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Navigating the law concerning construction defects

December 16, 2015

There are few things quite as distressing to a homeowner than construction defects. Few things are quite as distressing to construction professionals as allegations of construction defects. With respect to construction defects, both the homeowner and construction professional need to be aware of several pertinent legal issues.

The Colorado Defect Act Reform Act governs procedures for providing notice of construction defects to construction professionals as that term is defined in the statute. A homeowner’s failure to comply with the act’s requirements could prevent the homeowner from recovering damages arising from the construction defect.

The act requires that a homeowner provide a Notice of Claim to a construction professional by certified mail, return receipt or personal service. The Notice of Claim is a condition precedent to bringing any civil action or arbitration proceeding. The Notice of Claim must contain a description of the claim in reasonable detail sufficient to determine the general nature, type and location of the defect and any damages allegedly caused by the defect.

For residential construction defect claims, the Notice of Claim must be submitted no later than 75 days before an action can be filed. Upon receipt, the construction professional may request access to the property to conduct an inspection. A homeowner must provide the construction professional with reasonable access to the property during normal business hours. The inspection must be completed within 30 days after the Notice of Claim is served.

Once the inspection has been conducted, a construction professional has 30 days to make an offer to resolve the claim, either by paying a settlement amount or providing a plan to remedy the defect. A homeowner is under no obligation to accept any settlement proposal, and the construction professional has no right to insist that it be able to make the proposed repairs. If the construction professional does not make a settlement offer, fails to comply with its offer, or if the homeowner rejects the offer, then the homeowner may elect to bring an action against the construction professional. Claims involving commercial properties are also governed by CDARA but have different time frames for the notice of claim process.

A construction professional who receives a Notice of Claim from a homeowner should immediately provide the Notice to its insurance carrier. Depending on the language of the insurance policy, the construction professional’s insurer may have an obligation to provide an immediate defense of the claim. That would include retaining an attorney to represent the construction professional’s interests. The attorney would be able assist in making sure that the construction professional complies with CDARA’s requirements.

The insurance company might also retain an expert to perform an inspection of the claimed defects. A prompt assessment of the validity of the construction defect claims may aid in an early resolution of the construction defect matter.

Some construction defects may constitute “emergencies” that need immediate repair. However, CDARA does not contain any provision allowing a homeowner to bypass the Notice of Claim procedures even for emergencies. Unfortunately, CDARA mandates that its provisions be complied with before any action can be commenced and contains a provision staying any homeowner’s action if the homeowner has failed to comply with CDARA’s requirements. If a homeowner makes repairs before complying with CDARA and later seeks to bring a claim, he or she could risk having the claim stayed. If the homeowner cannot comply with CDARA after the claim has been stayed because the homeowner has already made the repairs, the homeowner’s claim may be stayed indefinitely.

A claimant also has an obligation to mitigate its damages that may require the homeowner to take prompt action to repair defects. This is a complex issue that a homeowner may need to discuss with an attorney in order to evaluate the risks and rewards of making repairs before complying with CDARA.

Homeowners should be aware that there are statutes governing when a claim has to be brought. A construction defect cause of action claim arises “at the time the claimant or the claimant’s predecessor in interest discovers or in the exercise of reasonable diligence should have discovered the physical manifestations of a defect in the improvement which ultimately causes the injury.” Generally, construction defect claims have a two-year statute of limitations.

A homeowner also should be aware that a separate statute, the statute of repose, places an outside limit on when construction defect claims can be brought against a construction professional. Homeowners need to be aware that while CDARA has a tolling provision in it which will toll both the statutes of limitations and repose until 60 days after the completion of the notice of claim procedures, a construction professional’s repair attempts undertaken outside of CDARA’s provisions will not toll a statute of limitations for construction defect claims.

These are just some of the legal issues related to construction defects. Homeowners and construction professionals would be wise to seek legal advice in order to fully understand construction defect issues and to protect their rights.

Ken Golden is a partner with the law firm of Gregory, Golden & Landeryou LLC, in Durango. Reach him at 247-3123.

Telluride Office:

101 E. Colorado Avenue, Suite 201A
Telluride, CO 81435