By: Rebecca Dow
Construction defect litigation reform will take a small step forward this week when Gov. John Hickenlooper signs HB 1279 on May 23, 2017. HB 1279 will go into effect immediately after signature by the Governor, and developers and residential builders will need to be aware of certain aspects of the law. HB 1279 has been much touted as a bipartisan effort toward addressing the housing squeeze in Colorado, as reflected by just 3.4 percent of new housing starts in 2016 being for sale condominiums in the Denver metro area. HB 1279 passed unanimously by both the House and the Senate on May 4, 2107. This is the first piece of legislation passed in the last several years to address any aspect of construction defect litigation reform, although during that time more robust construction defect reform ordinances have been passed by approximately 12 cities and counties in Colorado. HB 1279 offers some pluses to developers/builders, but also contains some pitfalls, as discussed below. Finally, this article will provide some practical pointers for residential construction under HB 1279.
By: Tim Gordon
Building a mixed-use project? If so, Colorado law might render void some of the contractual protections that you bargained for.
In Broomfield Senior Living Owner, LLC v. R.G. Brinkmann Co., 2017 COA 31, reh’g denied (Apr. 20, 2017), a division of the Colorado Court of Appeals had to decide whether certain construction defects claims brought by a project owner were untimely. The project was a senior assisted and independent living facility (senior facility). The construction contract (an AIA form) contained three separate accrual provisions with respect to claims: Claims arising from acts or failures to act (1) occurring before substantial completion accrue no later than the date of substantial completion; (2) occurring between substantial completion and final payment certificate accrue no later than the final payment certificate issuance date; and (3) occurring after final payment accrue no later than the time provided in the warranty provisions. Applying the contract language, the trial court entered summary judgment in the contractor’s favor and ruled that the construction defects claims at issue accrued on the date of substantial completion and were therefor barred.
by: Tamara J. Lindsay
In late December 2016, the Armed Services Board of Contract Appeals (“ASBCA”) dismissed two claims that had been lodged against Lockheed Martin Integrated Systems, Inc. (“Lockheed Martian”) by the United States Army based on the government’s reliance on a “plainly invalid legal theory.” See ASBCA No. 59508, 2016 WL 7655944 (Dec. 20, 2016). The decision, which consolidated Lockheed Martin’s appeal of two contracting officer’s final decisions, concerned claims by the government for alleged breach of contract by Lockheed Martin in the amounts of $102,294,891.00 and $14,494,740.00, respectively. Each of these claims arose out of an audit in 2014 by the Defense Contract Audit Agency that found work performed by Lockheed Martin subcontractors was not appropriately backed up or substantiated.
By: Rebecca W. Dow, Esq.
When negotiating a construction contract with a general contractor (GC), the owner/developer should be aware of, and address, a number of issues to attempt to mitigate or limit the risk of construction defect litigation for a residential project, including multi-family and for-rent residential apartment and senior housing projects. The standard forms of construction contract—such as the American Institute of Architects (AIA) or ConsensusDocs—are more beneficial to the contractor than the owner in many respects. A construction contract will need to be reviewed thoroughly and revised to better protect the owner, and in the case of residential construction, should in particular, address the following top 10 key issues:
1) Scope of Work—The scope of work should be well-defined, accurate, comprehensive and identify the basic components of the project. The scope should not be based solely on the drawings and specifications, which are never 100% complete, and the contractor should agree to reasonably infer the scope of work from the contract documents to produce the intended work. If there is an inconsistency in the contract documents or between the drawings and specifications and contract documents, the contractor should provide the better quality or quantity of the work or materials. The contractor should be required to report any errors, omissions or inconsistencies in the contract documents to the owner. Contractor’s work should be subject to inspection by the owner, applicable city, county or governmental entities, and any third-party inspectors retained by owner or construction lender for quality assurance and quality control. Contractor should give advance notice to owner as to specified key system installations—such as soil, foundation, acoustical, exterior, building wrap, HVAC and structural components to allow review and inspection by such third-party inspectors.
By Garrett Walker
Contractors frequently encounter contract provisions requiring that they test their employees on a particular project for the presence of drugs and alcohol. At times these provisions also purport to require disclosure to the other party of test results or other confidential information. By attempting to comply with these contract provisions, some contractors unintentionally expose themselves to claims by their prospective and current employees. Read more
By: Tamara J. Lindsay
Choice of law provisions are often a negotiated term in construction contracts. Oddly enough, Colorado’s anti-indemnity statute makes at least this one term easy for the parties to agree on. C.R.S. 13-21-111.5(6)(g) provides that, “[n]otwithstanding any contractual provision to the contrary, the laws of the state of Colorado shall apply to every construction agreement affecting improvements to real property within the state of Colorado.”
By: Kevin Bridston
In my experience as a trial lawyer specializing in construction claims, I see a consistent pattern with project documentation: weak project documentation impairs the claimant’s ability to resolve the claim, whether by settlement, arbitration, or trial. The weaknesses generally fall into three categories: (1) failure to follow contractual requirements for notice; (2) failure to completely document daily events, impacts and costs on the project; and (3) failure to raise critical issues as soon as practicable after they are known. Each of these weaknesses can and should be addressed on the project to improve the likelihood of a favorable and timely resolution of claims.
By Tim Gordon
The Colorado Supreme Court has finally weighed in and held that the 90-day tolling period for indemnification claims related to construction defects actions also tolls the statute of repose, ending years of confusion and making the tolling provision effective. Goodman v. Heritage Builders, Inc., 2017 CO 13.
By: Rebecca Dow
The lack of more affordable housing in Colorado has been well documented over the last several years, and there have been a number of attempts to address reform of the current laws by legislative action. More than 13 communities with 2.5 million residents have passed local ordinances to promote condo development to provide owner-occupied, multi-family housing by putting in place reforms to reduce the threat of expensive, time-consuming litigation over construction defects. Since 2015, a broad, bipartisan coalition of mayors, economic development groups, affordable housing groups, and representatives of the construction and housing industry (the Homeownership Opportunity Alliance or HOA) have attempted to find a state-wide legislative solution to the housing crisis. The HOA notes that condos are only 3.4% of new housing starts in the Denver metro area, compared to 20% in 2007.
The HOA’s most recent construction defect reform bill (SB156) was introduced on February 1st in the Colorado legislature, offering a more robust reform proposal regarding construction defect disputes. SB156 as introduced appears to be an improved version of SB177, which was introduced in 2015, and ended in a quick death in a “kill” committee in the Senate. The 2017 bill includes the previous bill’s provision that prevents the removal of binding arbitration clauses in the declaration of a common interest community, and states that any amendment or removal of a mediation or arbitration provision in a common interest community declaration cannot apply to claims that were originally described in the declaration. This means that an amendment or removal of a binding arbitration provision in the association declaration will not be applicable to a construction defect claim. This new and improved bill makes this protection also applicable to non-CCIOA party wall agreements, REAs and similar documents, which contain mediation or arbitration requirements–protecting those documents from amendments to strip out mediation or arbitration provisions for construction defect claims. Read more
By Tim Gordon
Good fences may make good neighbors, but construction projects often make bad ones. In Begley v. Ireson, 2017COA3, Begley and Hirsh wanted to demolish the old house on their property and build a new home. They hired an architect, submitted plans to Denver for approval, and hired a contractor to perform the work. But the work abruptly stopped after their neighbors complained and scared off the contractor.