Builders in Colorado may have been in a celebratory mood on June 5 when the state’s Supreme Court ruled on a landmark construction defect dispute. The case involved how the declarations for projects can be changed, and the justices ruled by a 5-2 majority that a homeowners association was wrong to file a lawsuit before first obtaining the builder’s consent to change a binding arbitration provision.
Builders generally favor arbitration because it usually resolves disputes more quickly and can prevent ruinously costly litigation. Industry experts say that the litigious nature of the construction sector is one of the main reasons that builders have been reluctant to begin condominium projects in recent years. Condominiums accounted for 20 percent of all Colorado housing starts just a few years ago, but that figure has since fallen to just 3 percent.
Builders have also been highly critical of Colorado’s construction defect laws and the inability of the state’s lawmakers to address them. They say that filing lawsuits over minor construction issues is too easy for property owners, and they have called for mandatory arbitration in building defect disputes to end the legal gridlock and get the state’s construction industry back on track. A Senate bill that would have answered these calls failed to pass in April, but legal experts believe that the Supreme Court ruling will prompt lawmakers to revisit the issue.
Construction defect lawsuits are often complex and challenging, and builders may find that the legal representatives provided by their insurance providers may not always have the experience necessary to deal with the myriad regulations and legal issues involved. Attorneys with a background in this kind of litigation will likely have made these arguments on behalf of both plaintiffs and defendants, and they could bring a more nuanced approach to negotiations and court proceedings.