Right to Remedy Construction Defects

In the "Construction Defect Action Reform Act" (act), Colorado law establishes procedures for bringing a lawsuit for a construction defect (claim). Section 2 Section 4 of the bill clarifies that a person that has had a claim brought on the person's behalf is also considered a claimant, and therefore, the act applies to the person for whom the claim is brought. Sections 3 and 6 create a right for a construction professional to remedy a claim made against the construction professional by doing remedial work or hiring another construction professional to perform the work. The following applies to the remedy:

• The construction professional must notify the claimant and diligently make sure the remedial work is performed; and
• Upon completion, the claimant is deemed to have settled and released the claim, and the claimant is limited to claims regarding improper performance of the remedial work.

Currently, a claim may be held in abeyance if the parties have agreed to mediation. Section 3 also adds other forms of alternative dispute resolution for which the claim would be held in abeyance. Alternative dispute resolution is binding. If a settlement offer of a payment is made and accepted in a claim, the payment constitutes a settlement of the claim and the cause of action is deemed to have been released, and an offer of settlement is not admissible in any subsequent action or legal proceeding unless the proceeding is to enforce the settlement.

To bring a claim or related action, section 4 section 2 requires a unit owners' association (association) to obtain the written consent of at least two-thirds 60% of the actual owners of the units in the common interest community. The consent must contain the currently required notices must be signed by each consenting owner, and must have certain attestations.

Under the act, a claimant is barred from seeking damages for failing to comply with building codes or industry standards unless the failure results in:

• Actual damage to real or personal property;
• Actual loss of the use of real or personal property;
• Bodily injury or wrongful death; or
• A risk of bodily injury or death to, or a threat to the life, health, or safety of, the occupants.

Section 5 requires the actual property damage to be the result of a building code violation and requires the risk of injury or death or the threat to life, health, or safety to be imminent and unreasonable. Section 3 changes the standard concerning the risk of bodily injury or death to a verifiable danger to the occupants and adds another option to bring a claim if the defect results in a failure or lack of capacity of a building component to perform the intended purpose of the building component. Under current law, an association may institute, defend, or intervene in litigation or administrative proceedings in its own name on behalf of itself or 2 or more unit owners on matters affecting a common interest community. For a construction defect matter to affect a common interest community, section 7 requires that the matter concern real estate that is owned by the association or by all members of the association. Section 7 also establishes that, when an association makes a claim or takes legal action on behalf of unit owners when the matter does not concern real estate owned by the association:

• The association and each claim are subject to each defense, limitation, claim procedure, and alternative dispute resolution procedure that each unit owner would be subject to if the unit owner had brought the claim; and
• The association has a fiduciary duty to act in the best interest of each unit owner.

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)

(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)