Construction defect law in Colorado has been a polarizing issue for decades. In 2001, the Colorado Construction Defect Action Reform Act (CDARA) was passed to address a perceived crisis in the Colorado construction industry caused by a surge in litigation arising from construction defects. The law had several key provisions. It prescribed a process for claimants to notify contractors of claims, it set a statute of repose (i.e. a strict time limit during which a claimant can file a construction defect action), and it imposed certain caps on damages.
For the last several years, altering CDARA has been a political third rail. The last major change happened in 2017. But as housing costs continue to rise, Colorado lawmakers recently tried again. In February 2024, a group of state senators introduced Senate Bill 106, which, they claimed, would reduce the number of lawsuits arising from construction defects by narrowing the time period during which such suits could be filed, and by encouraging builders and homeowners to agree on repairs more quickly without resorting to litigation.
Right after SB-106 was introduced in the Senate, a starkly contrasting bill was introduced in the Colorado House of Representatives. HB24-1230 was poised to increase the statute of repose from six years (with the possibility of extension to eight years) to ten years (with the possibility of extension to twelve years). An expanded repose period can provide relief to homeowners whose homes contain latent defects that go undetected until they rear their heads and cause damage long after construction is complete.
A quick scan of articles reporting or commenting on these two bills will give one a sense of how politically charged the construction defect environment is in Colorado. Developers and builders claim that, without more protections in place to limit litigation, the housing supply will shrink, leading to even higher home prices. A new study, however, suggests that there is little to no empirical evidence to support builders’ contention that the lack of affordable housing in Colorado is due in large part to construction defect litigation. The study also shows that Colorado’s construction companies are enjoying record profits and low construction defect costs. In their own financial statements, these construction companies concede that construction defect litigation will not have a material impact on their profits, operations, or cashflow.
On the other side of the debate, homeowners, HOAs, and subrogation insurance carriers claim that increased protections for contractors and watered-down remedies create perverse incentives, and will lead to even more inferior construction, more damage, more lawsuits, and less justice for damaged parties.
HB24-1230 was passed in the House but its fate has not yet been decided in the Senate. SB-106, on the other hand, died in committee. Battles like this one in Colorado are being waged in other states, too—particularly ones which have seen their populations grow fervently in the last few decades. Like any political fight, the issue is ripe for fear-mongering and misinformation. As such, it is important for interested parties to stay informed and get involved in the political processes which could have dramatic effects on their bottom lines.
