Those of you who follow our blog know that during the 2014 Colorado legislative session, Senate Bill 220 was introduced with the intent to spur condominium construction in Colorado – an honorable goal. However, instead of providing incentives for developers to build quality construction, SB 220 was drafted to destroy the rights of homeowners living in condominium associations to hold builders responsible for their defective construction.
SB 220 was the brainchild of the Homeowner Opportunity Alliance which called itself the HOA Alliance. This “HOA Alliance” tirelessly lobbied legislators to eviscerate the ability of HOAs to assist homeowners who live in them to hold builders responsible for their shoddy construction. The Homeowner Opportunity Alliance was incorporated by Mayor Murphy himself.
Luckily for folks owning homes in condominium associations, SB 220 was killed in the Senate. However, Mayor Murphy evidently didn’t get the message that destroying the rights of the little guy to spur condo development isn’t how things are done in Colorado.
Since the HOA Alliance wasn’t successful during the 2014 legislative session, Mayor Murphy has introduced a proposed ordinance in Lakewood to circumvent the essential protections which state law currently affords homeowners. The proposed ordinance, which no doubt violates the limitations of home rule, would do the following:
1. Rewrites the definition of “construction defects” to only include violations of building code and manufacturer specifications.
What about the other defects that don’t fall within this definition? Are homeowners in Lakewood simply going to be out of luck?
2. Once notice is given to a builder that there are defects, the builder has the unilateral authority to determine the scope of the defects, offer to repair the defects and to carry out the repairs. When an offer to repair is made, the homeowner cannot refuse the repairs and has no voice in the repair process!
In other words, the builder who was responsible for the shoddy construction in the first place has complete control over the repairs. How is this fair? How does this protect the rights of the homeowners? In significant cases of construction defects, why should the builder have the right to go back in to conduct repairs of their choice without agreement of the homeowners? If the exterior of a condominium is leaking like a sieve or a porch falls off the back of a home due to shoddy construction, why should the builder be permitted to ever touch those structures again?
3. Requires that associations comply with provisions of the declaration addressing how construction defect claims are procedurally handled.
This is the declaration that is drafted by legal counsel for the developer and is intended to protect the interests of the developer – not the homeowners. The homeowners who purchase units in the association have absolutely no voice in drafting the provisions relating to construction defects. Why should homeowners be stuck complying with procedural hurdles built into declarations to prevent them from pursuing the developers for construction defects? How can this be fair?
4. Requires HOAs to provide notice (in addition to the notice that is already required in the Colorado Common Interest Ownership Act) to homeowners addressing a variety of issues relating directly to the construction defects. However, the HOAs are not permitted to have their construction defect attorneys, who are the experts on these issues, assist them with making these disclosures.
This provision sets up boards of HOAs for breach of fiduciary duty lawsuits. It is impossible for any individual on the board of an HOA to have the knowledge necessary to make these technical and specialized disclosures. It would also be malpractice for their general counsel attorney, who doesn’t specialize in construction defects, to assist their boards in making these disclosures.
5. Prior to an HOA being permitted to give notice to the builder of potential defects or to proceed with litigation or arbitration, 51% of the homeowners must provide written consent to their board to take these actions to protect their interests. Oh, and by the way, proxy voting is prohibited.
This provision is really quite brilliant in ensuring that associations are never able to proceed with action against builders for defective construction. First, the developers will maintain ownership of a sufficient number of units to ensure that the association never obtains 51% of written consents until after the statutes of limitation and repose have run. Second, some developers are now starting to write into the contracts for sale of their units that the purchasers are not permitted to cooperate with their association in bringing construction defect claims against the developer. Obviously, this would make obtaining written consent impossible. Third, anyone who has ever lived in an association knows that utilization of proxies is absolutely essential in obtaining votes. There is a lot of voter apathy in some HOAs and that’s just a fact.
By providing this overview of the proposed ordinance in Lakewood and the real world impact of its provisions, it was my intent to take the lipstick off Mayor Murphy’s pig. I suspect the members of the Lakewood City Council were not educated about the practical realities of this proposed ordinance. While it may be naïve on my part, I have to believe that the members of the City Council care about the constituents they were elected to represent and will leave the issue of construction defects to state law – where it clearly belongs.