How Colorado lawmakers aim to boost construction of affordable condos
State lawmakers are taking another crack at boosting condominium development in Colorado after years of stagnation by trying to reduce the chance of lawsuits filed against builders by homeowners over alleged construction errors.
“Our state isn’t building homes that people can afford to buy any more,” said state Rep. Shannon Bird, a Westminster Democrat.
Bird is one of the main sponsors of House Bill 1272, which would rewrite the so-called construction defect liability rules for condos built in a certain price range. The legislation has the support of Gov. Jared Polis, as well as Republicans in the legislature.
But some progressive Democrats at the Capitol, as well as homeowners’ rights groups, worry it goes too far.
Here’s why the measure is being brought, how it would work and what opponents have to say.
The state of condo development in Colorado
Condos are seen as a more affordable way to boost homeownership.
The median sale price of a single-family home in Colorado was about $645,000 in January, according to Redfin, while the median sale price of a condo was roughly $525,000.
But condo construction in Colorado has been scarce. From 2018 to 2022, condo construction in the Denver metro area fell to about 600 new units per year, down 80% from the five-year period from 2002 to 2006, when an average of 3,000 new units were built per year, according to data gathered by Zonda.
Developers blame Colorado’s construction liability laws for the decrease, complaining that insurers either won’t offer coverage for condo projects or that their rates are too expensive to be financially feasible.
But it’s not just Colorado.
Condo construction is at a historic low across the U.S., according to the Urban Institute, a policy think tank based in Washington, D.C. Liability insurance costs play a role, experts say, but so do other factors. It’s easier to secure financing for rental apartments, for instance, which developers can sell immediately to investors rather than relying on individuals to buy each condo, which can take years.
Construction defects legislation has been a political third rail in Colorado for years. The last major change to the state’s construction defects laws was made in 2017. But rising housing costs and the failure of other affordable housing measures has thrust the issue back to the forefront. Another construction defects measure failed in the legislature last year.
“I view this as an opportunity to really come together with some common sense solutions and hopefully put this one to bed for a little bit,” said Rep. Andy Boesenecker, a Fort Collins Democrat.
Targeting “affordable” condo development
The bill would specifically offer legal protections to developers who build condos, which under the definitions in the bill includes townhomes, that are considered affordable.
The condos would have to cost no more than $806,500 in most of Colorado to fall under the legislation. In parts of the state where housing is most expensive, like Denver, Boulder, Eagle and Pitkin counties, the cost could be higher, up to $1,209,750, depending on location.
The limits are tied to the Federal Housing Authority conforming loan caps, which are adjusted annually. (You can find a list of the county caps here and a map here.)
The bill defines the condos that fit under the affordability definition as being in the “middle market.”
“One of the biggest criticisms of the legislation that we ran last year was that there was no guarantee builders were going to build in a more affordable market,” Bird said. “I wanted to be directly responsive to that concern.”
Third-party inspections, warranties and affirmative defenses
To seize the benefits of House Bill 1272, a developer would be required to have their work on middle-market condo complexes be monitored during the building process by a third-party inspector.
“A lot of insurance companies are already requiring this as a condition of offering insurance, and a lot of good builders are doing this,” Bird said. “This is pulling in one of those best practices that already exists on the market and giving those good builders credit and trying to create incentives for more builders to adopt the practice.”
If a builder adhered to the inspections, they could only be sued by a middle-market condominium owner for a construction error that results in “actual damage” or “actual loss” to real estate or personal property, or that causes or poses a risk of injury or death. An owner would also be able to sue for “an unreasonable reduction in the capability of, or any actual failure of, a building component.”
Right now, condo owners have the broad power to sue for construction errors that cause damage or pose a safety risk.
Adhering to the inspection process would also allow a middle-market condo builder to offer a limited warranty that includes one year of coverage for workmanship and materials; two years for plumbing, electrical, heating and air conditioning; and six years for major structural components.
If a builder doesn’t offer a warranty, a condo owner would have 10 years to file a lawsuit. Right now, the statute of limitations to file a construction defects claim is six years.
“The whole goal is incentivizing better construction in the first place,” Bird said. “You stand by your work with a warranty, you’ve had an independent individual be examining your work as you go and you’re accountable for making identified, necessary repairs.”
Giving builders a list of outs
Middle-market condo builders who adhere to the inspection process would also be afforded a list of so-called affirmative defenses they could use to defend themselves against a construction defect lawsuit.
