourage development right away.

“I don’t think it will have much immediate impact,” said Lisa Laughlin, executive officer for the Home Builders Association of Southwest Colorado.

The state has failed several times to revise a law that has impaired condo construction statewide. Now, the Durango City Council is likely to approve a law that would offer greater protection from lawsuits.

“We need to create a vehicle that allows the developers to take that risk and the banks along with them. ... I think the time is right,” Mayor Dean Brookie told city staff members Tuesday during a work session. A public hearing on the law will be held April 5.

The proposed ordinance would give developers the chance to repair defects before litigation can be filed. It also would require homeowner association boards to get approval from the majority of members before filing a lawsuit, according to a draft.

Instead of filing a lawsuit, a homeowners association and the developer would have to go through mediation or arbitration first if that is required by the governing documents of the association, city attorney Dirk Nelson said. The homeowners association could not amend the documents to file a lawsuit instead.

The Colorado General Assembly may require a vote of the homeowners association board before lawsuits could be filed and other changes similar to the drafted Durango law, said Bill Ray, a spokesman for the Homeownership Opportunity Alliance.

However, it is unknown if a developer would be bound by the Durango law or if the state law would supersede it, Nelson said.

“We may have to face that challenge,” he said.

Other cities including Aurora and Colorado Springs have already past similar local ordinances, and Laughlin believes these ordinances will encourage action from the state.

“It’s really a vote of confidence,” she said.

One of the changes, to require homeowner associations to go through mediation or arbitration, already has precedent at the state level because a court ruling supported the use of arbitration last year.

Arbitration can be faster and cheaper than a jury trail, and it can lead to a binding agreement, said Ken Golden, an attorney with Gregory, Golden & Landeryou.

These cases are not necessarily decided by judges but by people who have experience with construction, he said.

An arbitrator tends to be more pragmatic and may not be swayed as much by emotional points as a jury.

mshinn@durangoherald.com

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