Homebuilder Immunity Act dies in committee. What’s next?

Wednesday, April 29, 2015 @ 09:04 AM
Author: Jesse Witt

For the third straight year, the Colorado legislature has rejected efforts by the homebuilders’ lobby to provide virtual immunity for construction defects and property damage.

Late Monday night, the House committee on State, Military, and Veterans Affairs voted down Senate Bill 15-177 on straight party lines. All six Democrats on the committee voted against the bill, while all five Republicans voted for it. Similar bills had died in the Senate in 2013 and 2014.

In theory, SB177 would have boosted multifamily construction by shielding builders from liability for negligent work. Unlike the 2013 bill, this version never expressly stated that it was providing homebuilders with immunity, but it would have made it nearly impossible for community associations to take action against a builder who refused to honor a warranty. And even if the homeowners managed to overcome the procedural obstacles, the bill would have forced their claims into costly, private arbitration. Proponents hoped that, by eliminating responsibility for negligent work and property damage, they could entice homebuilders to construct more cheap condominiums.

Meanwhile, economist Pat Pacey testified that sluggish multifamily construction in Colorado is the result of low demand, not litigation. She noted that Colorado’s construction defect laws are about average compared to other states, and that multifamily construction is down across the nation. Nevertheless, many new multifamily projects, including a new 66-unit transportation-oriented development near I-25 and Yale and a 180-unit community in Littleton, have recently broken ground in Colorado. This left bill proponents struggling to find data to support their claim of a homebuilding crisis.

Sponsors also touted SB177 as an “affordable housing” measure, but none of the witnesses on Monday night could explain how eliminating consumer protections would help affordable housing communities. The closest anyone came was a representative of Habitat for Humanity, who suggested that her group might build higher density homes on land it was holding if the legislature could prevent claims for substandard work. In the end, however, the fact that a charity might construct a few more condominiums was not enough to persuade Democrats to strip away consumer protections for the entire state; seeing no guarantee that SB177 would provide any significant increase in affordable housing, they voted to postpone the bill indefinitely, effectively killing the measure for 2015.

The latest defeat for the homebuilders’ lobby poses the question of whether they will run yet another immunity bill in 2016. Initial comments from lobbyists suggest that they may abandon hope of statewide legislation and instead try to enact local ordinances to shield builders, notwithstanding the fact that most legal experts believe that these ordinances are unconstitutional. Lakewood and Lone Tree have passed such measures, but they conflict with state law and most likely exceed the cities’ home rule authority.

For whatever reason, the homebuilders remain unwilling to meet with homeowner advocates to talk about a compromise measure. After Monday’s vote, one prominent lobbyist said that his feelings were hurt by a comment on Twitter about shoddy construction, and that this made the homebuilders less likely to talk. In the meantime, Democrats in both chambers have expressed interest in changing the law to require meaningful mediation of construction defect disputes, create incentives for quality construction, and lower insurance costs, so long as consumer rights are protected. To date, however, the homebuilders’ so-called “coalition” includes only builders, lenders, and business groups who insist that immunity is the only option; those who suggest a compromise have been unwelcome at their table. When homeowner advocates have tried to meet with the coalition, they have been ignored or—in at least one instance—have literally been asked to leave.  As Monday’s vote shows, this unilateral approach is unlikely to succeed, and the homebuilders will need to consider the views of other stakeholders if they wish to change Colorado’s construction defect laws.

UPDATE: Efforts to run a bill in 2016 fell apart late in the session, and no new legislation was introduced.