It is no secret that housing has become a major problem in Colorado. At least one title company has indicated that the median home price in the Denver metro area jumped from about $215,000 in 2009 to $525,000 in 2021. One reason for this incredible increase is probably simple supply and demand. The state’s population has grown by about 15% during roughly the same time period. More people wanting fewer homes would naturally lead to higher prices. This is great if you have a home and are taking out a second mortgage, but terrible if you’re trying to buy a home, particularly at lower income levels.
The Colorado American Dream Act
The Colorado legislature appears to have been motivated to try and encourage home builders to increase supply by passing the “Colorado American Dream Act,” House Bill 25-1272. The Act generally raises barriers to certain construction defect plaintiffs bringing claims but also punishes construction professionals who refuse to offer a fair cure for construction defect. The legislature’s theory appears to be that if they rebalance the risks and costs of construction defect, they can encourage more home construction – especially multifamily housing. This blog post, and the one following it, will consider the impact of this new Act on construction defect claims in Colorado.
The Multifamily Construction Incentive Program (MCIP)
The Act creates a warranty program called the Multifamily Construction Incentive Program (MCIP). To participate, a builder must provide specific warranties (1 year for workmanship, 2 years for plumbing, electrical, and materials, and 6 years for major structural components), submit to mandatory third party inspections, and record Notice of Election to participate in MCIP in the real property records.
Protections for Builders Under MCIP
If a contractor participates in MCIP, then it theoretically benefits from several procedural protections. First, the Act prohibits claims against the builder other than those resulting in actual damage, actual loss of use, actual bodily injury, or an unreasonable risk of the same. Claims for some kinds of problems, like sloppy craftsmanship, technical code violations, wrong colors, or any number of other types of damages might simply not be viable claims at all.
A second protection for builders who participate in MCIP is that, so long as the builder provides specific information during pre-complaint discussion about the defect, the plaintiff filing a construction defect lawsuit must submit its “Certificate of Review” with its Complaint rather than the normal sixty days after service of the Complaint provided by C.R.S. § 13-20-602.
The Certificate of Review Trap
For those who may not know, Colorado requires anyone who sues a licensed professional for negligence to have consulted a professional in the same field who confirms the claim is non-frivolous. Not only does MCIP push up the deadline to file this certification, but it also requires the certificate to include far more detail as to the specific negligence alleged and the qualifications of the expert offering the opinion. And, if the certificate is not filed along with the Complaint, the Court “shall dismiss” the Complaint. This is also a change, as previously the remedy for failing to file your certificate of review was often simply an order to get it filed.
The upshot of this is that any plaintiff interested in suing under MCIP will need to spend a lot more time and a lot more money evaluating the claim before filing. This requirement will also be a serious trap for the unwary plaintiff who files a lawsuit without complying. Even a dismissal without prejudice (allowing the plaintiff to re-file) has consequences because if a second lawsuit is also dismissed for some procedural reason it can automatically be treated as a final dismissal without prejudice. In other words, screwing up your certificate of review under MCIP burns up the only “do-over” a plaintiff gets in a lawsuit.
Statute of Limitations and Non-Party Designations
Even worse, if the plaintiff waited to file the lawsuit until the statute of limitations was about to expire, there might not be time to get a certificate and re-file before the time limit runs. The Act specifically notes that its requirements do not extend any statutes of limitations or repose.
Incidentally, the Act also adds a requirement that if an architect or engineer is designated as a non-party at fault, the defendant designating them has to also give an enhanced certificate of review at least forty-five (45) days before trial. Non-parties at fault are not actually added to the case, but if the jury finds they are partially at fault, the defendant is only liable for a fraction of any damages. Prior to this Act, there wasn’t a clear statute requiring a certificate for non-party designations. Now, defendants will have to pay an expert to opine on the non-parties fault before trial. If they do not, they will lose the ability to apportion damages.
Why Legal Guidance Matters
These new provisions, and others to be discussed in the next blog post, make the new Act a very dangerous trap for the unwary. Whether you are a homeowner injured by a construction defect or a professional accused of the same, these new requirements make it even more important that you consult with an attorney with experience in this field as soon as an issue arises.
The Denver business attorneys at Moriarty Underhill LLC can help you navigate these changes and protect your interests. Reach out to our team today to discuss your situation.