- Construction defect laws need to be reformed.
- Expert addressed CREJ conference on Tuesday.
- SB-177 addresses construction defect litigation.
The need to reform Colorado’s construction defect litigation kicked off a half-day conference on Tuesday focused on rental apartments.
“I know you deal with apartments and rental units, but this is an issue all of the business community should be engaged in,” real estate attorney Amy Hansen told about 700 experts in rental development, investment and lending who attended the 2015 Multifamily Development & Investment Conference Expo.
“Everyone in business is impacted by the economy. Housing is key to our economy,” said Hansen, of the Homeownership Opportunity Alliance (or HOA), which is working to reform the construction defect laws in Colorado.
“The housing economy is fluid. We need a strong housing market across the board,” Hansen told the real estate experts attending the conference at the Inverness Hotel and Conference Center.
The conference was sponsored by the Colorado Real Estate Journal. It included panels discussing apartment lending, tax assessments for multifamily projects, investments and development.
HOA is comprised of 50 diverse groups. It also has 24 mayors as members.
Groups that belong to HOA include the Denver Metro Chamber of Commerce, the Apartment Association of Metro Denver, the Colorado Association of Home builders, Downtown Denver Partnership, the Hispanic Chamber of Commerce of Metro Denver, the Home Builders Association of Metro Denver, Hope Communities, Habitat for Humanity, NAIOP Colorado, and the Urban Land Conservancy, just to name a few.
Broad-based support for condo litigation defect reform
“We have groups that often are not aligned with each other,” which shows how broad-based the support is for construction defect litigation reform.
She noted that Senate Bill-177, which would address the problem of litigation “that has just about ground condo development to a halt in Colorado,” has bipartisan support.’
Senate Bill 177 is sponsored by Rep. Mark Scheffel, R-Parker, Sen. Jessie Ulibarri, D-Westminster, Rep. Brian DelGrosso, R-Loveland and Rep. Jonathan Singer, D-Longmont.
Only 317 permits were issued for “new, for-sale” condos last year, and a third of those were in one community in Highlands Ranch, she said. Another major condo development would be a planned 226-unit, 12-story condo tower across from Sloan’s Lake on the former St. Anthony’s campus. However, the developers have not yet bought the land for the tower.
Condo permits made up 4 percent of all permits issued last year, while in a healthy market, they should account for 20 percent to 25 percent of all of the housing construction activity, she said.
In 2005, before the Colorado Legislature made it easier to sue for construction defects, there were more than 4,000 condos built or converted in the metro area, she said.
Currently, often only two or three members of a condo’s board has the authority to bring a construction defect lawsuit, she said.
Often, many of the condo owners do not learn of it until they are notified with court papers, she said.
Even they had no role in the lawsuit, condo owners will find it is impossible to sell their units to someone needing a mortgage.
It also is impossible to refinance an existing loan when the community is involved in a construction defect lawsuit, she said.
Some of the highlights of SB-177 include:
- That before a construction defect claim is filed, the matter must be submitted to mediation to a neutral third party.
- The condo board must provide an advanced notice to all condo unit owners.
- The condo board must also disclose all of the projected costs, duration, and financial impact of the construction defect claim.
- Finally, the board must obtain the written consent of the majority of the condo owners to file a lawsuit.
Condo demand strong
Hansen said some critics of the legislation contend that condos aren’t being built because there is no consumer demand for them.
However, Hansen noted that resale condos and townhomes last year rose by about 14 percent, compared with about 10 percent for single-family homes. That shows the consumer demand for condos, she said.
Separately, Chris Mygatt, president and COO of Coldwell Banker Residential Brokerage, at the realty firm’s Real Estate & Economic Summit on Monday, said there is huge demand for condos in the Denver market.
Mygatt said he hoped the construction defect litigation laws would be changed to allow the construction of much-needed affordable housing, he said.
Currently, Mygatt noted, only high-end condo developments can pencil out, because of the fear of being sued.
The need for affordable condos is compounded because Denver has become such an expensive rental market, she said.
“Rents are soaring,” Hansen said.
“You need to make $35 per hour to afford the median-priced apartment in the Denver metro area,” Hansen continued.
“First-time home buyers are finding a real hard time finding something to buy,” she said.
Hansen also some people mistakenly think this is only a Denver problem.
“It’s not just a Denver problem,” she said.
Rather, it is a statewide problem, hitting communities from Fort Collins to Durango and everything in between, according to Hansen.
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