State lawmakers hope more affordable condos are in Colorado’s future with deal on defects legislation

Update: The House State, Veterans and Military Affairs Committee voted unanimously Wednesday afternoon to send the bill to the full House for debate.

House lawmakers today announced they have reached an agreement on a key measure home builders say will bring them back to Colorado to build more affordable owner-occupied housing in the state’s tighter-than-tight housing market.

The House State, Veterans and Military Affairs is scheduled to hear the bill Wednesday afternoon.

Related: Why Colorado lawmakers hope this is the year to solve the affordable condo crisis

The bipartisan measure had been stalled in the House for the past three weeks after a policy committee for the Homeownership Opportunity Alliance, a coalition that includes the builders and affordable housing advocates, announced they would oppose the bill.

Lawmakers, the alliance, and a group representing condo homeowners continued to negotiate. And this morning they said they reached a breakthrough that will allow the bill to move forward.

The issue is construction defects.

While not defined in state law, the term is what people use to describe non-working parts of their homes, primarily in newly-built multi-family housing such as condos. That can include poorly-sealed windows or doors, leaky roofs, or busted plumbing.

Current law allows the board of a condo’s homeowners’ association to file a defects claim if as few as five units in the HOA sign on. The board must first notify the homeowners, but the law does not require they obtain permission before proceeding. And once a construction defect legal action is underway, a homeowner cannot sell or refinance a home in the development— even if their home is not among those with problems.

That’s a big deal.

The proposed law in question requires an HOA board to notify all homeowners in an association, as well as the developer, about the potential for a lawsuit. The bill also requires the HOA to allow a developer an opportunity to present relevant facts to homeowners, along with potential costs and benefits from the HOA or its attorney. Finally, the HOA board must obtain permission from a majority of homeowners before proceeding with a lawsuit.

The compromise sought by builders and developers came over a time-out on the statute of limitations for filing a lawsuit. That time-out, set originally in the bill at 120 days, was to allow homeowners to vote on whether to go forward with a lawsuit. The compromise reduces the time-out to 90 days.

“With this groundbreaking consensus bill we are protecting consumers, empowering homeowners and balancing risk in the marketplace for developers to break ground on attainable multi-family homes across the state,” said Democratic Rep. Alec Garnett of Denver, one of the measure’s co-sponsors, in a statement. “I want to thank everyone from all sides for staying at the table.”

Kathie Barstnar, co-chair of the Homeownership Opportunity Alliance, said “the bill is not a magic bullet,” and noted that negotiations over informed consent for condo owners have been going on for three years. She said she believes the law, if passed, will help bring more attainable housing options to millennials, seniors, teachers, and other public servants.

Suzanne Leff of the Community Associations Institute, which represents condo owners and has battled the Homeownership Opportunity Alliance throughout the session, also sang kumbaya on the deal. She expects the amended measure will provide a balance between promoting construction and protecting homeowners when they end up with defective condos.

One big question remains: Will the reforms will actually result in any new construction of affordable owner-occupied housing?

Seventeen metro-area communities passed resolutions or other legislation in the past five years to create their own community construction defect reforms. But according to a group of Colorado mayors, that has not yet led to building new affordable condo development.

“Affordable,” by the way, is defined by the Denver Metro Association of Realtors at somewhere around the U.S. median housing price of $222,000.

Photo credit: Roland Tanglao, via creative commons license, Flickr