Builders wary of amendment: Proposed initiative repeals state’s ‘fix-it-first’ law

By Greg Avery
Camera Business Writer

In most elections, Amendment 34 could be one of the season’s most entertainingly nasty campaigns- greedy developers vs. sleazy trial lawyers.

While those questionable stereotypes have been raised by opposing sides of the issue, the debate over a proposal to change rules governing liability for construction defects has been overshadowed by hotly contested races and other weighty ballot issues.

But Amendment 34 has the potential to affect thousands of property owners who sell or buy homes each year, and area home builders, including Boulder-based McStain Neighborhoods, are closely watching the ballot item’s fate.

The initiative, if approved by voters, would repeal a 2-year-old state law requiring home buyers to give builders a chance to fix construction defects before filing suit. Passage of the amendment also would remove caps on non-punitive damages in such lawsuits as well as prevent new laws from limiting non-punitive damages and a home buyer’s ability to sue.

Supporters of Amendment 34 say it is necessary to protect buyers from faulty construction and irresponsible companies that don’t honor workmanship expectations on what is, for most people, the biggest investment they will make.

Opponents say it will enable a flood of suits against home builders- including ones who would honor requests to fix construction defects- that would increase home builder insurance costs, thus driving up the costs of housing and putting some small builders out of business.

Amendment 34 debate heating up

In 2002, the state Legislature made Colorado the 24^th state to pass a “fix-it-first” law, House Bill 1161, requiring property owners to give builders a chance to fix defects before filing a lawsuit and seeking damages.

The notion of reversing the state law with a permanent constitutional amendment has drawn universal opposition from the home-building industry and economic development groups who worry that it could increase home prices and hurt the economy.

Eric Wittenberg, chief executive officer of McStain, said he worries that skyrocketing insurance rates would be particularly damaging to affordable housing and multi-family housing projects.

“It’s already difficult to get insurance on attached housing here,” Wittenberg said.

Before the 2002 bill limited construction defect lawsuits, a couple of insurers quit offering coverage in Colorado because of the rising cost of damage awards to entire homeowners associations resulting from one or two defective units, Wittenberg said.

He said he worries that Amendment 34 could lead Colorado to repeat what he saw as a builder in California years ago, when lawsuits became so common and the cost of home builders’ insurance so high that it ground multi-family housing construction to a halt for nearly a decade.

Allowing builders to fix their mistakes before a lawsuit is filed is a better approach, Wittenberg said, because most builders, for the sake of their reputation, are responsive to home buyer complaints.

“They want to be able to say they take care of home buyers and do quality work.” Wittenberg said.

Scott Sullan , a Denver attorney, helped create Amendment 34. He has won construction defect awards from home-builders on behalf of more than 15,000 Coloradans and, in the mid-1990s, motivated Richmond Homes to offer dozens of new warranties in Superior’s Rock Creek neighborhood over expansive soils.

When home builders say the amendment was invented to benefit trial lawyers, it’s mainly Sullan they’re talking about.

Sullan said the home building industry is spinning Amendment 34 to sound like employment protection for rich attorneys when, in reality, it’s an attempt to give people making the biggest purchase of their lives more protection and put them equal to developers under the law.

Colorado’s “fix-it-first” law limited damages that “construction professionals”- almost anyone professionally involved in home building- might have to pay while individual homeowners who sell a house that was remodeled with defects are unfairly left open to the full brunt of a costly lawsuit, he said.

Critics say problems with state law can be addressed by legislation and don’t require a constitutional amendment.

But adjustments that benefit consumers will never happen unless voters do it, Sullan argues.

“The economic influence of the home building industry is so enormous in that Legislature that there would be no chance, none, of passing the kind of reforms that would really protect home buyers,” Sullan said.