Second Regular Session
Seventy-fourth General Assembly
STATE OF COLORADO
REENGROSSED
This Version Includes All Amendments
Adopted in the House of Introduction
LLS NO. 24-0290.02 Jery Payne x2157
SENATE BILL 24-106
Senate Committees House Committees
Local Government & Housing
A BILL FOR AN ACT
C
ONCERNING LEGAL ACTIONS BA SED ON CLAIMED DEFECTS IN101
CONSTRUCTION PROJECTS .102
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov
.)
In the "Construction Defect Action Reform Act" (act), Colorado
law establishes procedures for bringing a lawsuit for a construction defect
(claim). Section 2 of the bill clarifies that a person that has had a claim
brought on the person's behalf is also considered a claimant, and
therefore, the act applies to the person for whom the claim is brought.
Sections 3 and 6 create a right for a construction professional to
SENATE
Amended 3rd Reading
April 11, 2024
SENATE
Amended 2nd Reading
April 10, 2024
SENATE SPONSORSHIP
Zenzinger and Coleman, Buckner, Gardner, Ginal, Kirkmeyer, Liston, Mullica, Pelton R.,
Roberts, Simpson, Will, Baisley, Bridges, Lundeen, Pelton B., Rich, Smallwood, Van Winkle
HOUSE SPONSORSHIP
Bird, Bradfield, Clifford, Frizell, Lindstedt, Lynch, Pugliese, Snyder, Taggart, Wilson,
Winter T.
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing law.
Dashes through the words or numbers indicate deletions from existing law. remedy a claim made against the construction professional by doing
remedial work or hiring another construction professional to perform the
work. The following applies to the remedy:
! The construction professional must notify the claimant and
diligently make sure the remedial work is performed; and
! Upon completion, the claimant is deemed to have settled
and released the claim, and the claimant is limited to claims
regarding improper performance of the remedial work.
Currently, a claim may be held in abeyance if the parties have
agreed to mediation. Section 3 also adds other forms of alternative
dispute resolution for which the claim would be held in abeyance.
Alternative dispute resolution is binding. If a settlement offer of a
payment is made and accepted in a claim, the payment constitutes a
settlement of the claim and the cause of action is deemed to have been
released, and an offer of settlement is not admissible in any subsequent
action or legal proceeding unless the proceeding is to enforce the
settlement.
To bring a claim or related action, section 4 requires a unit owners'
association (association) to obtain the written consent of at least
two-thirds of the actual owners of the units in the common interest
community. The consent must contain the currently required notices, must
be signed by each consenting owner, and must have certain attestations.
Under the act, a claimant is barred from seeking damages for
failing to comply with building codes or industry standards unless the
failure results in:
! Actual damage to real or personal property;
! Actual loss of the use of real or personal property;
! Bodily injury or wrongful death; or
! A risk of bodily injury or death to, or a threat to the life,
health, or safety of, the occupants.
Section 5 requires the actual property damage to be the result of a
building code violation and requires the risk of injury or death or the
threat to life, health, or safety to be imminent and unreasonable.
Under current law, an association may institute, defend, or
intervene in litigation or administrative proceedings in its own name on
behalf of itself or 2 or more unit owners on matters affecting a common
interest community. For a construction defect matter to affect a common
interest community, section 7 requires that the matter concern real estate
that is owned by the association or by all members of the association.
