Homeowners' Association Construction Defect Lawsuit Approval Timelines

The bill states that when the governing documents of a common interest community require mediation or arbitration of a construction defect claim and the requirement is later amended or removed, mediation or arbitration is still required for a construction defect claim. These provisions are in section 3 of the bill. Section 3 also specifies that the mediation or arbitration must take place in the judicial district in which the community is located and that the arbitrator must:

• Be a neutral third party;
• Make certain disclosures before being selected; and
• Be selected as specified in the common interest community's governing documents or, if not so specified, in accordance with applicable state or federal laws governing mediation or arbitration.

Section 1 of the bill specifies that, in the arbitration of a construction defect action, the arbitrator is required to follow the substantive law of Colorado with regard to any applicable claim or defense and any remedy granted, and a failure to do so is grounds for a district court to vacate or refuse to confirm the arbitrator's award.

Section 4 of the bill requires that, before a construction defect claim is filed on behalf of the association:

• The parties must submit the matter to mediation before a neutral third party; and
• The board must give advance notice to all unit owners, together with a disclosure of the projected costs, duration, and financial impact of the construction defect claim, and must obtain the written consent of the owners of units to which at least a majority of the votes in the association are allocated.

Section 5 of the bill adds to the disclosures required prior to the purchase and sale of property in a common interest community a notice that the community's governing documents may require binding arbitration of certain disputes.
(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)