A bill that aims to encourage condominium construction by lowering litigation risks passed the Colorado House Monday.

House Bill 25-1272 passed on a bipartisan 59-5 vote, with some of the chamber’s most progressive Democrats voting against it.

It is the Legislature’s second attempt in as many years to pass a policy to reverse the decline in condo construction in the state, which supporters see as an accessibly priced option for first-time buyers who want to stop renting but can’t afford a detached single-family home. In February, the median single-family home in Colorado was $640,000 and the average condo was $424,200, according to RedFin.

The number of condo developers in Colorado dropped by 84 percent between 2007 and 2022, partially due to rising liability insurance costs and frequent litigation from homeowners, according to a report from the Common Sense Institute.

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“The current course that we are on right now is unacceptable. Our kids and our grandkids, for those of us who are older — they need a better future than (for) their only hope to ever be a forever tenant,” bill sponsor Representative Shannon Bird, a Westminster Democrat, said ahead of the vote. “That is no way to achieve financial security and stability and to become a permanent member of your community. They need the chance to have home ownership.”

The bill would create an incentive program for multifamily builders to opt into, dubbed the Multifamily Construction Incentive Program. They would need to hire a qualified third-party inspector to review the project as it is being built and offer a warranty for any defect or damage the owner discovers, ranging from one year for workmanship problems and six years for major structural issues.

In exchange, the builder would be protected from construction defect claims unless the damage affects the home’s functionality or safety, including an inability to use the property, failure of a building component, injury or death.

Under the program, an owner would have six years to bring an action and the builder would need to offer to fix the defect.

The idea is to address problems without litigation, encouraging more insurers to back projects in Colorado.

“They know that those homes will be built right in the first place, but also that the first mechanism for fixing an issue — God forbid if one exists — isn’t simply litigation. In the case of the program, the expectation is that they exhaust the remedies offered to them through the warranty, knowing that if the warranty is insufficient or doesn’t meet the need at stake, a homeowner still has the opportunity to litigate that claim,” bill sponsor Representative Andrew Boesenecker, a Fort Collins Democrat, said during a committee hearing on the bill in March.

That incentive program was amended into the bill, as well as a handful of other amendments, to appease some homeowners and the Colorado Trial Lawyers Association. As introduced, the bill would have protected builders during defect litigation as long as they had a certificate of occupancy from a local government.

Questions linger

A separate bill sponsored by Representative Jennifer Bacon, a Denver Democrat, would have added more protections for homeowners in defect litigation, but she pulled it when some of its provisions got rolled into HB-1272. That includes a requirement for builders to give a claimant documents related to building plans, soil reports, maintenance recommendations and insurance.

Still, Bacon said there are questions lingering about the process and cost to homeowners who find construction defects under the proposed program.

Her bill would have changed the statute of limitations for defect claims to begin when a homeowner discovers a problem, not when the problem happens in the first place, but that timeline switch did not make it into the amended HB-1272.

“We’re still looking forward to striking a balance where we could confidently say that we have created a program where builders will build, but also the things that were bargained with that have to do with homeowners are not going to leave them in a place where they have to buy at their own risk, and that is incredibly important,” she said ahead of the final House vote.

The bill now heads to the Senate for consideration, where it is sponsored by Senate President James Coleman, a Denver Democrat, and Senator Dylan Roberts, a Frisco Democrat. Six senators, including three Republicans, are already signed on in support.