Those would include:
- Weather or earthquake
- War, terrorism or vandalism
- Failure to complete recommended or commonly accepted maintenance
- Building alterations
- Wear and tear
- Misuse, abuse or neglect of a structure
A builder could also argue in court that a middle-market condo owner failed to reasonably mitigate damages caused by a construction defect. For instance, an owner would be required to turn off the water to their unit if they discover a leak instead of letting the damage compound.
“We worked with the trial bar on this language,” Bird said.
Finally, if a middle-market condo owner decides to file a construction defects lawsuit, their builder would get an opportunity to offer to fix the problem. A condo owner could reject the offer, but they would have to counter with a proposal from another construction company to fix the error on the original builder’s dime.
“We recognize that not every homeowner wants that same builder back in their home,” Bird said. “Sometimes the relationship has been damaged and there’s no trust.”
If the original builder rejects the proposal, the lawsuit could proceed.
Raising the bar for HOAs who want to sue builders
One across-the-board change the bill would make is to require that a homeowners association get the support of 65% of owners in a condominium building to file a construction defect lawsuit against a builder, up from a simple majority.
The measure would also require that an HOA that successfully sues a builder for a construction defects claim must first use any monetary damages they received to repair the defect.
What opponents say
Critics of the effort say it’s already too hard for homeowners to hold builders accountable for shoddy work. And in some cases, the bill would give them less time to do so.
Under current law, homeowners generally get six years to discover a defect and qualify for legal recourse. But if they find the problem in year five or six after moving into a residence, homeowners get a couple years after that to file a suit, bringing the total period to as much as seven or eight years.
The bill would eliminate that grace period for middle-market condos.
Once a suit gets to court, middle-market-condo owners could also face higher hurdles to prove wrongdoing, according to Build Our Homes Right, a coalition of homeowners and legal advocates that has long opposed legislative efforts to make it harder to sue condominium builders. The bill would create a “rebuttable presumption” that a home was built properly as long as it received a final certificate of occupancy from a local government inspection. A homeowner would have to provide a preponderance of evidence to overcome that barrier in court.
“This bill will undermine the very Colorado families it seeks to help,” Janine Musser, a Westminster homeowner and coalition member, said in a statement. “It should be a given that builders will take responsibility for poor workmanship that results in homeowners like me dealing with sinking foundations and flooding basements.”
Moreover, opponents say, the focus on middle-market housing creates a system where wealthier Coloradans who buy million-dollar homes would get more consumer protections than the working class.
“Under this proposal, Colorado would create a two-tier system — where those with the least to spend are given fewer rights, while wealthier homebuyers enjoy stronger protections,” Sam Cannon, president of the Colorado Trial Lawyers Association, said in a statement. “Justice should be accessible to all, not reserved for those who can afford it.”
But even those who have been opposed to easing Colorado’s construction defects rules in the past seem open to the conversation this year.
“I think that everyone’s at a point where we’re willing to lean into the difficult conversation and try to find solutions,” said Rep. Steven Woodrow, a Denver Democrat who frequently works on housing legislation.
One big difference between House Bill 1272 and previous attempts to change Colorado’s construction defects laws is that this year’s measure is that the 2025 legislation offers options, not mandates.
Builders could opt not to adhere to the third-party inspection and waive their right to the liability constraints and consumers could choose whether to buy a condo that falls under the framework.
An opposing effort
Opponents don’t hate everything in House Bill 1272.
For instance, Build Our Homes Right supports a provision that would allow either side to collect attorneys fees if a judge finds that the homeowner or the builder acted unreasonably in the settlement process — either by refusing a reasonable offer to fix the problem or not offering enough.
But much like last year, they favor a competing effort from the progressive left.
House Bill 1261, sponsored by Rep. Jennifer Bacon and Senate Majority Leader Robert Rodriguez, both Denver Democrats, would give homeowners more time to file lawsuits, starting the clock ticking on a claim when they discover the root cause of a problem, rather than when they notice the problem itself. Builders, under the measure, would have to pay homeowners 8% interest if they lose a construction defects lawsuit.
The Department of Regulatory Agencies would also be required to report annually on liability insurance costs related to condo projects.
The legislation is likely to face a tough road at the Capitol. And the governor has signaled opposition to House Bill 1261.
The sweet spot: everyone is unhappy
The proponents of House Bill 1172 are hoping their bill will make everyone a little unhappy. They feel that’s the sweet spot in tackling construction defects reform.
“It’s going to have to mean that everyone gives a little bit of something,” Boesenecker said. “That’s been the approach here — compromise, collaboration.”
The measure has not been scheduled for its first hearing yet.