Litigation/Construction/Review of Governing Documents

In consideration of filing a construction defect or similar lawsuit, the importance of reviewing governing documents as well as the underlying construction documents and reports is of the utmost nature in this day and age when legislatures and Developers work to limit access to courts.

In Colorado, the legislature has recently passed legislation putting obstacles in the way of Associations and other claimants which hinder them from obtaining full access to the courts and obtaining full damages for the construction defects they are faced with repairing. Under this new legislation, the Associations must now provide the "construction professionals" with a description of the alleged construction defects before filing any legal action. The statute does not bar the claimant from pursuing a claim if it files a lawsuit first, but it does stay the proceedings until it is done.

The Notice of Claim is to provide the construction professionals with a description of the construction that the claimant alleges to be defective. It must be mailed by certified mail, return receipt requested, or personally served no later than 75 days before the Association can file the lawsuit against the construction professionals. (The statute provides a mandatory process and a time table to negotiate a resolution of the claim, which will not be discussed here.) It also tolls the statute of limitation for sixty days after the completion of the notice process. So if the Association is running out of time to file its action, the statute will be tolled to allow the Association to comply with the notice and defect requirements.

The other, and, perhaps more insidious problem for the unwary, is now contained in the governing documents of the Association. In most cases today, attorneys who are bringing these types of lawsuits are well aware of the legislative pitfalls that have been put in the way of Associations.

The new danger is the Declarations, the governing documents. Not only are the Developers putting in restrictions limiting the access to courts and juries by requiring mandatory arbitration clauses in the governing documents, they are putting short fuses on the process. In one Association Declaration we have come across, the Developer put in a time restriction clause near the end of the document. In the particular Article, the Developer gives the Association 30 days to submit its "claim" to mediation after submission of the claim to the Developer. If the Association does not submit the claim or appear for the mediation, the Document states that the Association will be deemed to have waived its right to the claim which would act as a release and discharge of the Developer from any and all liability relating to the claim.

If the attorney, Association and/or Manager fails to thoroughly read the governing documents, the substantial claim they wish to bring may be time barred. It therefore can not be emphasized enough that all parties, the attorney, the Board and manager familiarize themselves with all Association governing documents and plats at the beginning of their investigation. Currently there are no cases which uphold or support the Developer's position that all claims are time barred by this provision. But with the negative attitude toward litigation no matter how appropriate and necessary, one should not count on favorable rulings from the judicial system. True vigilance and diligence is the only protection against the forces that are barring access to the courtroom doors and remedial justice.

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