Quote:
Originally Posted by CherryCreek
Will this make a difference? If I follow the logic of "construction defects litigation risk is preventing condo construction" crowd it goes like this:
1. Builders won't build condos because they are afraid of litigation risk for construction defects.
2. Also, this risk makes it prohibitively expensive to get appropriate insurance.
As discussed on here previously, the big issue is whether Denver or any other City has the right to legislate in this area given existing state wide legislation. It doesn't really matter what I think (I think it's doubtful). It matters only what developers and/or insurers think.
Will this cause developers to now take a "risk" they previously have been unwilling to (assuming that's true)? Is there any evidence of movement in other cities which have adopted ordinances on this issue?
Knowing the general risk aversion of developers and insurers, I suspect that the lack of clarity around the validity of these ordinances will largely leave us stuck in the status quo. As you note, there is still value in pushing the issue and perhaps the legislature will finally take notice and resolve the issue.
Next year is an election year so both lobbying and campaign donations have at least some hope of making a difference.
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I don't think you're analyzing this deeply enough. Whether the City can legislate in "this area" depends on the area we are talking about, and the specifics of the proposed ordinance. You can't really compare this to the ordinances of other cities, because they are each a little bit different, and Denver's dramatically so.
There is no question that Denver has the power to say what its codes can/cannot be used for. I am not sure that makes much difference, but it'll certainly stand up.
I am not sure whether Denver has the legal authority to require a majority of homeowners to sue. I am skeptical myself, but I think that one goes 50/50 - it's not as questionable as an ordinance that requires a right to remedy, which doesn't exist in CDARA - so there's a good chance it survives. It adds to CDARA, but doesn't contradict it. However, for the sake of looking at whether builders get any comfort, let's just ignore this one.
That brings us to the third leg - the codification of the Vallagio decision. I don't think anyone is saying the Court of Appeals didn't have the legal authority to interpret CCIOA, that's ludicrous. So insurers can clearly rely on it. The question is - what does this do for litigation risk? Borrowing the language of the City Attorney's office:
"Vallagio stands for the proposition that the original developer of a condominium project can structure the declaration of covenants in a way that permanently governs the procedures for any future construction defect claims, and prevents HOAs from amending or repealing the covenant without the consent of the original declarant. In [Vallagio] the covenants required binding arbitration for any construction defect claims, and advised prospective condo purchasers that the developer's ability and willingness to build and market the project was absolutely based upon the homebuyer's acceptance of the binding arbitration requirement for construction defect claims. The proposed Denver ordinance would institutionalize the Vallagio holding by saying that when a new common interest community is created in Denver, and the declaration of covenants clearly advises homebuyers of a requirement for binding arbitration of construction defect claims while stating that this requirement cannot be eliminated without the consent of the original declarant, then city law recognizes such covenant as being binding and inviolate."
I think mandatory binding arbitration, which is now supported by both the courts and the City, is absolutely something that gives insurers comfort. And since there is no question about whether the City has legal authority to legislate in this area, since the Court of Appeals did that for them, I think your analysis is off. None of the other ordinances have, to my knowledge, addressed this point, so comparisons are meaningless.
Of course, nothing moves more slowly than insurers, so short of legislative action, this will still take some time. But I believe it might work, even without further legislative action.
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