By Shane Fleener, Hearn & Fleener, LLC
What is a “construction defect”? A construction defect is any condition or improvement that was designed, installed or constructed in a manner that falls below the applicable standard of care. Generally speaking, this encompasses any construction that does not comply with the building code requirements and/or the applicable plans, specifications, soil reports, geotechnical reports and/or the manufacturer installation instructions for the products used.
What are the legal ramifications and remedies if construction defects exist? Under Colorado law, construction professionals owe a legal duty to homeowners (and homeowner associations) to construct homes and common interest communities in a non-defective manner. If this duty is breached, and assuming legal defenses do not apply, construction professionals are required to pay affected homeowners or associations the “reasonable cost to repair” the defects, as well as the reasonable cost to repair damages resulting from such defects.
This is the single largest benefit to asserting a defect claim: ensuring that the builders (or their insurance carriers) provide the funds necessary to repair the construction defects that they caused. Absent the assertion of a claim, homeowners or associations may be required to pay the significant cost for such repairs through increased dues or large special assessments.
Who Can Assert a Construction Defect Claim? Residential homeowners in Colorado have standing to assert a construction defect claim with respect to problems impacting their own home and lot. This is true regardless of whether the homeowner is a first purchaser or purchased from another homeowner.
Generally speaking, homeowner associations also have standing to assert a construction defect claim both on the association’s own behalf, and on behalf of two or more of the association’s homeowner members. Importantly, this standing extends to all portions of the common interest community, including common elements and individual lots and units, and regardless of whether the community is comprised of multi-family units or single-family homes. Moreover, an association’s standing generally exists regardless of any division of ownership or repair/maintenance responsibilities that exist between the association and the homeowners.
What is the Process and Timeline for a Construction Defect Claim?
A construction defect claim can be divided into three steps: (1) Completion of all pre-claim requirements under Colorado law; (2) the assertion of a formal legal claim or arbitration; and (3) the post-litigation repair process.
Colorado law contains two pre-claim requirements. The first is the 75-day Notice of Claim Process contained in CDARA. This requirement applies to homeowners and associations alike. The second pre-claim requirement is the “builder meeting” and homeowner vote process contained in CCIOA. This requirement, which generally lasts around 90-days, only applies to homeowner associations. While these two processes are statutorily required, they are also important. First, they provide valuable transparency to homeowners and give everyone in the community the right to vote on the issue of whether a claim should be asserted. They also give the builder an opportunity to resolve the problems before any formal legal claim is asserted.
Only if the Notice of Claim process is unsuccessful and the homeowners vote to approve the association’s course of action should a formal legal claim be asserted. If a formal claim is asserted, homeowners can generally expect the process claim to last between twelve and eighteen months.
After the claim is resolved through settlement or judgment, the post-litigation repair process begins. While every case is different, that process can last anywhere between six months and three years. While the goal is always to recover sufficient funds to perform all repairs, practical and legal considerations sometimes result in a lesser recovery. In that case, the homeowner or association should prioritize repairs with the assistance of counsel or a construction manager. For obvious reasons, life safety and water intrusion issues are almost always addressed first.
Time Limitations for the Assertion of a Construction Defect Claim
There is a limited amount of time to assert a defect claim under Colorado law. Colorado’s statute of repose prohibits the assertion of a construction defect claim six (6) years after “substantial completion” of the defective improvement. “Substantial completion” is traditionally linked to the Certificate of Occupancy date for the improvement alleged to contain the defect. On the other hand, the statute of limitations prohibits the assertion of a construction defect claim two (2) years after the discovery of the defect or a “physical manifestation” of the defect. Importantly, this two-year period can begin to run as soon as a homeowner, or a homeowner association, observes any condition related to a defect, regardless of whether a defect is known to exist at that time.
There is a strong argument that neither the statute of repose nor the statute of limitations can begin to run until Declarant turnover of an association’s board has occurred. For that reason, diligent homeowner associations and community managers should have their communities evaluated within the first six years after Declarant turnover.
About the author: Shane Fleener is the managing partner of Hearn & Fleener, LLC, a law firm specializing in the representation of homeowners and homeowner associations in construction defect disputes. Having practiced in the field since 2006, Shane is actively involved with legislative efforts aimed at protecting homeowner rights and has been recognized as a leader in the industry by Super Lawyers, Law Week Colorado, Lawyers of Distinction and Best Lawyers.
