Archive for the ‘Blog’ Category

Senate committee rejects Colorado SB 13-052

Thursday, April 18, 2013 @ 09:04 AM
Author: Jesse Witt

On 17 April 2013, the Colorado Senate’s judiciary committee rejected SB 13-052, which would have severely limited legal protections for homeowner associations located near public transit.
As originally drafted, the bill would have defined any homeowner association within a half mile of a bus or light rail stop as a “Transit-Oriented Development.” Such associations would lose the right to recover any damages in court for building code violations or other negligent construction, and the developers of such communities would gain absolute immunity from claims for environmental hazards or pollution. A last-minute amendment from the bill’s sponsor would have limited the bill’s scope to communities near light rail and removed provisions requiring private arbitration of disputes, but the three Democrats on the committee remained concerned about the lack of data supporting the bill and the risk that it would harm consumers. The committee’s two Republicans voted in favor of the bill.
Jesse Witt of The Witt Law Firm testified on behalf of the Community Associations Institute in opposition to the bill. Mr Witt asserted that, although the proponents of the bill had argued that an insurance crisis was hindering the construction of new homes near public transit, SB 13-052 would do nothing to improve the insurance climate. Instead, the bill would reward the incompetent builders who cut corners, refuse to take care of their customers, and expect their insurance companies to “clean up the mess.” These builders cause insurance premiums to rise for everyone, including the many quality builders in Colorado who take the time to do things right. Making homeowner associations increase their dues to fix negligent builders’ mistakes was not, according to Mr Witt, the right policy for Colorado.
The stakeholders agreed to meet over the summer to discuss other options to encourage new construction and ensure the availability of affordable insurance without unfairly penalizing homeowners. Please check this site or contact The Witt Law Firm for updates on this process.

Colorado SB 13-052 would gut homeowner rights in construction defect disputes

Tuesday, January 29, 2013 @ 12:01 PM
Author: Jesse Witt

The Colorado General Assembly is considering a bill that would gut legal protections for many homeowner associations in the Denver Metro Area. Entitled the “Transit-oriented Development Claims Act of 2013,” the bill claims to encourage the construction of new multi-family communities near light rail stations. In reality, however, the bill would simply make builders immune from legal responsibility for many negligent acts.

Sponsored by Senator Mark Scheffel (R-Douglas), Senator Bill Cadman (R-El Paso), and Representative Brian DelGrosso (R-Larimer), SB 13-052 would create a special procedure to be followed whenever a homeowner or HOA identifies potential construction defects in a “transit-oriented development” project. In any such community, the builder responsible for the defects would have a broad right to enter the property and make whatever repairs the builder felt were appropriate, without approval or consent from the homeowners. If the repairs were inadequate, the homeowners’ only option would be to participate in binding arbitration before a private dispute resolution service; the homeowners’ right to trial by impartial judge or jury would be forfeited. In addition, builders would enjoy complete immunity from any claims for environmental contamination, excess sound transmission, mold, odors, humidity, smoke, or fumes, and builders would have no obligation to repair such problems.

The real catch in this bill, however, is the definition of “transit-oriented development.” The bill does not limit its scope to communities near light rail; instead, the bill comprises all multi-family projects within “within one-half mile of any commuter rail stop, commuter light rail stop, or commuter bus stop.” By including bus stops in this definition, the bill could potentially ensnare hundreds of condominium and townhome communities within the RTD zone, including numerous projects that are nowhere near any light rail lines.

Whether the bill would apply to existing communities or merely affect future construction is unclear. The bill would also amend the statute of limitations and repose to make it easier for builders to sue subcontractors for indemnity.

At The Witt Law Firm, we represent a broad client base of contractors, homeowners, and associations. We support efforts to improve construction law, particularly where such efforts balance the rights of construction professionals and homeowners. Construction professionals should absolutely be able to build quality projects without the fear of litigation, just as homeowners should be able to expect homes that are built in compliance with local codes and industry standards. We do not believe that SB 13-052 would further either of these goals. By shielding builders from liability for their own negligence, this bill would reward those who use cheap materials and unqualified workers, and it would make it harder for honest, competent contractors to stay competitive.

If our legislators want to create incentives for building near light rail, we would encourage them to look at other options besides creating immunity for shoddy construction work. Expanding resources for building code education and stricter contractor licensing standards, for example, could help weed out negligent contractors and thereby reduce overall litigation. Offering special financing to those who build quality homes in designated areas could help draw developers to this market. There are many valid ways to approach this issue without penalizing innocent homeowners. Erecting leaky homes with environmental hazards near our train and bus stops, however, is not the answer.

Update: The Senate Judiciary Committee rejected SB 13-052 on 17 April 2013. Click here for more information.

