Builders vs. homeowners: Construction defects bill promises controversy

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DENVER -- Condominium owner Jon Harris can’t walk in his own kitchen without fear of tiles cracking beneath his feet.  “The tiles are coming loose because they were not installed properly,” He said.

He has spent the last decade of his life dealing with repairs inside his unit at The Point Condominiums in the Five Points neighborhood.

Workers have spent the last six months making repairs to every condo at the complex because of drainage issues that caused some units to flood. “I just thought nobody would sell anything like this, if it was substandard construction you wouldn`t sell that to anybody because it would just be wrong,” Harris said.  After his homeowners association settled a lawsuit with the builder, Harris became president of “Build our Homes Right.”

The consumer group is dead set against a measure introduced in the Colorado legislature on Tuesday that would reduce lawsuits against home builders. “I would say the way to solve this is to stop building crap! Start building quality construction and the lawsuits go away,” insisted Harris.

The  controversial legislation is sponsored by Senate Majority Leader Mark Scheffel, R-Parker, and Sen. Jessie Ulibarri, D-Adams County, as well as House Minority Leader Brian DelGrosso, R-Loveland, and Jonathon Singer, D-Longmont.

The lawmakers say their measure will promote affordable housing, especially in the condominium market. A report by Metrostudy found in 2014 new for-sale condo units only made up 4 percent of overall new home starts in the Denver metro area versus a historical norm of 20 percent. Builders and developers blame the decline on lawsuits over construction. “We`re hoping that the legislation would allow a level playing field, said developer Chris Elliott.

Elliott also said builders are spending $10,000 per unit just to cover the insurance on townhomes that sell in the mid $200,000 range. “It just becomes too expensive within the marketplace to build this type of product,” said Elliott.

“Everybody would love to see insurance rates go down,” said Scheffel, who believes his bill will reduce insurance rates by forcing arbitration on homeowners before they could sue. "Where parties can get together and work things out. That`s part of our system now, whether it`s mediation, arbitration so sure we`re going to encourage that."

Critics like attorney Cass McKenzie, who has represented homeowners, said the measure will just shift legal liability from builders to homeowners. “Forced arbitration on these homeowners could cost tens of thousands to them that they don`t have,” said McKenzie.  In addition, McKenzie says condo owners don’t want to trade a jury for an arbitrator because he says the measure will allow builders to pick the arbitrator. “They want to tell you this is the arbitrator that`s going to decide our claims. The problem is it`ll be an arbitrator they`re using over and over again.”

Senator Scheffel said there’s no reason to fear arbitrators will be biased. “I don`t see that at all.  Arbitrators, this is how they make their living, so they`re desirous of being non-biased.”

An economist hired by “Build our Homes Right” complained the measure will do nothing to address construction defects.

Pat Pacey, a Boulder-based economist, did a study that found a lack of condo construction isn’t because of high insurance rates to builders, but because of low demand. “There`s more money to be made in building apartments right now then there are in building condos,” said Pacey.

She said many millennials can’t afford condos and would rather rent. But developers like Chris Elliot dispute that. “There`s a continuous demand for homes particularly at the lower end of the price point.”

Reduce lawsuits and Senator Scheffel said builders will increase condo development. “You`ve got people saying 'hey, we would love to afford our own affordable home in these areas and we simply can`t.'”

Critics like condo owner Jon Harris believe builders are falsely promising more affordable housing to avoid accountability. “If you give home builders a free pass, they`ll build more crap,” predicted Harris.

Homeowners have six years to sue a builder if they discover new construction defects. A separate bill pending in the legislature would reduce the statute of limitations to three years.

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