The Colorado Legislature has proposed a new law to limit lawsuits against builders in order to incentivize builders to increase supply of affordable housing. Will the new law help or hurt the market. What is in the new bill and how does it radically change the current defect law?
What is in the new Colorado Construction defect bill?
Below are the highlights of the new bill
- Establishes a claimant’s duty to mitigate an alleged construction defect and specifies how a claimant may satisfy this duty and the consequences to a claimant that fails to satisfy this duty;
- Requires that a construction professional must send or deliver to the claimant an offer to settle the claim or a written response that identifies the standards that apply to the claim and explains why the defect does not require repair; and
- Requires a construction professional who is the defendant in a construction defects action to submit specified information to the claimant.
- updates the statute of limitations for construction defect claims to 10 years unless the construction professional provided the consumer with a warranty that meets the requirements of the bill, in which case the statute of limitations is 6 years.
- Allows a construction professional that meets specified requirements to use certain affirmative defenses in construction claims brought against the construction professional for the construction of middle market housing.
A few important notes:
- Law only applies to units below conforming limits which is approximately 833k in Denver metro
- Only applies to Condos/multifamily units
- A warranty must be provided by the builder that covers construction defects in order to mitigate construction lawsuits.
Will the Colorado Construction defect bill alter building throughout Colorado?
I’m doubtful this bill will move the needle to encourage construction of affordable housing projects. With the huge increases in building costs, land costs, etc… it is more profitable to build more expensive units or build government backed affordable housing. The proposal above does nothing to change the direction of building especially in the Denver metro area.
Will this defect bill have the inverse effect to restrict building
Based on how the bill is written as of this writing, the defect bill likely will make matters worse. The statute of limitations has increased from 6-10 years creating more liability for builders and furthermore the compliance costs of inspections, warranties, etc… likely outweigh the benefits. Builders will focus on higher priced properties and lower government subsidized projects.
Already a big problem in the condo market
Regardless of this bill, the condo market is already in the dumps. Lower priced condos are getting hit the hardest as the numbers no longer make sense to pay for the monthly HOA dues, capital calls, etc… At the lower price points it is now cheaper to rent which is making it increasingly more difficult to sell leading to huge increases in inventory. Furthermore as the single family market is cooling in the front range there are other single family options that end up cheaper without the monthly HOA dues. Here are 4 reasons why the condo market in Colorado is struggling.
Summary
Gov. Jared Polis, a Democrat, cheered the bill at a news conference Wednesday as a proposal that “balances homeowner protections, de-risks the market and allows more condos to be built and sold.”
Although the bill was greeted with great fanfare that it will radically increase affordable housing throughout Colorado, the reality is far different. The bill is so onerous that builders will continue to focus on the higher end more profitable segment along with the very low income builds that are government subsidized. Ironically, how the bill is written today, this bill will likely further strain any affordable housing projects that are not government subsidized.
Additional Reading/Resources
https://leg.colorado.gov/bills/hb25-1272
https://coloradohardmoney.com/condo-prices-fall-throughout-colorado/
We are a Colorado Private/ Hard Money Lender funding in cash!
If you were forwarded this message, please subscribe to our newsletter
I need your help as my goal in writing these articles is to provide the best information/insight on Colorado Real Estate that you cannot get anywhere else! Please like and share my articles on linked in, twitter, facebook, and other social media and forward to your friends/associates I would greatly appreciate it.
Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. He is the owner of Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Glen resides in Colorado, lends in Colorado, owns property in Colorado, and services loans in Colorado which provides a unique real estate prospective of what is actually happening on the ground both in Denver and throughout Colorado. My goal of this real estate blog is to provide an honest assessment of what I see happening in Colorado real estate and how it will impact real estate owners, buyers, realtors, mortgage professionals, etc…
Fairview is the recognized leader in Colorado Hard Money and Colorado private lending focusing on residential investment properties and commercial properties both in Denver and throughout the state. We are the Colorado experts having closed thousands of loans throughout the Front range, Western slope, resort communities, and everywhere in between. We also live, work, and play in the mountains throughout Colorado and understand the intricacies of each market.
When you call you will speak directly to the decision makers and get an honest answer quickly. We are recognized in the industry as the leader in Colorado hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide. To get started on a loan all we need is our simple one page application (no upfront fees or other games)
Tags: Denver hard money, Denver Colorado hard money lender, Colorado hard money, Colorado private lender, Denver private lender, Colorado ski lender, Colorado real estate trends, Colorado real estate prices, Private real estate loans, Hard money loans, Private real estate mortgage, Hard money mortgage lender, Hard money mortgage lender, residential hard money loans, commercial hard money loans, private mortgage lender, Hard Money Lender, Private lender, private real estate lender, residential hard money lender, commercial hard money lender, No doc real estate lender