Firm wins jury verdict for HOA

Monday, April 16, 2012 @ 11:04 AM
Author: Jesse Witt

On Friday, a Douglas County jury returned a verdict in favor of one of The Witt Law Firm‘s clients, a Lone Tree homeowner association seeking to recover the cost of rebuilding a road in its community. The evidence showed that the community’s developer had not prepared the road’s subgrade properly in the late 1990′s, which caused the association to incur significant repair expenses in 2011.
The developer argued that the statute of limitations precluded recovery, but the association successfully established that the developer had not relinquished ownership of the road until shortly before the association performed the repairs in question.
Jesse Witt and Marci Achenbach represented the association at trial.

Court of Appeals issues notable construction law opinions

Tuesday, February 7, 2012 @ 01:02 PM
Author: Jesse Witt

The Colorado Court of Appeals issued several opinions last Thursday that may be of interest to those who litigate construction claims. I have included the court’s new citation format, though I retain doubts about whether it will catch on.
In Swinerton Builders v. Nassi, 2012 COA 17, the court held that a builder could enforce a contractual fee-shifting provision against an individual found liable as the alter ego of a corporate developer. The parties had previously executed a contract, based on the AIA A201 form, which granted attorney fees to the prevailing party in the event of a dispute. After an arbitrator found that the developer, Beauvallon Corporation, had breached its contract, the builder filed suit in Denver District Court to enforce the arbitrator’s award. The court allowed the builder to pierce the corporate veil and hold Beauvallon’s president, Craig Nassi, liable for the award as the company’s alter ego, but it denied the builder’s request for attorney fees. The Court of Appeals reversed and ruled that, once the corporate veil was pierced, Nassi became liable for all of the corporation’s contractual obligations, including the fee-shifting clause.
In Colorado Special Districts Property & Liability Pool v. Lyons, 2012 COA 18, the court affirmed dismissal of bad faith claims against a public insurance entity on governmental immunity grounds. The case arose from several banks’ claims for damages arising from a developer’s sale of construction bonds. Two of the developer’s directors, William S. Lyons Jr. and William S. Lyons III, requested that a state insurance pool defend and indemnify them. The insurance pool filed a complaint for declaratory relief, and the Lyonses counterclaimed for bad faith. The court found that the Lyonses sought relief in tort, that the pool was a public entity, and that the pool had not waived its sovereign immunity. As such, the Colorado Governmental Immunity Act precluded the claims.
Finally, in Shaw Construction, LLC v. United Builder Services, Inc., 2012 COA 24, an interlocutory appeal from a summary judgment ruling, the court held that the statute of repose for a multi-phase condominium development could begin to run when a discrete component of the project was completed, and that the Construction Defect Action Reform Act (CDARA) only tolled the statute of limitations and repose for those parties who had received a notice of claim. The case began in 2007 when the community’s HOA served Shaw, the general contractor, and other parties with a notice of claim under CDARA. The HOA later filed suit, and it named Shaw as a defendant in 2010. Shaw then filed a third-party complaint against its subcontractors and served them with its own notice of claim the following day. The subcontractors moved for summary judgment based on the six year statute of repose, arguing that they had completed their work at least six years and nineteen days before Shaw had filed its complaint, and the trial court agreed.
On appeal, Shaw argued that the trial court had erred because (a) the project as a whole did not reach completion until several months after the subcontractors finished their work, and (b) the HOA’s 2007 notice of claim had tolled the statute of repose as to all parties. The Court of Appeals rejected both arguments. The court first reviewed the legislative history of CDARA and concluded that its tolling provisions were only intended to apply to those parties that had received actual notice of a claim for defective construction. The court then held that the statute of repose should be measured from the date that a particular “improvement to real property” reached substantial completion, not from the date that the entire project was completed; because Shaw offered no facts to suggest that the subcontractors had performed work on their improvement within the six years preceding the filing of Shaw’s third-party complaint, the court ruled that summary judgment was proper. The court also approved the holding of Thermo Development, Inc. v. Central Masonry Corp., 195 P.3d 1166, 1170 (Colo. App. 2008), wherein another division had concluded that the 2001 CDARA amendments were merely intended to extend the statute of limitations, not the statute of repose, for indemnity claims. Judge Jones concurred in the result but dissented from the panel’s decision to entertain interlocutory review of the ruling.
Personally, I can understand the reasoning of the decision in Shaw, but I feel that it raises troubling policy issues. Statutes of limitations and repose are intended to discourage stale claims, not bar meritorious causes of action or create extra litigation. Restricting a general contractor’s right to recover indemnity from culpable subcontractors hurts the construction industry by forcing innocent builders to bear the cost of others’ mistakes, and by encouraging contractors to sue numerous potential parties at the outset of a case. In this regard, I do not believe that the Shaw and Thermo Development opinions accurately reflect the intent of CDARA’s drafters, and I hope that future court decisions correct this.