Colorado 2024 Regular Session

Colorado Senate Bill SB106 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1	1		Second Regular Session
2	2		Seventy-fourth General Assembly
3	3		STATE OF COLORADO
4		-	~~REENGROSSED~~
5		-	This Version Includes All Amendments
6		-	~~Adopted~~ in the House of Introduction
	4	+	ENGROSSED
	5	+	This Version Includes All Amendments Adopted
	6	+	on Second Reading in the House of Introduction
7	7		LLS NO. 24-0290.02 Jery Payne x2157
8	8		SENATE BILL 24-106
9	9		Senate Committees House Committees
10	10		Local Government & Housing
11	11		A BILL FOR AN ACT
12	12		C
13	13		ONCERNING LEGAL ACTIONS BA SED ON CLAIMED DEFECTS IN101
14	14		CONSTRUCTION PROJECTS .102
15	15		Bill Summary
16	16		(Note: This summary applies to this bill as introduced and does
17	17		not reflect any amendments that may be subsequently adopted. If this bill
18	18		passes third reading in the house of introduction, a bill summary that
19	19		applies to the reengrossed version of this bill will be available at
20	20		http://leg.colorado.gov
21	21		.)
22	22		In the "Construction Defect Action Reform Act" (act), Colorado
23	23		law establishes procedures for bringing a lawsuit for a construction defect
24	24		(claim). Section 2 of the bill clarifies that a person that has had a claim
25	25		brought on the person's behalf is also considered a claimant, and
26	26		therefore, the act applies to the person for whom the claim is brought.
27	27		Sections 3 and 6 create a right for a construction professional to
28	28		SENATE
29		-	Amended 3rd Reading
30		-	April 11, 2024
31		-	SENATE
32	29		Amended 2nd Reading
33	30		April 10, 2024
34	31		SENATE SPONSORSHIP
35	32		Zenzinger and Coleman, Buckner, Gardner, Ginal, Kirkmeyer, Liston, Mullica, Pelton R.,
36		-	Roberts, Simpson, Will~~, Baisley, Bridges, Lundeen, Pelton B., Rich, Smallwood, Van Winkle~~
	33	+	Roberts, Simpson, Will
37	34		HOUSE SPONSORSHIP
38	35		Bird, Bradfield, Clifford, Frizell, Lindstedt, Lynch, Pugliese, Snyder, Taggart, Wilson,
39	36		Winter T.
40	37		Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
41	38		Capital letters or bold & italic numbers indicate new material to be added to existing law.
42	39		Dashes through the words or numbers indicate deletions from existing law. remedy a claim made against the construction professional by doing
43	40		remedial work or hiring another construction professional to perform the
44	41		work. The following applies to the remedy:
45	42		! The construction professional must notify the claimant and
46	43		diligently make sure the remedial work is performed; and
47	44		! Upon completion, the claimant is deemed to have settled
48	45		and released the claim, and the claimant is limited to claims
49	46		regarding improper performance of the remedial work.
50	47		Currently, a claim may be held in abeyance if the parties have
51	48		agreed to mediation. Section 3 also adds other forms of alternative
52	49		dispute resolution for which the claim would be held in abeyance.
53	50		Alternative dispute resolution is binding. If a settlement offer of a
54	51		payment is made and accepted in a claim, the payment constitutes a
55	52		settlement of the claim and the cause of action is deemed to have been
56	53		released, and an offer of settlement is not admissible in any subsequent
57	54		action or legal proceeding unless the proceeding is to enforce the
58	55		settlement.
59	56		To bring a claim or related action, section 4 requires a unit owners'
60	57		association (association) to obtain the written consent of at least
61	58		two-thirds of the actual owners of the units in the common interest
62	59		community. The consent must contain the currently required notices, must
63	60		be signed by each consenting owner, and must have certain attestations.
64	61		Under the act, a claimant is barred from seeking damages for
65	62		failing to comply with building codes or industry standards unless the
66	63		failure results in:
67	64		! Actual damage to real or personal property;
68	65		! Actual loss of the use of real or personal property;
69	66		! Bodily injury or wrongful death; or
70	67		! A risk of bodily injury or death to, or a threat to the life,
71	68		health, or safety of, the occupants.
