A Senate committee on Monday stripped a key provision from a significantly debated bill that homebuilders and business groups warned could have launched a new era of construction-defects lawsuits against single-family homes.
In a 3-2 vote, Democratic Sen. Dylan Roberts of Avon joined Republicans on the Senate Judiciary Committee in taking Section 1 out of House Bill 1192, a measure largely focused on updating the Colorado State Antitrust Act. While the overriding bill is not very controversial, the now-removed section had created months of efforts to trim or to kill HB 1192 for fear of what it could mean for consumer-protection lawsuits.
That first section of the proposal sought to specify that a defective product or service did not have to have a “significant public impact” in order to constitute a violation of the Colorado Consumer Protection Act. Plaintiffs suing a business under the CCPA can seek treble damages and attorney’s fees — a combination of financial payouts that often can be the difference between a lawyer being able to take a case and having to decline to take it.
The proposal also sought to remove a requirement that a violator of the act have acted “recklessly,” thereby lowering the bar for filing a CCPA lawsuit. And it would have made the addition of disallowable clauses in Colorado — such as the restriction on non-compete clauses that the Legislature approved last year — violations of the CCPA.
Weak consumer protections?
Supporters said the additions were needed because Colorado law currently offers fewer consumer protections than most other states. Co-sponsoring Sen. Julie Gonzales, D-Denver, noted, for example that the “significant public impact” requirement is not found in Colorado law but is a judge-created standard that’s been enforced by courts, and the changes in Section 1 were meant to inform courts that legislators want them to enforce state law as they define it.
But opponents by removing requirements for violators to act recklessly and have significant public impact, HB 1192 could have turned run-of-the-mill consumer complaints into costly violations of a Colorado law meant to be applied to the worst actors, opponents argued. And the changes also could have permitted single acts to be targeted with CCPA claims, which meant that the deluge of construction-defects lawsuits that ground condominium construction to a halt a dozen years ago could be pressed on individually built residences, warned Ted Leighty, CEO of the Colorado Association of Home Builders.
The Senate Judiciary Committee heard testimony on HB 1192 way back on March 22 but delayed a vote on it several times as proponents talked with Roberts, who was the swing vote on the committee. With such discussions seemingly having reached an impasse, Roberts voted Monday with GOP Sens. Bob Gardner of Colorado Springs and Kevin Van Winkle of Highlands Ranch for Gardner’s amendment to remove the CCPA changes despite sponsors’ pleas.
“The significant public impact is an unattainable wall that the business community would like to have,” Sen. Robert Rodriguez, the Denver Democrat and co-sponsor of the bill, said to no ultimate avail. “This legislation is very important. This section is very important. It’s not out of the realm for consumers to have access to this justice.”
What a slimmed-down HB 1192 does
Roberts did not comment on why he voted to yank the changes to the CCPA. But the moderate Democrat has said in several other key votes this year — such as changes he approved to keep alive Gov. Jared Polis’ housing-focused land-use reform bill and his vote to kill a bill permitting local rent-control measures — that his aim on housing policy is to produce more units to help pull Colorado from its affordability crisis.
Roberts then turned around and voted with Gonzales and Rodriguez to advance what remains of HB 1192 onto the Senate Appropriations Committee over the objection of the two Republicans. Among other things, the bill extends Colorado’s protections against price-gouging to 180 days after a disaster declaration expires, and it increases from $250,000 to $1 million the maximum civil penalty that a court may award for violation of the Colorado antitrust act.
With the legislative session scheduled to end no later than May 8, it’s highly unlikely that homebuilders and business groups will get their wish for the General Assembly to produce further construction-defects law reform this year. But that doesn’t mean that Republicans haven’t tried to force the issue lately.
The future of construction-defects reform
Legislators in 2017 passed what was viewed then as a seminal law on the issue that, combined with a subsequent court decision, made it harder for homeowners’ associations to file lawsuits over purported defects in their condominium complexes. However, builders say that insurance rates remain so prohibitively high on owner-occupied multifamily construction that few firms are willing to invest in that housing stock, leaving condos as less than 5% of new buildings in the Denver metro area.
During debate Thursday in the Senate on the land-use bill, Senate Minority Leader Paul Lundeen, R-Monument, proposed an amendment to create a task force to study why condo building remains so scarce and what further steps the Legislature can take to enable it. Lundeen proposed 13 appointees representing sectors ranging from contractors to insurers to plaintiff’s attorneys study the issue, though the amendment was rejected after Senate Majority Leader Dominick Moreno, the sponsor of the land-use bill, called the idea duplicative to a broader task force that the bill creates.
With proponents of Section 1 not expected to be able to find the votes to add it back into HB 1192, the 2023 legislative session likely represents another year without movement on the issue of construction-defects lawsuits — either toward making them harder or expanding homeowners’ right to file them.
But Dave Davia, CEO of the Rocky Mountain Mechanical Contractors Association, said that he hopes that legislators next year can find a way to address the barriers that make it so expensive to take the risk of building condominiums and can find a way to start to knock them down. At a time when both Republicans and Democrats say they need to take bold steps to address affordability, this is an area that must be addressed as part of a holistic solution, he said.
“Construction-defects litigation prevents contracting companies from stepping back in and addressing the challenges,” Davia said. “The more we can provide certainty for builders, the more the insurance community can help ensure that kind of construction. That’s where we are all focused.”