By Deborah Goonan, Independent American Communities
Yesterday I wrote about efforts to enact consumer friendly legislation for homeowners in HOAs in Michigan, and efforts by industry trade groups representing home builders, including Community Associations Institute, to neutralize or kill the bill entirely.
Michigan HB 4919 was originally drafted to prevent developers from writing anti-litigation provisions into condominium association governing documents. Specifically, the bill aimed to void any governing document requirement for a two-thirds vote of all unit owners before an association could file a construction defect lawsuit against the developer or affiliated contractors. But the local chapter of CAI convinced Legislators to amend HB 4919 to carve out an exception for developers that would ultimately allow provisions requiring a two-thirds vote of all unit owners to approve litigation. In other words, the amendment completely reversed the original intent of the bill. If enacted as amended, HB 4919 would be ineffective at best, and potentially harmful to condominium owners in Michigan.
Today let’s take another look at what’s going on in Colorado. I have been following construction defects legislative proposals in the state for the past several years. This year, once again, city Mayors are joining forces with developers of affordable housing to push the same agenda they have been promoting in the past.
Supporters of SB 156 claim construction defects reform legislation is necessary to keep construction costs low, especially in order to build affordable housing, mainly in the form of condominiums.
To summarize, SB 156, which recently passed in the Senate 23-12, seeks to prevent homeowners and condominium associations from engaging in civil litigation and jury trials involving claims of construction defects. Specifically the bill, as currently drafted, mandates pre-trial mediation or arbitration, and requires an association to obtain a vote of a simple majority of all unit owners before proceeding with any claim against a developer for construction defects.
The bill would also prohibit the rights of owners in an association governed community to “amend out” developer-written provisions that mandate mediation or arbitration for all construction defect disputes. In short, SB 156 would blatantly impair homeowners’ rights to amend their governing documents, if such amendment would remove an economic advantage for the developer.
How would SB 156 affect homeowners?
Legislators need to ask the owners of poorly constructed condos, in need of extensive repairs, how affordable it is to live now that assessments have increased substantially, because their developer has not been held fully accountable.
Likewise, Legislators should look into how much property values have plummeted in common interest communities plagued by poor workmanship.
Curiously, while the Community Associations Institute (CAI) chapter in Michigan stands behind an amendment forcing a two-thirds vote of unit owners before the association can proceed with litigation against the developer, in Colorado, a CAI spokesperson has gone on record opposing SB 156, which contains similar provisions.
Construction bill backers knock opponents for embracing arbitration in their own contracts
by Ernest Luning on February 27, 2017 (Colorado Statesman)
Backers of Republican-sponsored legislation to steer construction defects complaints into arbitration are crying foul because opponents require the dispute-resolution method in their own contracts.
An organization representing homeowner associations, however, says arbitration is fine in certain cases, but its spokeswoman maintains that forcing complicated construction disputes into arbitration — instead of guaranteeing the HOAs their day in court — is a “bad fit” for all concerned.
[Suzanne] Leff, [the spokeswoman for the Community Associations Institute, a trade association representing homeowners’ associations] has already said her group opposes SB 156.
“We do not support Senate Bill 156, which would require homeowners to enter into forced binding arbitration and severely limit their access to the court system,” she told The Statesman earlier this month. “We put homeowners and their communities first, seeking to protect them from defects, and cannot agree to give up their rights to a fair trial as Senate Bill 156 requires.”
So who is lobbying for SB 156? Once again, attorneys who represent real estate developers are very much in favor of preventing litigation brought by homeowners and condominium associations in Colorado.
For instance, see this article in the National Law Review, written by an attorney that represents developers, entitled Latest (and Greatest) Colorado Construction Defect Reform Bill—SB17-156.
I can only surmise that, by comparison to CAI in Michigan, there must be fewer attorneys that represent developers with memberships in the Colorado Chapter of CAI.
But it is fascinating to observe the apparent contradiction in public policy on this issue between two different chapters of CAI.
As for what’s next, according to reports in the Colorado Statesman, SB 156 faces stiff opposition in the Democratic controlled House.
If the Colorado Legislature is truly inclined to prevent costly construction defect litigation, perhaps state policymakers need to focus on prevention of poor quality construction in the first place.
State laws might also begin to mandate less onerous zoning restrictions for residential construction, and put an end the de facto mandate of common interest, association-governed communities for virtually all new housing development.
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