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SAWHORSE
Construction-defect law Multi-family’s single headache hurting Aurora and state
“Condos were a great stepping stone for individuals and families looking to gain ownership experience, but we don’t have that anymore,” she said. “Individuals that cannot afford the median home price of about $300,000 are left with the rental market and that’s a big challenge.”
By QUINCY SNOWDON, Staff Writer, Updated: November 17, 2014 11:40 am
AURORA | Where have all the condos gone?
That’s what many first-time homebuyers across the metro area have been wondering for nearly the past decade.
The number of new, multifamily for-sale — not rental — units being constructed in the metro area has plummeted in recent years, with the number of construction permits filed for new condominiums shrinking by approximately 87 percent between 2012 and 2013 according to the Home Builders Association of Metro Denver
Behind nose-diving numbers, many market observers are pointing to Colorado’s construction defect law as the central cause for such stifled condo construction. They claim that the law has scared builders and developers away from erecting new, for-sale multifamily units for fear of being sued.
“It’s a big challenge for the community fabric,” said Patty Silverstein, president of Development Research Partners, an economic research firm based in Littleton.
At its crux, the law passed in 2005 aims to protect homeowners and homeowners associations from being swindled into costly repairs due to shoddy construction on new homes. As the law is currently written, it allows for condominium homeowners to pursue class-action litigation against builders for defects in their homes with a majority vote from a condominium homeowners’ association, which could be passed with as few as two people. A passage of that vote then allows for each individual unit owner to sue the builder or developer without giving either an opportunity to repair any flaws.
Apartment owners sue builders less often because multiple units are often owned by a single entity. That usually means one plaintiff and one settlement if a construction-defect suit arises in an apartment building, but the possibility of hundreds in a condominium with separate owners.
Critics have argued the law provides too much power to homeowners, and has choked the condominium market to the verge of non-existence. In turn, that lack of smaller, for-sale units has stressed the housing market by not giving first-time homebuyers affordable options, Silverstein said.
“Condos were a great stepping stone for individuals and families looking to gain ownership experience, but we don’t have that anymore,” she said. “Individuals that cannot afford the median home price of about $300,000 are left with the rental market and that’s a big challenge.”
With the completion of the Aurora FasTracks expansion, construction defects legislation also poses an issue for a variety of transit-oriented development, or TOD, projects slotted to be built in those areas, such as the Regatta Plaza development in Aurora.
“(With the way this law is now) we will not be able to have affordable housing in any TOD,” said Aurora City Councilwoman Debi Hunter Holen. “Apartments are good to an extent, but we need to offer our citizens an opportunity to own property they can afford, and not just rent.”
On top of TOD-area concerns, other critics of the law, such as Lakewood Mayor Bob Murphy, worry that the influx of baby boomers looking to downsize to a condo or apartment, ideally next to accessible transit, will have few or no options.
“We have changing demographics and we have a baby boomer population, many of whom want a new housing situation with less maintenance and maybe near light rail,” said Murphy. “We want to invest in our community and build to accommodate that, but in the City of Lakewood we haven’t had a condominium that’s owner-occupied built since 2006.”
Last month, Murphy and the City of Lakewood challenged construction defect legislation when the Lakewood city council passed an ordinance that makes it more difficult for homeowners to pursue legal action for defects and allows the builders a chance to fix any mistakes made on new owner-occupied construction in Lakewood. Passed by a vote of 7-4, one of the most contentious stipulations of the ordinance was the addition of a “right to repair” clause. The condition requires homeowners’ associations to gather a larger consensus before pursuing legal action and gives builders a longer time to amend any defects.
“We really strongly believe that we’re enhancing consumer protection, critics say we’re too builder-friendly, but honestly there’s nothing more unfriendly to the consumer than the really strong possibility that the biggest investment in their life is going to be encumbered by class action litigation for 3-5 years,” Murphy said.
Murphy said the Lakewood ordinance will set a precedent for other municipalities to pass similar measures, and that he has already spoken with officials from surrounding areas.
Hunter Holen said the Aurora City Council is keeping tabs on what happens with the recently passed Lakewood measure before considering anything similar.
“We’re aware of the ordinance and just monitoring it to see how it’s being implemented,” she said. “If it’s good, we might want to model something after it, but don’t want to take that risk until we find out if it’s going to be a benefit.”
The first-of-its-kind Lakewood vote is being analyzed by legislators and legal experts alike, some of whom believe Lakewood overstepped its bounds and will be taken to court for doing so.
“I wouldn’t be surprised if a lawsuit is filed against the City of Lakewood in the not-too-distant future,” said Molly Foley-Healy, a homeowners’ association attorney in Littleton. “I believe based on the law in Colorado there is little question that the City of Lakewood did in fact exceed its authority under home rule.”
Aurora City Councilwoman Molly Markert said that she isn’t interested in what happens with the city ordinances concerning the law, and that the dispute over construction defect legislation needs to be decided by the state.
“This is a state issue and the state Legislature needs to solve it,” she said. “Of course there are pros and cons, but the state needs to act to find a compromise.”
