Defects law benefits builders, homeowners alike
There has been a great deal of interest, along with some misunderstanding and misrepresentation, surrounding the new Construction Defect Actions bill (HB03-1161), which Gov. Owens signed on April 25. I find that once people realize what has been happening in this area ” the excesses and abuses ” and they learn the contents of the bill, most everyone agrees the new law is a significant improvement.
In recent years we’ve seen an escalation in the number of defects resulting in litigation, with settlements hugely out of proportion to the actual defect. Sometimes even after a settlement, the original defect was never repaired.
Contractors have seen their general liability insurance increase from 600 percent to 1,100 percent. One builder’s insurance went from $1,200 to $25,000 annually.
About 15 percent of the home price for low-cost and multi-family construction is just to cover liability insurance.
Opponents of the law claim that it exempts select industries from consumer protection laws and class-action lawsuits, that its parameters are burdensome, and that the construction industry can now hide behind special rules. These claims are simply not true.
The new law protects and benefits consumers and builders alike. The only people who do not benefit are the trial attorneys who’ve been making millions from inflated settlements.
Builders do not set out to build a faulty home or building, or to disappoint consumers. Their reputation depends on building a quality product. Unfortunately, sometimes things go wrong. A bad batch of materials may be used, or some other unforeseen element leads to a defect in the structure.
What homeowners want is to have things made right, to get what they paid for, and to recover actual expenses incurred as a result of the problem. Builders want the right to remedy what is wrong. This is exactly what the new law facilitates.
Much research was done for this bill, and we heard lots of testimony before voting.
Settlements have been staggering. One homeowner built a house for $117,000. There were some problems, they sued and received a $2.1 million settlement ” nearly 18 times the original cost of the home. I found cases that settled for $6 million and up, with more than a third of the money going to attorneys.
This is a gross misuse of the system, tying up courts and driving up builder’s insurance costs, ultimately leading to higher home prices for all consumers.
The new law brings honesty to the discussion between homeowners and builders, and establishes fair and reasonable parameters for all parties involved.
When a defect is experienced, a complaint is prepared and delivered to the builder in writing. The builder has the right to remedy, and can repair the defect or offer a financial settlement.
The offer can be accepted or rejected. If it is rejected, homeowners may sue to recover actual damages, but not for things like mental anguish or other intangible damages. Only in rare cases of proven fraudulence on the part of the builder may the homeowner receive treble (threefold) damages, which are capped at $250,000 per instance.
I worked on this bill for three years, and I’m pleased with its final form and content. I believe it is fair, just and a big improvement over what was previously in place. It benefits both homeowners and contractors, and will allow quality construction and fair market competition to keep home prices in line, which is good for Colorado’s economy.
If you’d like to review the entire Construction Defects Bill and its history in becoming law, you may do so at my Web site, http://www.greggrippy.com, under the menu option “Rippy Bills.” You may also send your questions and comments by e-mail at the Web site, or phone me at (970) 379-6100.
” Gregg Rippy, a Glenwood Springs Republican, represents District 61 in the Colorado House of Representatives.
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