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Buyers, sellers share responsibility in defect cases

Home sellers need to be ‘forthcoming’ about problems

Chuck and Corrine Owens lived happily at the Villas at La Campanella for two years until 2012, when they started noticing problems with their home.

Neighbors were also having troubles: water leaking in and drainage issues with the landscape. When contractors came to investigate, they said the problem wasn’t a quick fix; it was structural.

When the developer denied responsibility, the homeowners association sought legal advice and filed a lawsuit in 2013. After two years of depositions, the lawsuit was settled with the various defendants to pay for reconstruction on the north Main Avenue townhomes, and the work is still underway.

“We’re fortunate that the damage inside was basically just through a dining room area, and that has been sectioned off,” Chuck Owens said. “Everyone is affected in one way or another.”

Lawsuits of that kind, regardless of fault, are not uncommon.

Attorney Ken Golden, who handles civil cases often dealing with construction law, has represented both buyer and seller in regional cases involving seller disclosure disputes and construction defects.

“The biggest issues are failure to provide the information to the prospective buyer about the property,” Golden said. “As a general rule, everyone should be as forthcoming as they can.”

Golden and his partner, Daniel Gregory, have handled cases that range from a developer building a house in Vail with a faulty foundation after ignoring a geotechnical report, to a Mancos buyer who purchased a home advertised as a fishing property, only to find that the stream was uninhabitable.

Legislators have wrestled for years with a bill that would set stricter conditions for homeowners in multi-family developments to file defects lawsuits. Some see the initiative as a free pass for developers to get away with sloppy work, while others see it as a way to block ill-founded litigation that deters developers from building multi-family units, which are needed in Durango.

But lawsuits can generally be avoided if both sellers and buyers fulfill their responsibilities under Colorado law, which requires the seller to disclose relevant latent defects and the buyer to exercise due diligence in uncovering available information about the property’s flaws.

Both parties are required to complete Colorado Division of Real Estate-approved forms containing checklists addressing defects in a property’s structure, roofing, sewer and water that currently or have ever existed. Buyers also have to acknowledge whether a third party owns or can lease subsurface minerals.

“I tell buyers to ask the seller specific questions and in writing if possible,” Gregory said.

Buyers should also be aware that a typical home inspection won’t reveal foundation problems, so hiring a contractor to conduct a more thorough inspection is recommended.

County and city building and planning departments, as well as the assessors office, hold a wealth of property information as well, including tax documentation, soil and environmental reports, and information on water quality and oil and gas development on or near the property in question.

Golden also advises looking at the homeowners association’s governing documents to find out how construction defect issues are handled and if there has been prior litigation. Both buyers and sellers have been responsible for some of the blame, he said.

“In my experience, buyers don’t do quite as much investigating as they should, and sellers feel like if a form doesn’t explicitly ask, they don’t have to say anything. Give as much information as you can because the downside is a lawsuit.”

In the best-case scenarios, the seller pays nothing to the plaintiff. Most cases settle before going to trial, but they can often drag on a year or more. With La Campanella, the case settled last year, but work continues to get the townhomes structurally sound.

“It’s terrible to have to live through this, the uncertainty, the refusals to acknowledge that they didn’t build the place right,” Owens said. “We look back and I don’t think there is anything else we could have done; I don’t think even a general contractor would have discovered the problem. Thank goodness there are attorneys out there who will figure out what needs to be done. We’re grateful for that.”


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