Owner Approval for a Construction Defect Lawsuit?

Written by: on Wednesday, April, 19th, 2017

On March 17, 2017, House Bill 17-1279 was introduced and assigned to the State, Veterans, and Military Affairs Committee. The original intent of H.B. 17-1279 was to open the lines of communication between the association board, the association members, and the developer or builder and act as a bill that could garner bipartisan support.

This bill is the basis for a promising compromise which has bipartisan support and will be heard in House hearings Thursday (April 20, 2017) and Friday (April 21, 2017) before making its way to the Senate. This bill has been fast tracked and the intent of the sponsors is to have the same signed into law prior to the close of the legislative session on May 10, 2017.

As intended, the proposed bill, as originally drafted, would require that before an association files suit against a developer or builder for a construction defect, the board must: (1) notify the unit owners and the developer or builder of the potential construction defect lawsuit; (2) hold an owner meeting wherein both the association (acting through the board) and the developer or builder have an opportunity to present their side of the argument and any facts and/or arguments deemed relevant; and (3) after the conclusion of the meeting, the association must obtain approval from a majority of members, after providing said members with detailed disclosures about the lawsuit and its potential costs and benefits.

Pursuant to the proposed language, a construction defect action is defined as

(A) any civil action or arbitration proceeding for damages, indemnity, subrogation, or contribution brought against a construction professional to assert a claim, counterclaim, cross-claim, or third-party claim for damages or loss to, or the loss of use of, real or personal property or personal injury caused by a defect in the design or construction of an improvement to real property, regardless of the theory of liability.

(B) Includes any related, ancillary, or derivative claim, and any claim for breach of fiduciary duty or an act or omission of a member of an association’s executive board, that arises form an alleged construction defect or that seeks the same or similar damages.

Thus, the proposed scope of the bill is very broad and the intent is for construction defect action transparency between the all parties, i.e. the board, the members, and the developer or builder.
Please note, as this bill is not yet law, and is still in the early stages, the above procedure is not yet required or binding at this time. However, the hope of the sponsors is that the bill will move forward and encourage construction of entry level homes.

If you have any questions on the above please contact any of our attorneys at (303) 432-9999.