Builders Pay the Price

$8 Million Judgment For Aurora Residents Highlights Problems

By John Rebchook, Rocky Mountain News

July 30, 2008

When Sue Small paid about $175,000 for her townhome in Central Park development in Aurora in 2003, she was thrilled.

"I was looking at a lot of single-family homes, but I kept going back and decided I should just buy it," she recalled.

"It has a lovely layout. It is very warm and homey."

But her dream soon turned into a nightmare.

The front porch started to settle and sag, roof columns were separating and her front window leaked so much it was like a waterfall inside her home during a heavy rain.

Improper drainage was causing flooding in many of the basements in the 74-unit complex.

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In March, a jury had awarded the association slightly more than $5 million, but earlier this month the settlement was amended to $8 million [website note: the verdict and settlement was obtained by a firm other than Sullan², Sandgrund, Smith & Perczak, P.C.] ***

In another recent case, another law firm won $11.7 million for townhomes in Westminster.

The law firm that won the Westminster case, Sullan, Sandgrund, Smith & Perczak, P.C., won a $39.5 million case about two years ago in Rock Creek in Superior, believed to be the biggest ever in Colorado.

All these cases involved homes built during the construction boom in the late 1990s and early 2000s, when builders couldn't construct homes fast enough to sate the demand from buyers.

Industry officials contend they had trouble hiring qualified subcontractors, which is playing a big role in recent cases alleging shoddy construction.

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Lawyer Dan Fowler, one of the attorneys representing the homebuilder, said they don't plan to appeal.

Fowler said builders constructing homes during the housing boom in 2000-2001 era "had a difficulty in finding qualified subcontractors and were forced to hire people who were basically carpetbagging from place to place."

That was a time when many people were taking their money out of the stock market and putting it into homes.

Asked if unqualified subcontractors caused the problems at Central Park Townhomes, Fowler said, "There were a number of subs who wound up getting replaced."

Said Rob Nanfelt, of the Colorado Association of Home Builders, "I think that was probably a pretty fair assessment of what had been going on."

He said that construction lawsuits had been declining for about five years, when legislation was passed in 2003 to address the growing number of lawsuits.

Lately there are indications that lawsuits may have started to spike a bit, he said.

But Scott Sullan, whose firm has won a number of lawsuits against builders, said that the number of lawsuits had dropped substantially.

He said builders "learned their lessons from the late '90s," and are now being more responsible.

He said John Laing Homes recently voluntarily agreed to pay about $12 million to fix homes and that Richmond American Homes voluntarily agreed to spend about $18 million.

Also, builders increasingly are retaining third-party quality control specialists to make sure work is done properly, Sullan said.

Lawyer Carrier A. Rodgers of Moye White LLP, said the "big ones catch everyone's attention," but argued that the $20 million in recent awards to homeowners associations in two cases doesn't indicate a trend.

Note: *** indicates that text has been omitted.