Current system encourages people to sue builders.
The decade-long fight for Colorado builders’ right to repair
defects in newly constructed condominiums continues.
Many small business owners say the construction defect law,
enacted in 2005, encourages homeowners to sue over construction disputes, which
has discouraged the building of new condos.
“What that has done over the last few years is that builders
can’t get insurance to build new projects, and nobody can find affordable
housing when they’re attempting to downsize,” says Tony Gagliardi, NFIB state
director for Colorado.
The Denver Post reported that condos’ share of new home starts in metro
Denver declined from 26 percent in 2008 to 4.6 percent in the second quarter of
2014.
Gagliardi and his wife were recently looking for a condo in
downtown Denver but were unable to find one in their price range. “There are
virtually no condominiums on the market, and the ones that are on the market
are selling for double what they were five years ago,” he says.
To
make matters worse, the law allows condo associations to sue a builder with
just a vote from the majority of the condo association board, rather than the
majority of the homeowners.
NFIB member Mark Harmouz has seen the problems with the
construction defect law from both a personal and business standpoint. He
recently owned a unit in a condominium development involved in a lawsuit. While
his unit had minor flaws that he had already attended to, selling it was a
bigger challenge. “When we went to sell the condo last year, a lot of lenders
would not even touch it,” he says.
Harmouz, who owns engineering and property management company
Mark Harmouz LLC, also has turned down potential clients who requested work on
a condo, just to avoid possible lawsuits.
Both Harmouz and Gagliardi agree there’s a way to solve this
problem—mediation. Gagliardi is pushing for a change in the construction defect
law that will make it more difficult for owners to sue their builders. The city
of Lakewood recently amended its law to give builders the “right to repair” defects,
to encourage methods aside from lawsuits to resolve disputes with builders and
to require that a majority of homeowners in a condo development agree to a
lawsuit before it’s filed.
But without a statewide change, Gagliardi worries that
Colorado’s construction industry will continue to spiral downward into more
unemployment, especially for subcontractors and builders.
“We have to make enough changes so that we could get the market
going again,” he says. “We’ve got builders out of work. Subcontractors are out
of work. Nobody can find a new condo or townhome to buy because nobody’s
building them.”
