Colorado: DR Horton loses another lawsuit, construction defect reform bill advances

By Deborah Goonan, Independent American Communities

One HOA in The Conservatory neighborhood of Aurora was recently awarded $13.5 million in arbitration with D.R. Horton. The construction defect claim was for reconstruction of a groundwater underdrain system that has caused basement flooding in the past.

D.R. Horton had refused to repair the drainage system, leading to the HOA’s decision to file a lawsuit.

Aurora HOA wins $13.5 million award in dispute with Texas homebuilder

Apr 11, 2017, 1:36pm MDT

A homeowners association in Aurora has received an arbitration award of $13.5 million in a dispute with D.R. Horton Inc., according to a statement from the HOA’s attorneys, Benson, Kerrane, Storz & Nelson PC.

The HOA for The Conservatory neighborhood, roughly located along Hampden Avenue west of E-470, received the award against KDB Homes, a subsidiary of the Texas-based D.R. Horton, in a dispute over water damage related to the community’s underdrain system, the release states.

A homeowner first reported problems with water backing up through her sump pit and flooding her basement in 2014, and while investigating the issue, the HOA discovered that many of the homes in the area were connected to a drainage system that was intended to collect groundwater from the foundations of the homes and carry the water under the streets and out of the community. But that system was failing, according to the release.

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Meanwhile, one of six proposed bills seeking to modify Colorado’s current statute with regard to construction defect claims is making its way through the House. The key compromise provision in HB 1279 requires a vote of a majority of homeowners to authorize an association-governed community’s board to commence construction defect litigation.

Unlike bills introduced in past years, this year’s bill excludes votes from units owned by the developer or affiliates of the developer, as well votes of non-responsive unit owners. (Those owners who have not responded, following the association’s good faith attempt to contact them, or whose mail ballots are returned as undeliverable.)

As currently written, a vote of owners is not required to initiate litigation for construction defects in non-residential components or common areas. The vote is only intended for litigation involving defects that directly affect residential units.

If enacted, the law would require an association to disclose certain facts to unit owners prior to taking a vote on the matter of filing a construction defect lawsuit, including: the nature of construction defects and estimated cost to repair; potential cost, benefits and risks of litigation; the effects of failure to repair defects; potential adverse effects of litigation on the owners’ ability to refinance a mortgage, sell a unit to a buyer requiring a mortgage; and the risk for future special assessments.

Proponents of the bill claim that the proposed amendments in HB 1279 will encourage developers to build more condominiums in the state. But many critics remain skeptical that passage of HB 1279 will result in more condo construction, as there are several other economic factors that have led developers to build rental apartments instead of condominiums.

Construction defects measure in Colorado passes critical legislative committee vote
Rep. Alec Garnett, a co-sponsor of HB 1279, says he expects measure to pass both chambers before the legislative session ends

By JOHN AGUILAR | | The Denver Post
PUBLISHED: April 19, 2017 at 10:54 am | UPDATED: April 19, 2017 at 11:05 pm

The Colorado legislature took a major step toward passing the state’s first viable construction defects reform bill, with a House committee on Wednesday giving unanimous support to a measure requiring majority homeowner consent before a legal action can be taken against a condominium builder for shoddy workmanship.

Supporters of House Bill 1279 referred to the measure as a bipartisan compromise on an issue that repeatedly has stymied previous legislatures, and they promised it will help rejuvenate Colorado’s anemic condo construction market by making it more difficult for homeowners associations to sue developers over defects.

The bill is one of half a dozen defects reform measures introduced this year to tackle the challenge of laggard condo construction in Colorado — most of which have died or face an uncertain future.

Rep. Alec Garnett, D-Denver, a co-sponsor of HB 1279, said he expects it to pass both chambers before the legislative session ends in May. The measure passed the House State, Veterans and Military Affairs Committee on Wednesday afternoon on an 8-0 vote.

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Current bill making its way through Legislature

Marianne Goodland
April 19, 2017 Capitol Dispatch

Update: The House State, Veterans and Military Affairs Committee voted unanimously Wednesday afternoon to send the bill to the full House for debate.

House lawmakers today announced they have reached an agreement on a key measure home builders say will bring them back to Colorado to build more affordable owner-occupied housing in the state’s tighter-than-tight housing market.

The House State, Veterans and Military Affairs is scheduled to hear the bill Wednesday afternoon.

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While it is always a good idea to increase transparency for members of an association-governed community, it is important to realize that obtaining a majority vote of homeowners (even considering exclusion of certain unit owner votes) is an extremely challenging task. There will only be a 90-day window of opportunity for the association to communicate their intentions to owners and to distribute and collect ballots on the issue.

Members of the association will not be privy to the legal strategy of the association. Only the board of directors will know the full details involving the legal claim, as a matter of attorney client privilege.

Therefore, in my opinion, HB 1279 will provide very limited transparency for homeowners.

The larger question is this: is there truly a consumer-driven demand for condominiums, or is the demand primarily driven by Mayors of Colorado’s cities and builders of affordable housing who may be hoping to cash in on tax benefits?

And why isn’t Colorado considering other paths to homeownership besides condominiums? For example, why are cities not considering the possibility of construction of modestly-sized single family detached homes or independently owned townhouses, without mandatory homeowner associations?


Tracking CO HB17-1279

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