As the 2015 Colorado legislative session gets underway, the media attention and discussion regarding the lack of attainable housing, skyrocketing rental rates, and the ongoing state and local efforts to reverse these trends have risen to a dull roar. The hyperbole and rhetoric from those who would oppose any reforms has risen to cacophonous levels.
Among the most often quoted talking points from the opposition are that any changes to Colorado’s existing laws would strip homeowners of their right to seek redress for construction defects and that they would virtually insulate construction professionals from such claims. The long and the short of it is that if this year’s legislation looks anything like SB 220 from last year, nothing could be further from the truth. The two main provisions from SB 220 were: 1) protection of a construction professional’s ability to resolve construction defect claims through arbitration; and 2) requirement of informed consent of more than 50% of the owners within a common interest community before a construction defect action could begin. Neither of these changes would strip homeowners of any rights and they certainly would not insulate construction professionals from construction defect actions.
There is No Right to a Jury Trial in Civil Actions
One of the opposition’s favorite arguments is that requiring arbitration of construction defect claims unfairly infringes upon homeowners’ “rights” to have their cases tried to a jury of their peers. The problem with this argument is that it is simply not true. There is no constitutional right in Colorado to have your civil action tried to a jury. SeeColorado Constitution, Article II, § 23 (“The right of trial by jury shall remain inviolate in criminal cases…”); see also Garhart ex rel. Tinsman v. Columbia/Healthone, LLC, 95 P.3d 571, 580 (Colo. 2010) (“[T]he Colorado constitutional right to a jury applies to criminal cases, not civil cases…”).
Despite the opposition’s view of arbitration, the simple fact is that in Colorado, arbitration is a favored method of dispute resolution. Peterman v. State Farm Mut. Auto. Ins. Co., 961 P.2d 487, 493 (Colo. 1998). The Colorado Constitution, statutes, and case law all support agreements to arbitrate disputes. See Lane v. Urgitus, 145 P.3d 672 (Colo. 2006). Colorado public policy strongly favors the resolution of disputes through arbitration. See Huizar v. Allstate Ins. Co., 952 P.2d 342 (Colo. 1998); Byerly v. Kirkpatrick Pettis Smith Polian, Inc., 996 P.2d 771 (Colo. App. 2000).
In fact, the Colorado Common Interest Act, the law giving rise to common interest communities and empowering the very homeowners associations which bring construction defect actions, states:
The General Assembly hereby specifically endorses and encourages associations, unit owners, managers, declarants, and all other parties to disputes arising under this article to agree to make use of all available public or private resources for alternative dispute resolution, including, without limitation, the resources offered by the office of dispute resolution within the Colorado judicial branch through its website.
C.R.S. § 38-33.3-124(1)(a)(II).
This same section concludes with the following subsection:
The declaration, bylaws, or rules of the association may specify situations in which disputes shall be resolved by binding arbitration under the uniform arbitration act, part 2 of article 22 of title 13, C.R.S., or by other means of alternative dispute resolution under the “Dispute Resolution Act,” part 3 of article 22 of title 13, C.R.S.
The most hypocritical part of this argument, from the opposition’s perspective, is that some of the very plaintiffs’ attorneys now championing the “right” to jury trials have arbitration clauses in their own engagement letters, signed by homeowners associations when the associations hire the attorneys to represent them in construction defect actions. Perhaps the “right” to a jury trial only applies when the associations sue construction professionals for construction defects, not when they sue plaintiffs’ attorneys for malpractice.
Requiring Informed Consent Does Not Insulate Construction Professionals From Construction Defect Claims
One of the most often repeated arguments against requiring informed consent from a majority of owners in a development before a construction defect action can be initiated is that developers/declarants typically own a number of homes within a community while they remain unsold and that the declarant could frustrate the consent requirement by voting against the construction defect action. To the extent that the legislature views this to be a legitimate concern, one way to deal with it would be to make clear that a declarant cannot vote in the election regarding whether to proceed with a construction defect action. I have seen this written into several declarations for homeowners associations, and it would seem to eliminate the problem highlighted by the opposition. Once that concern is ameliorated, would the opposition continue to argue against a homeowner’s right to have a say as to whether his or her community should engage in a construction defect action?
At the end of the day, homes are one of the largest investments people may make in their lives and it seems only right that they should have a say as to whether their association will proceed with a construction defect action on their behalf, after being fully informed as to the consequences of taking that action. To learn more about construction law in Colorado or the litigation of construction defect claims, you can reach David McLain by e-mail at McLain@hhmrlaw.com or by telephone at (303) 987-9813.