72	69		Section 5 requires the actual property damage to be the result of a
73	70		building code violation and requires the risk of injury or death or the
74	71		threat to life, health, or safety to be imminent and unreasonable.
75	72		Under current law, an association may institute, defend, or
76	73		intervene in litigation or administrative proceedings in its own name on
77	74		behalf of itself or 2 or more unit owners on matters affecting a common
78	75		interest community. For a construction defect matter to affect a common
79	76		interest community, section 7 requires that the matter concern real estate
80	77		that is owned by the association or by all members of the association.
81	78		Section 7 also establishes that, when an association makes a claim
82	79		or takes legal action on behalf of unit owners when the matter does not
83	80		concern real estate owned by the association:
84	81		! The association and each claim are subject to each defense,
85	82		limitation, claim procedure, and alternative dispute
86	83		resolution procedure that each unit owner would be subject
87	84		106
88	85		-2- to if the unit owner had brought the claim; and
89	86		! The association has a fiduciary duty to act in the best
90	87		interest of each unit owner.
91	88		Be it enacted by the General Assembly of the State of Colorado:1
92	89		SECTION 1. Legislative declaration. (1) The general assembly2
93	90		finds that:3
94	91		(a) Access to affordable, quality housing is foundational to4
95	92		personal and financial stability and provides safety and life sustaining5
96	93		shelter, but it is also a vehicle for reducing childhood poverty and6
97	94		increasing economic mobility and intergenerational wealth;7
98	95		(b) Colorado has a challenge insofar as, according to the state8
99	96		demographer, it has the sixth most expensive housing market in the9
100	97		nation;10
101	98		(c) Our state's housing supply has not kept pace with our11
102	99		population growth. Between 2010 and 2020, the state added 126,00012
103	100		fewer housing units than in the prior decade, and as of 2022, Colorado13
104	101		has an unmet housing need of between 65,000 and 100,000 units.14
105	102		(d) To address this challenge, Colorado must not only increase the15
106	103		number of homes that are available for purchase or rent, but it must also16
107	104		ensure that the increased supply is a diverse combination of rental and17
108	105		home ownership opportunities that will meet the needs, preferences, and18
109	106		varied income levels of the people in our state;19
110	107		(e) Multifamily for-sale housing is a critical component of this20
111	108		solution because it helps close the affordability gap and adds a needed21
112	109		element to the diverse mix of housing options the state can offer22
113	110		Coloradans, and historically condominiums have been the most affordable23
114	111		housing choice for owner-occupied housing;24
115	112		106-3- (f) Notwithstanding the fact that Colorado's population today is1
116	113		20% greater than what it was in 2008, condominium construction in the2
117	114		front range has slowed dramatically and is now 76% lower than it was in3
118	115		the years between 2002 and 2008, and between 2007 and 2022, the4
119	116		number of entities developing condominiums decreased by 84%;5
120	117		(g) Despite the downturn in construction, consumer demand for6
121	118		condominiums remains strong in Colorado;7
122	119		(h) There were 2.4 resold condominiums for every new8
123	120		condominium sale in 2005, but in 2022, there were 30 condominium9
124	121		resales for every new sale, and this is especially true for affordably priced10
125	122		condominiums;11
126	123		(i) At the same time that fewer mid-priced condominiums are12
127	124		being built, they are also becoming increasingly more expensive to13
128	125		construct, and that cost is passed on to the consumer in the form of higher14
129	126		sales prices;15
130	127		(j) In 2005, the majority of new and existing condominium units16
131	128		were priced under $300,000 because of an adequate supply, but by 2023,17
132	129		only 2% of new condominiums built were priced under $300,000, and due18
133	130		to the severe lack of supply, currently only one-third of resale19
134	131		condominiums are available for a price under $300,000;20