Attempts to make changes to the law failed on the floor of the state Senate in both 2013 and 2014.
“Condos were a great stepping stone for individuals and families looking to gain ownership experience, but we don’t have that anymore,” she said. “Individuals that cannot afford the median home price of about $300,000 are left with the rental market and that’s a big challenge.”
By QUINCY SNOWDON, Staff Writer, Updated: November 17, 2014 11:40 am
AURORA | Where have all the condos gone?
That’s what many first-time homebuyers across the metro area have been wondering for nearly the past decade.
The number of new, multifamily for-sale — not rental — units being constructed in the metro area has plummeted in recent years, with the number of construction permits filed for new condominiums shrinking by approximately 87 percent between 2012 and 2013 according to the Home Builders Association of Metro Denver
Behind nose-diving numbers, many market observers are pointing to Colorado’s construction defect law as the central cause for such stifled condo construction. They claim that the law has scared builders and developers away from erecting new, for-sale multifamily units for fear of being sued.
“It’s a big challenge for the community fabric,” said Patty Silverstein, president of Development Research Partners, an economic research firm based in Littleton.
At its crux, the law passed in 2005 aims to protect homeowners and homeowners associations from being swindled into costly repairs due to shoddy construction on new homes. As the law is currently written, it allows for condominium homeowners to pursue class-action litigation against builders for defects in their homes with a majority vote from a condominium homeowners’ association, which could be passed with as few as two people. A passage of that vote then allows for each individual unit owner to sue the builder or developer without giving either an opportunity to repair any flaws.
Apartment owners sue builders less often because multiple units are often owned by a single entity. That usually means one plaintiff and one settlement if a construction-defect suit arises in an apartment building, but the possibility of hundreds in a condominium with separate owners.
Critics have argued the law provides too much power to homeowners, and has choked the condominium market to the verge of non-existence. In turn, that lack of smaller, for-sale units has stressed the housing market by not giving first-time homebuyers affordable options, Silverstein said.
“Condos were a great stepping stone for individuals and families looking to gain ownership experience, but we don’t have that anymore,” she said. “Individuals that cannot afford the median home price of about $300,000 are left with the rental market and that’s a big challenge.”
With the completion of the Aurora FasTracks expansion, construction defects legislation also poses an issue for a variety of transit-oriented development, or TOD, projects slotted to be built in those areas, such as the Regatta Plaza development in Aurora.
“(With the way this law is now) we will not be able to have affordable housing in any TOD,” said Aurora City Councilwoman Debi Hunter Holen. “Apartments are good to an extent, but we need to offer our citizens an opportunity to own property they can afford, and not just rent.”
On top of TOD-area concerns, other critics of the law, such as Lakewood Mayor Bob Murphy, worry that the influx of baby boomers looking to downsize to a condo or apartment, ideally next to accessible transit, will have few or no options.
“We have changing demographics and we have a baby boomer population, many of whom want a new housing situation with less maintenance and maybe near light rail,” said Murphy. “We want to invest in our community and build to accommodate that, but in the City of Lakewood we haven’t had a condominium that’s owner-occupied built since 2006.”
Last month, Murphy and the City of Lakewood challenged construction defect legislation when the Lakewood city council passed an ordinance that makes it more difficult for homeowners to pursue legal action for defects and allows the builders a chance to fix any mistakes made on new owner-occupied construction in Lakewood. Passed by a vote of 7-4, one of the most contentious stipulations of the ordinance was the addition of a “right to repair” clause. The condition requires homeowners’ associations to gather a larger consensus before pursuing legal action and gives builders a longer time to amend any defects.
“We really strongly believe that we’re enhancing consumer protection, critics say we’re too builder-friendly, but honestly there’s nothing more unfriendly to the consumer than the really strong possibility that the biggest investment in their life is going to be encumbered by class action litigation for 3-5 years,” Murphy said.
Murphy said the Lakewood ordinance will set a precedent for other municipalities to pass similar measures, and that he has already spoken with officials from surrounding areas.
Hunter Holen said the Aurora City Council is keeping tabs on what happens with the recently passed Lakewood measure before considering anything similar.
“We’re aware of the ordinance and just monitoring it to see how it’s being implemented,” she said. “If it’s good, we might want to model something after it, but don’t want to take that risk until we find out if it’s going to be a benefit.”
The first-of-its-kind Lakewood vote is being analyzed by legislators and legal experts alike, some of whom believe Lakewood overstepped its bounds and will be taken to court for doing so.
“I wouldn’t be surprised if a lawsuit is filed against the City of Lakewood in the not-too-distant future,” said Molly Foley-Healy, a homeowners’ association attorney in Littleton. “I believe based on the law in Colorado there is little question that the City of Lakewood did in fact exceed its authority under home rule.”
Aurora City Councilwoman Molly Markert said that she isn’t interested in what happens with the city ordinances concerning the law, and that the dispute over construction defect legislation needs to be decided by the state.
“This is a state issue and the state Legislature needs to solve it,” she said. “Of course there are pros and cons, but the state needs to act to find a compromise.”
Attempts to make changes to the law failed on the floor of the state Senate in both 2013 and 2014.