By Jared E. Berg, John W. Mill and William R. Reed

The Denver City Council on November 16, 2015 unanimously approved the first reading of a construction defect action reform ordinance designed to spur condominium development in Denver. Like Lakewood and other metro-area municipalities that have passed similar ordinances, Denver is concerned about the chilling effect construction defect lawsuits have had on condo development and believes this ordinance will provide developers with necessary protection from such suits.

The City Council voted after over two hours of debate and public comment both in favor of and against the ordinance. The ordinance elicited strong support from community leaders, construction trade organizations, and business leaders and strong opposition from some homeowners and community associations. Denver Mayor Michael Hancock introduced the ordinance.

The ordinance provides that a failure to substantially comply with the building code cannot support any type of defect claim unless the violation causes actual damage to property, loss of use of property, bodily injury, death, a risk of bodily injury or death or a threat to life, health or safety. The ordinance prohibits any strict liability or negligence per se claims based on a violation of the building code. The ordinance also provides that to the extent the building code specifically regulates any particular element, feature, component or other detail of construction, if the work complies with the building code, then it shall not be considered defective.

The ordinance requires that before an HOA asserts a construction defect claim the HOA must provide certain information about the claim to all HOA members and obtain the consent of a majority of HOA members. The ordinance also provides that if a condominium declaration requires arbitration of defect claims the HOA cannot modify or eliminate that provision without the developer’s consent, provided the declaration contains certain specific language.

The final reading of the ordinance is scheduled for November 23, 2015. The Council will take further public comment, consider amendments, and hold its final vote at that time.

Sherman & Howard represents owners, developers, general contractors and others in construction defect actions and advises clients on ways to reduce and manage the risk of construction defect claims. Our construction and insurance attorneys are actively following state and local construction defect action reform efforts and frequently speak to clients, construction industry organizations and others about construction defect issues.

If you have questions about this advisory, please contact any member in our Construction Industry Practice Group.

Sherman & Howard L.L.C. has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation and does not create an attorney-client relationship between any reader and the Firm.

©2015 Sherman & Howard L.L.C.                                                                                 November 24, 2015