135	132		(k) While costs of labor and materials are increasing for all types21
136	133		of home construction, the cost increases associated with condominium22
137	134		construction have outpaced those associated with single-family home23
138	135		construction, and this is particularly evident as it relates to the cost for24
139	136		contractors' liability insurance;25
140	137		(l) In Colorado, the high costs and frequency of construction26
141	138		liability litigation related to condominium development have driven27
142	139		106
143	140		-4- insurance companies to raise insurance rates for developers;1
144	141		(m) In recent years, insurance costs for condominiums surged to2
145	142		5.5% of a project's hard costs, which was more than 233% higher than the3
146	143		insurance costs of multifamily rental home projects;4
147	144		(n) Colorado needs balanced public policy that decreases5
148	145		insurance costs by reducing the magnitude and frequency of defect6
149	146		claims, ensures that every homeowner has the right to pursue timely and7
150	147		effective remedies for defective construction, and ensures that such8
151	148		remedies are fair to the home buyer but do not prevent the construction9
152	149		of affordable multifamily for-sale housing options;10
153	150		(o) Building codes are adopted to establish minimum requirements11
154	151		to safeguard the public safety, health, and general welfare and to provide12
155	152		safety to firefighters and emergency responders during emergency13
156	153		operations;14
157	154		(p) The construction of affordable housing will only create15
158	155		financial stability, economic mobility, and intergenerational wealth if the16
159	156		buyers of affordable housing are not unfairly burdened with the cost to17
160	157		repair construction defects caused by builder negligence; and18
161	158		(q) Homeowners who are prevented from pursuing legal remedies19
162	159		for construction defects may be prevented from refinancing or selling20
163	160		their homes and may be subjected to financial insecurity, bankruptcy, or21
164	161		foreclosure.22
165	162		(2) The general assembly declares that this act:23
166	163		(a) Is intended to protect homeowner rights to seek redress for24
167	164		construction defects and to be able to pursue the most efficient and25
168	165		cost-effective dispute resolution process to be made whole; and26
169	166		(b) Is not intended to be interpreted in a manner that would have27
170	167		106
171	168		-5- the effect of lowering the quality of construction in the state of Colorado1
172	169		or encouraging builders to ignore building codes.2
173	170		(3) The general assembly further declares that this act will help3
174	171		bring down the building costs of affordably priced homes and create more4
175	172		opportunities to build wealth for Coloradans through home ownership.5
176	173		SECTION 2. In Colorado Revised Statutes, 38-33.3-303.5,6
177	174		amend (1)(d)(I)(A) and (1)(d)(III) introductory portion as follows:7
178	175		38-33.3-303.5. Construction defect actions - disclosure -8
179	176		approval by unit owners - definitions - exemptions. (1) (d) Approval9
180	177		by unit owners - procedures. (I) (A) Notwithstanding any provision of10
181	178		law or any requirement in the governing documents, the executive board11
182	179		may HAS THE RIGHT TO initiate the construction defect action only if12
183	180		authorized within the voting period by owners of units to which a13
184	181		majority of AT LEAST SIXTY PERCENT OF THE votes in the association are14
185	182		allocated. Such A UNIT OWNER VOTING IN FAVOR OF PROCEEDING WITH A15
186	183		CONSTRUCTION DEFECT ACTION MUST ALSO ACKNOWLEDGE IN WRITING16
187	184		THAT THE UNIT OWNER HAS RECEIVED THE DISCLOSURES REQUIRED UNDER17
188		-	~~SUBSECTION~~ (1)(c) ~~OF THIS SECTION~~ AND THAT THE UNIT OWNER HAS BEEN18
	185	+	SECTION 38-33.3-303.5 (1)(c) AND THAT THE UNIT OWNER HAS BEEN18
189	186		INFORMED OF THE UNIT OWNER'S OBLIGATION UNDER COLORADO LAW TO19
190	187		DISCLOSE KNOWN DEFECTS UPON SALE OF THE PROPERTY . THE approval20
191	188		is not required for an association to proceed with a construction defect21
192	189		action if the alleged construction defect pertains
193	190		ONLY to a facility that is
194	191		22