Section 7 also establishes that, when an association makes a claim
or takes legal action on behalf of unit owners when the matter does not
concern real estate owned by the association:
! The association and each claim are subject to each defense,
limitation, claim procedure, and alternative dispute
resolution procedure that each unit owner would be subject
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-2- to if the unit owner had brought the claim; and
! The association has a fiduciary duty to act in the best
interest of each unit owner.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. Legislative declaration. (1) The general assembly2
finds that:3
(a) Access to affordable, quality housing is foundational to4
personal and financial stability and provides safety and life sustaining5
shelter, but it is also a vehicle for reducing childhood poverty and6
increasing economic mobility and intergenerational wealth;7
(b) Colorado has a challenge insofar as, according to the state8
demographer, it has the sixth most expensive housing market in the9
nation;10
(c) Our state's housing supply has not kept pace with our11
population growth. Between 2010 and 2020, the state added 126,00012
fewer housing units than in the prior decade, and as of 2022, Colorado13
has an unmet housing need of between 65,000 and 100,000 units.14
(d) To address this challenge, Colorado must not only increase the15
number of homes that are available for purchase or rent, but it must also16
ensure that the increased supply is a diverse combination of rental and17
home ownership opportunities that will meet the needs, preferences, and18
varied income levels of the people in our state;19
(e) Multifamily for-sale housing is a critical component of this20
solution because it helps close the affordability gap and adds a needed21
element to the diverse mix of housing options the state can offer22
Coloradans, and historically condominiums have been the most affordable23
housing choice for owner-occupied housing;24
106-3- (f) Notwithstanding the fact that Colorado's population today is1
20% greater than what it was in 2008, condominium construction in the2
front range has slowed dramatically and is now 76% lower than it was in3
the years between 2002 and 2008, and between 2007 and 2022, the4
number of entities developing condominiums decreased by 84%;5
(g) Despite the downturn in construction, consumer demand for6
condominiums remains strong in Colorado;7
(h) There were 2.4 resold condominiums for every new8
condominium sale in 2005, but in 2022, there were 30 condominium9
resales for every new sale, and this is especially true for affordably priced10
condominiums;11
(i) At the same time that fewer mid-priced condominiums are12
being built, they are also becoming increasingly more expensive to13
construct, and that cost is passed on to the consumer in the form of higher14
sales prices;15
(j) In 2005, the majority of new and existing condominium units16
were priced under $300,000 because of an adequate supply, but by 2023,17
only 2% of new condominiums built were priced under $300,000, and due18
to the severe lack of supply, currently only one-third of resale19
condominiums are available for a price under $300,000;20
(k) While costs of labor and materials are increasing for all types21
of home construction, the cost increases associated with condominium22
construction have outpaced those associated with single-family home23
construction, and this is particularly evident as it relates to the cost for24
contractors' liability insurance;25
(l) In Colorado, the high costs and frequency of construction26
liability litigation related to condominium development have driven27
106
-4- insurance companies to raise insurance rates for developers;1
(m) In recent years, insurance costs for condominiums surged to2
5.5% of a project's hard costs, which was more than 233% higher than the3
insurance costs of multifamily rental home projects;4
(n) Colorado needs balanced public policy that decreases5
insurance costs by reducing the magnitude and frequency of defect6
claims, ensures that every homeowner has the right to pursue timely and7
effective remedies for defective construction, and ensures that such8
remedies are fair to the home buyer but do not prevent the construction9
of affordable multifamily for-sale housing options;10
(o) Building codes are adopted to establish minimum requirements11
to safeguard the public safety, health, and general welfare and to provide12
safety to firefighters and emergency responders during emergency13
operations;14
(p) The construction of affordable housing will only create15
financial stability, economic mobility, and intergenerational wealth if the16
buyers of affordable housing are not unfairly burdened with the cost to17
repair construction defects caused by builder negligence; and18
(q) Homeowners who are prevented from pursuing legal remedies19
for construction defects may be prevented from refinancing or selling20
their homes and may be subjected to financial insecurity, bankruptcy, or21
foreclosure.22
(2) The general assembly declares that this act:23
(a) Is intended to protect homeowner rights to seek redress for24
construction defects and to be able to pursue the most efficient and25
cost-effective dispute resolution process to be made whole; and26
