Lawsuits are stalling entry-level housing, driving up prices

Recently at, Colorado Springs Chamber of Commerce president Johanna Reeder Kleymeyer offered a concise explanation of the primary barrier to construction of affordable entry-level housing in Colorado:

Construction defects lawsuits in Colorado have become a business unto itself. Law firms make millions by hiring forensic experts to “find” defects for up to six years after construction. When one defect is found in one unit, it is then assumed that the same defect is present in all units within the project.

The next step is to engage the insurance company of the general contractor, and potentially all subcontractors, and any architect or engineer on a project hoping to secure millions in settlement of the defects. Once a settlement is reached based upon the cost to “repair,” the law firm takes a percentage (30-40%) of the award, and the remainder goes to the HOA to resolve the defects. With only a portion of the settlement, many residents cannot actually complete the repairs. The only winners in this system are the trial lawyers.

One solution that the builders have requested for years is the right to repair. This would allow the contractor to fix the problems identified with the cooperation of the owners. These repairs would address the list identified and be paid for by the contractor. The owners win because the repairs are made. The contractor wins because they want a positive relationship with their buyers and can control the costs associated with the repairs. Fortunately, the trial lawyers cannot collect a large payday because there is no financial settlement.

Construction defects do occur. Homeowners have a right to have them repaired. The laws in the state of Colorado do not strike a balance and have created significant risk to builders.