195	192		intended and used for nonresidential purposes and if the cost to repair the23
196	193		alleged defect does not exceed fifty thousand dollars. Such THE approval24
197	194		is not required for an association to proceed with a construction defect25
198	195		action when the association is the
199	196		DIRECT contracting party for the
200	197		26
201	198		performance of labor or purchase of services or materials.27
202	199		106
203	200		-6- (III) Vote count - exclusions. For purposes of calculating the1
204	201		required majority vote under this subsection (1)(d) only, the following2
205	202		votes are excluded:3
206	203		SECTION 3. In Colorado Revised Statutes, 13-20-804, amend4
207	204		(1); repeal (2); and add (1)(e) and (3) as follows:5
208	205		13-20-804. Restriction on construction defect negligence6
209	206		claims. (1) No negligence claim seeking damages for a construction7
210	207		defect may be asserted in A CLAIMANT IS BARRED FROM BRINGING OR8
211	208		MAINTAINING A CLAIM SEEKING DAMAGES FOR A CONSTRUCTION DEFECT9
212	209		AS an action if such THE claim arises from the failure to construct an10
213	210		improvement to real property in substantial compliance with an applicable11
214	211		building code or industry standard; except that such THE claim may be12
215	212		asserted if such THE failure results in CAUSES one or more of the13
216	213		following:14
217	214		(a) Actual damage to real or personal property;15
218	215		(b) Actual loss of the use of real or personal property;16
219	216		(c) Bodily injury or wrongful death; or17
220	217		(d) A risk of bodily injury or death to, or a threat to the life,18
221	218		health, or safety of, VERIFIABLE DANGER TO the occupants of the19
222	219		residential real property;
223	220		OR
224	221		20
225	222		(e) A
226	223		N ACTUAL FAILURE OR LACK OF CAPACITY OF A BUILDING
227	224		21
228	225		COMPONENT TO PERFORM THE INTENDED FUNCTION OR PURPOSE OF THE22
229	226		BUILDING COMPONENT.23
230	227		(2) Nothing in this section shall be construed to prohibit, limit, or24
231	228		impair the following:25
232	229		(a) The assertion of tort claims other than claims for negligence;26
233	230		(b) The assertion of contract or warranty claims; or27
234	231		106
235	232		-7- (c) The assertion of claims that arise from the violation of any1
236	233		statute or ordinance other than claims for violation of a building code.2
237	234		(3) T
238	235		HIS SECTION DOES NOT PROHIBIT, LIMIT, OR IMPAIR CLAIMS,
239	236		3
240	237		INCLUDING EXPRESS CONTRACT CLAIMS , THAT ARE NOT BASED UPON4
241	238		VIOLATIONS OF AN APPLICABLE BUILDING CODE , MANUFACTURER'S5
242	239		INSTRUCTIONS, OR INDUSTRY STANDARD.6
243	240		SECTION 4. In Colorado Revised Statutes, 38-33.3-302, add7
244	241		(3)(c) as follows:8
245	242		38-33.3-302. Powers of unit owners' association. (3) (c) (I) I
246	243		F
247	244		9
248	245		AN ASSOCIATION TAKES AN ACTION UNDER SUBSECTION (1)(d) OF THIS10
249	246		SECTION FOR A CONSTRUCTION DEFECT ON BEHALF OF TWO OR MORE UNIT11
250	247		OWNERS, EACH CLAIM BROUGHT ON BEHALF OF A UNIT OWNER IS SUBJECT12
251	248		TO EACH DEFENSE THAT THE UNIT OWNER WOULD BE SUBJECT TO IF THE13
252	249		UNIT OWNER HAD BROUGHT THE CLAIM .14
253	250		(II) T
254	251		HIS SUBSECTION (3)(c) DOES NOT PROHIBIT AN ASSOCIATION
255	252		15
256	253		FROM ASSERTING CLAIMS ON BEHALF OF TWO OR MORE UNIT OWNERS16
257	254		THROUGH A SINGLE ACTION. 17
258	255		SECTION 5. Act subject to petition - effective date -18
259	256		applicability. (1) This act takes effect at 12:01 a.m. on the day following19
260	257		the expiration of the ninety-day period after final adjournment of the20
261	258		general assembly; except that, if a referendum petition is filed pursuant21
262	259		to section 1 (3) of article V of the state constitution against this act or an22
263	260		item, section, or part of this act within such period, then the act, item,23
264	261		section, or part will not take effect unless approved by the people at the24
265	262		general election to be held in November 2024 and, in such case, will take25
266	263		effect on the date of the official declaration of the vote thereon by the26
267	264		governor.27
268	265		106
269	266		-8- (2) This act applies to civil actions occurring and notices of claims1
270	267		received on or after the applicable effective date of this act.2
271	268		106
272	269		-9-