Colorado lawmakers have introduced House Bill 25-1261, a measure that, while ostensibly aimed at protecting homeowners from construction defects, will ultimately drive up the cost of housing, particularly for affordable condominiums and townhomes. This bill makes it easier to sue builders, extends the statute of limitations, and will have long-term negative consequences for housing development in Colorado. H.B. 25-1261 has been assigned to the House Transportation, Housing, and Local Government committee and is scheduled for hearing on March 11th.
If the state wants to encourage home construction — especially in the affordable housing sector — this bill is not the answer. It will hurt, not help, Colorado homeowners and prospective buyers. For that reason, we encourage anyone interested in increasing Colorado’s housing stock or in making housing more affordable to reach out to their legislators to urge opposition to H.B. 25-1261.
A Bill That Favors Lawsuits Over Housing Development
H.B. 25-1261 dramatically shifts the legal landscape in favor of plaintiffs’ attorneys and against homebuilders. Among its most problematic provisions, the bill:
Forces Builders to Disclose More Information in the Notice of Claim Process (Section 2)
Under Section 2, any construction professional who receives a construction defect notice of claim must, within 60 days, provide the claimant with all plans, specifications, soils reports, and engineering calculations related to the property. They must also turn over names, addresses, and details of every subcontractor involved in the project. Failure to comply bars the builder from designating nonparties at fault under Colorado’s comparative fault statute, C.R.S. § 13-21-111.5.
Colorado law allows a defendant to reduce its own liability by proving that another party — who is not named in the lawsuit — was wholly or partially at fault. If a builder is unable to designate subcontractors or other responsible nonparties because of failure to meet the bill’s disclosure requirements, it will be left solely responsible for all damages. This provision unfairly removes a key defense mechanism available under existing law and will inevitably lead to higher payouts and increased insurance premiums for builders.
Rather than encouraging good-faith resolution of disputes, this bill promotes litigation over negotiation, driving up legal and insurance costs and increasing the burden on builders.
Mandates Prejudgment Interest at 8% Annually (Section 3)
Section 3 mandates that a prevailing homeowner in a defect lawsuit be awarded 8% annual prejudgment interest, compounded from the date they first sent a notice of claim. Not only does this increase the financial exposure for builders, but it also incentivizes prolonged litigation rather than quick settlement. Plaintiffs’ attorneys have every reason to delay cases, knowing that interest will continue accruing at a high rate.
However, in Goodyear Tire & Rubber Co. v. Holmes, 193 P.3d 821 (Colo. 2008), the Colorado Supreme Court clarified that the purpose of prejudgment interest is to reimburse plaintiffs for the lost time value of money. The Court explained that when plaintiffs seek damages for future repair costs in today’s dollars, they have not yet been deprived of any money, and thus awarding prejudgment interest serves no legitimate purpose. In contrast, when plaintiffs have actually spent money on repairs, they are entitled to prejudgment interest from the time they incurred those costs.
By allowing prejudgment interest to accrue from the date a notice of claim is sent — rather than when actual damages are incurred — H.B. 25-1261 distorts the intent behind prejudgment interest. The only real impact will be inflated settlements and judgments that benefit plaintiffs’ attorneys at the expense of builders and, ultimately, homebuyers. This provision does nothing to help homeowners — it merely increases the financial windfall for the litigation industry while further driving up housing costs.
Expands Plaintiffs’ Attorneys’ Ability to Aggregate Claims (Section 5)
Section 5 voids any provision in a declaration that limits a property owner’s ability to bring or join an action with one or more claimants against a construction professional. This provision does nothing to protect an individual homeowner’s right to sue individually for its own construction defects — it simply allows plaintiffs’ attorneys to aggregate claims, creating mass litigation that drives up settlements and judgments.
The real purpose behind this provision is to provide an economy of scale for plaintiffs’ attorneys, enabling them to litigate mass cases more efficiently and extract larger settlements or judgments. By making it easier to group homeowners together in lawsuits, the bill increases litigation costs and discourages builders from taking on new projects, especially those of any scale. This is not about protecting homeowners — it is about protecting the plaintiffs’ attorneys’ business model while making home construction riskier and more expensive.
By increasing the size of litigated cases, H.B. 25-1261 will serve as yet another deterrent to building homes in Colorado, exacerbating the state’s already severe housing shortage.
Extends the Time to File Construction Defect Claims (Section 6)
Section 6 revises the statute of limitations, making it easier for plaintiffs to sue builders long after they first discovered, or in the exercise of reasonable diligence should have discovered, the manifestation of the defect. Under H.B. 25-1261, the statute of repose would not begin until both (1) the defect is discovered and (2) the cause of the defect is known.
Colorado courts have long held that a construction defect action accrues when an owner recognizes the physical manifestation of the defect, not when the cause is known. In Smith v. Executive Custom Homes, Inc., 230 P.3d 1186 (Colo. 2010) and United Fire Group ex rel. Metamorphosis Salon v. Powers Elec., Inc., 240 P.3d 569 (Colo. App. 2010), courts reaffirmed that the limitations period begins upon recognition of the defect, not the determination of its cause. H.B. 25-1261 unnecessarily extends this period, increasing uncertainty and costs for builders. The only purpose of this section is to bring back to life any claims that have become stale under existing Colorado law. While this will provide more claims for plaintiffs’ attorneys, it does nothing to make housing in Colorado more affordable.
Strips Arbitration Protections and Encourages More Lawsuits (Section 7)
Section 7 directly undermines arbitration protections by allowing associations to ignore provisions in their own declarations. This is a clear attack on builders’ ability to require arbitration for construction defect claims.
The Vallagio at Inverness Residential Condominium Association, Inc. v. Metropolitan Homes, Inc., 395 P.3d 788 (Colo. 2017) decision upheld arbitration clauses in declarations, emphasizing the strong public policy favoring arbitration. The Colorado Supreme Court ruled that builders could require arbitration of defect claims through declarations, which could not be unilaterally removed by the homeowners’ association without the declarant’s consent. H.B. 25-1261 overrides Vallagio, forcing more disputes into expensive and time-consuming litigation rather than allowing for faster, cost-effective arbitration.
Conclusion
House Bill 25-1261 is yet another attempt to expand liability for builders under the guise of consumer protection, but its real impact will be to increase the cost of housing, deter new construction, and flood the courts with more litigation. Rather than protecting homeowners, it primarily serves the interests of plaintiffs’ attorneys by extending liability, inflating settlements, and overriding established legal protections for builders and developers. This bill does nothing to encourage responsible homebuilding or ensure that more affordable housing is available in Colorado.
Colorado needs policies that support housing growth and affordability — not legislation that drives up costs and forces builders out of the market. H.B. 25-1261 should be rejected in favor of real solutions that foster housing development and protect consumer rights without destroying the ability to build homes in Colorado.
Call to Action: Contact Your Legislators Today
Use the Find My Legislator tool on the Colorado General Assembly’s website (https://leg.colorado.gov/find-my-legislator) to locate your state representative and senator. Call, e-mail, or write to them and urge them to oppose H.B. 25-1261.
- H.B. 25-1261 will increase litigation costs, discouraging builders from constructing affordable housing.
- The bill expands the time to file lawsuits unnecessarily, creating uncertainty and higher legal risks.
- It eliminates arbitration protections, forcing more disputes into costly and time-consuming litigation.
- The bill inflates settlements and judgments, increasing insurance premiums and construction costs.
- Colorado needs pro-housing policies, not legislation that deters development and drives up prices.
Your voice can make a difference in stopping this harmful legislation. Contact your representatives today and ask them to VOTE NO on H.B. 25-1261.
