Construction Defect Disclosure Law Effective August 8, 2017

The Colorado Common Interest Ownership Act’s newest addition became effective August 8, 2017.  Colorado Revised Statute 38-33.3-303.5 (formerly HB 17-1279) was signed into law on May 23, 2017 and became effective this week.

The law requires homeowner association executive boards to satisfy new disclosure, meeting, and voting requirements before commencing an action against construction professionals under Colorado’s Construction Defect Action Reform Act (C.R.S. 13-20-803, et seq.).

Before beginning a construction defect action (defined broadly as any civil action or arbitration proceeding for damages….against a construction professional..for damages or loss to…real or personal property or personal injury caused by a defect in the design or construction of an improvement to real property…”), the executive board of a common interest ownership community must “mail or deliver written notice” to each owner AND to each construction professional against whom the action is proposed.  The construction professional must also be provided separate notice advising of the owner’s meeting.

The notice must contain a description of the  nature of the construction defect action, which identifies the alleged defects with reasonable specificity, the relief sought, a good-faith estimate of the benefits and risks involved, and any other pertinent information, including

Presumably, the notice of owner’s meeting would give the construction professional time to prepare a presentation, propose repair, or offer a monetary settlement to be made at the meeting.

Vague laundry lists of defects have been the norm in construction defect notices of claim and lists of defect.  While the new law could result in early notice and more full disclosure, there is no mechanism allowing the construction professional an inspection or to obtain greater detail and the new law lacks a strong enforcement mechanism.

The advisory notices need not be sent to any construction professionals identified after the first advisory notice is mailed, so construction professionals with discreet scopes of work may be left out in early stages.

As a practical matter, the new laws timing requirements may not provide construction professionals sufficient time to truly prepare a response to the allegations, much less rally the support of its insurance carrier and legal counsel before the owner’s meeting.  While there are benefits to open dialogue, construction professionals should participate in any owner meetings with caution: the association will clearly have retained counsel and has litigation on its mind; statements and presentations could be used as later evidence in a lawsuit; and early participation without the approval or involvement of your insurance carrier may also have coverage implications.

 

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