Westword Draws Attention to Effect of Construction Defects Suits

[Published Sept. 12, 2013, in the Jeffco editions of the Denver Post's YourHub section and in five Jefferson County weekly newspapers]

For several years, it was nearly impossible to sell a condo at the downtown Golden complex known as Millstone at Clear Creek. The reason was that the condo association was embroiled in construction defects litigation against the builder and its insurance company. 

Those claims have been settled now, but until that happened, the only way to sell a condo at Millstone was to find cash buyers.  That’s because mortgage companies typically refuse to lend to a condo buyer when the HOA is involved in litigation — even as a complainant. The result is that the existing units can only be sold to cash buyers.  When you realize that condos are one of the favored — i.e., most affordable — options for first-time home buyers, you can see why it would be important to reduce the number of such lawsuits.  So far, the state legislature has been unsuccessful in dealing with this problem, and the result is that virtually no condo projects are being built currently.

Westword, the Denver arts and entertainment weekly, made this topic their cover story for their Sept. 5-11 issue, under the title “Design Flaw: Have Construction Lawsuits Killed Denver’s Condo Industry, or Is That Just a Bill of Sale?” You can find the article and follow-up blogs on this complex subject at www.Westword.com.

According to that very long and detailed article, virtually all multi-family construction has switched to the building of rental apartment buildings instead of condos.  From a public policy standpoint, this is not good because home owners create a more stable and diverse community base than do apartment renters.

Here in Golden, we have two multi-family projects getting under way. Both of them would have been condos in the past but both are to be rental apartments. The developers will tell you that it’s just too risky to build condos because of the threat of construction defect claims.

In many cases there are very serious defects, and the HOA will search out a contingency law firm — there are three big ones in the metro area, one of them two blocks from Millstone in downtown Golden.

These firms operate on the same basis as personal injury lawyers — no upfront charge for anything, and the law firm keeps one-third of any award plus all expenses, which can bring the net down to half the final award or even less.

If an HOA doesn’t seek out a construction defects law firm, it will probably get cold calls (after the HOA is set loose from the builder who controls it initially) from such firms asking, “Do you have any problems with leaks or other defects? We can send in some inspectors at no cost to you and see whether you might have a claim. We are very successful at getting money for construction defects. What do you say?”