(b) Is not intended to be interpreted in a manner that would have27
106
-5- the effect of lowering the quality of construction in the state of Colorado1
or encouraging builders to ignore building codes.2
(3) The general assembly further declares that this act will help3
bring down the building costs of affordably priced homes and create more4
opportunities to build wealth for Coloradans through home ownership.5
SECTION 2. In Colorado Revised Statutes, 38-33.3-303.5,6
amend (1)(d)(I)(A) and (1)(d)(III) introductory portion as follows:7
38-33.3-303.5. Construction defect actions - disclosure -8
approval by unit owners - definitions - exemptions. (1) (d) Approval9
by unit owners - procedures. (I) (A) Notwithstanding any provision of10
law or any requirement in the governing documents, the executive board11
may HAS THE RIGHT TO initiate the construction defect action only if12
authorized within the voting period by owners of units to which a13
majority of AT LEAST SIXTY PERCENT OF THE votes in the association are14
allocated. Such A UNIT OWNER VOTING IN FAVOR OF PROCEEDING WITH A15
CONSTRUCTION DEFECT ACTION MUST ALSO ACKNOWLEDGE IN WRITING16
THAT THE UNIT OWNER HAS RECEIVED THE DISCLOSURES REQUIRED UNDER17
SUBSECTION (1)(c) OF THIS SECTION AND THAT THE UNIT OWNER HAS BEEN18
INFORMED OF THE UNIT OWNER'S OBLIGATION UNDER COLORADO LAW TO19
DISCLOSE KNOWN DEFECTS UPON SALE OF THE PROPERTY . THE approval20
is not required for an association to proceed with a construction defect21
action if the alleged construction defect pertains
ONLY to a facility that is
22
intended and used for nonresidential purposes and if the cost to repair the23
alleged defect does not exceed fifty thousand dollars. Such THE approval24
is not required for an association to proceed with a construction defect25
action when the association is the
DIRECT contracting party for the
26
performance of labor or purchase of services or materials.27
106
-6- (III) Vote count - exclusions. For purposes of calculating the1
required majority vote under this subsection (1)(d) only, the following2
votes are excluded:3
SECTION 3. In Colorado Revised Statutes, 13-20-804, amend4
(1); repeal (2); and add (1)(e) and (3) as follows:5
13-20-804. Restriction on construction defect negligence6
claims. (1) No negligence claim seeking damages for a construction7
defect may be asserted in A CLAIMANT IS BARRED FROM BRINGING OR8
MAINTAINING A CLAIM SEEKING DAMAGES FOR A CONSTRUCTION DEFECT9
AS an action if such THE claim arises from the failure to construct an10
improvement to real property in substantial compliance with an applicable11
building code or industry standard; except that such THE claim may be12
asserted if such THE failure results in CAUSES one or more of the13
following:14
(a) Actual damage to real or personal property;15
(b) Actual loss of the use of real or personal property;16
(c) Bodily injury or wrongful death; or17
(d) A risk of bodily injury or death to, or a threat to the life,18
health, or safety of, VERIFIABLE DANGER TO the occupants of the19
residential real property;
OR
20
(e) A
N ACTUAL FAILURE OR LACK OF CAPACITY OF A BUILDING
21
COMPONENT TO PERFORM THE INTENDED FUNCTION OR PURPOSE OF THE22
BUILDING COMPONENT.23
(2) Nothing in this section shall be construed to prohibit, limit, or24
impair the following:25
(a) The assertion of tort claims other than claims for negligence;26
(b) The assertion of contract or warranty claims; or27
106
-7- (c) The assertion of claims that arise from the violation of any1
statute or ordinance other than claims for violation of a building code.2
(3) T
HIS SECTION DOES NOT PROHIBIT, LIMIT, OR IMPAIR CLAIMS,
3
INCLUDING EXPRESS CONTRACT CLAIMS , THAT ARE NOT BASED UPON4
VIOLATIONS OF AN APPLICABLE BUILDING CODE , MANUFACTURER'S5
INSTRUCTIONS, OR INDUSTRY STANDARD.6
SECTION 4. In Colorado Revised Statutes, 38-33.3-302, add7
(3)(c) as follows:8
38-33.3-302. Powers of unit owners' association. (3) (c) (I) I
F
9
AN ASSOCIATION TAKES AN ACTION UNDER SUBSECTION (1)(d) OF THIS10
SECTION FOR A CONSTRUCTION DEFECT ON BEHALF OF TWO OR MORE UNIT11
OWNERS, EACH CLAIM BROUGHT ON BEHALF OF A UNIT OWNER IS SUBJECT12
TO EACH DEFENSE THAT THE UNIT OWNER WOULD BE SUBJECT TO IF THE13
UNIT OWNER HAD BROUGHT THE CLAIM .14
(II) T
HIS SUBSECTION (3)(c) DOES NOT PROHIBIT AN ASSOCIATION
15
FROM ASSERTING CLAIMS ON BEHALF OF TWO OR MORE UNIT OWNERS16
THROUGH A SINGLE ACTION. 17
SECTION 5. Act subject to petition - effective date -18
applicability. (1) This act takes effect at 12:01 a.m. on the day following19
the expiration of the ninety-day period after final adjournment of the20
general assembly; except that, if a referendum petition is filed pursuant21
to section 1 (3) of article V of the state constitution against this act or an22
item, section, or part of this act within such period, then the act, item,23
section, or part will not take effect unless approved by the people at the24
general election to be held in November 2024 and, in such case, will take25
effect on the date of the official declaration of the vote thereon by the26
governor.27
106
-8- (2) This act applies to civil actions occurring and notices of claims1
received on or after the applicable effective date of this act.2
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