HB 1279 Construction Defect Actions Notice Vote Approval Headed to the Governor’s Desk
HB 1279 Construction Defect Actions Notice Vote Approval Headed to the Governor’s Desk
After more than four years of negotiations on construction litigation reform, HB-1279 sponsored by Representatives Garnett (D-Denver), and Saine (R-Firestone) and Senators Tate (R-Centennial) and Guzman (D-Denver), has passed through both the House and Senate unanimously and is now on its way to the Governor. We expect the Governor to sign it into law.
This informed consent compromise bill does nothing to stand in the way of individual owners who have a legitimate construction issue from seeking a legal remedy. It protects homeowners by ensuring they are aware of a potential lawsuit that could impact selling or refinancing their home and tightens up voting procedures so a majority of homeowners must approve initiating a legal action against a builder rather than leaving that decision to a homeowner association board.
The compromise bill addresses several aspects:
- Tolling Period – It sets a 90 day tolling of the statute of limitations (down from the originally proposed 120 day tolling period). This delay in the time period by which a lawsuit must be filed is also clarified to establish that the tolling period can happen only once, regardless of whether there is an amendment to the notice of filing a lawsuit (notice of claim). Previously there was ambiguity about whether attorneys could continue restarting the tolling period based on an amended claim.
- Voting/ballot integrity – A list of voters/unit owners must be shared with anyone served with the notice of claim (builders, contractors, architects, etc.). Further, there is only one vote per unit owner and they can only vote one time. This prevents the HOA Board from reviewing votes before the close of the voting period and then trying to change the minds of those that voted against pursuing litigation.
- Applicability – The bill language clarifies that the bill applies to all HOA’s, both pre and post 1992, when the Colorado Common Interest Ownership Act (CCIOA) was enacted.
- Definition of “Affiliate” – In the voting exclusions section the original bill ambiguously referred to affiliates of the development party as excluded from voting on commencing litigation. The final version of the bill tightens up the definition of who is considered an affiliate – someone that has a controlling interest in one of the development parties, or their spouse.
- Common elements – The introduced version precluded a vote if the defects claimed are on a common element (non-residential unit), for example a clubhouse or pool. The final version of the bill says that any remedies to repair that do not exceed $50,000 where the HOA is paying for the repairs do not require a vote. Any common element claim greater than $50,000 on a common element would require a vote. This was one of CAR’s biggest issues since any litigation, whether on a common element or on the residential units, clouds the title and can prevent unit owners from selling or refinancing their property.
- Bank-owned properties – These properties will count toward the vote if they vote. These properties were excluded in the original version of the bill.
- Non-responsive voters – These votes will not count. But the bill does allow builders/defendants to challenge in court any unit owners deemed non-responsive by the HOA board.
The Homeownership Opportunity Coalition, of which CAR is a member, believes this bill is a positive first step in the right direction to building more attainable housing for all Coloradans while also protecting homeowners and giving them a voice in whether or not to pursue litigation.
Thank you to each and every one of our members for your dedication on this critical issue, whether it was responding to our calls for action or providing your stories and insights, the time and energy you have put forward to voice your support for construction litigation reform was pivotal in helping us reach a compromise. We are excited to celebrate with you the opportunity to take the first steps in addressing this litigation issue that has plagued our building community and our housing market for the past decade.
Senate Concurrent Resolution 17-002: Real Estate Transfer Tax For Affordable Housing Dies in Committee
SCR 17-002, sponsored by Senator Kefalas (D-Ft. Collins), died Wedneday in the Senate Agriculture, Natural Resources and Energy Committee. CAR opposed this concurrent resolution and testified against it. The proposal would have deleted the prohibition in TABOR on new or increased transfer tax rates on real property of 1/10 of one percent of the value of the real property as specified in the deed for the privilege of transferring the title to real property.
Although REALTORS® understand the need for affordable housing in Colorado, one of our bedrock principles is that you cannot make housing more affordable by making it more expensive. CAR is an affordable housing advocate. We have supported legislative initiatives designed to create more affordable housing options. The creation and extension of the state Low Income Housing Tax Credit (LIHTC) program, and legislation that allocated a portion of the state’s unclaimed property trust fund to support programs that provide rental assistance and promote construction and rehabilitation of low-income rental housing are just a couple examples.
Last year, CAR passed legislation to create first-time homebuyer savings accounts to help Coloradans save for purchasing their first home. Additionally, we have donated more than $7 million through the Colorado Association of REALTORS® Housing Opportunity Foundation (CARHOF) to promote safe, decent and affordable housing for all in Colorado.
SCR 002 had several flaws. First, the transfer tax hurts the very families that it is intended to help because such a tax is regressive. It disproportionately impacts low-to-moderate income earners – those that can least afford it, which creates a barrier to homeownership. Down payment costs – including closing costs – remain a significant barrier to homeownership, especially for low-to moderate-income households.
Second, real estate transfer taxes are not a reliable funding source. Real estate transfer taxes are extremely sensitive to market forces, making the frequency of transactions and value of property variable in relation to the strength of the economy, which makes real estate transfer taxes a poor revenue source to fund affordable housing.
Finally, real estate transfer taxes are unconstitutional under TABOR. This concurrent resolution would remove that prohibition against transfer taxes in the constitution.
House Bill 17-1309: Documentary Fee to Fund Affordable Housing Dies in Committee
HB17-1309, sponsored by Senators Guzman (D-Denver), Coram (R-) and Representatives Jackson (D-Aurora) and Winter (D-Westminster) died on Wednesday in the Senate State, Veterans, & Military Affairs Committee. CAR opposed this bill and testified against it in committee. The bill would have doubled the existing documentary fee for the recording of real estate deeds and instruments with half of the money allocated to the county treasurer and the other half of the money allocated to the Colorado Housing and Finance Authority to create a housing investment fund to support new and existing affordable housing programs.
Although REALTORS understand the need for affordable housing in Colorado and we have supported affordable housing legislation and initiatives like first time home buyer savings accounts, the idea of making housing more expensive to make it more affordable makes no sense.
HB 1309 had the same flaws as SCR-002. Similar to the proposed transfer tax, HB-1309’s fee increase hurts the very families that it is intended to help because like a transfer tax, a documentary fee is regressive — it disproportionately impacts low-to-moderate income earners. And it creates barriers to homeownership because it increases the amount of money needed to purchase a home. Again, down payment costs – including closing costs – remain a significant obstacle to becoming a homeowner, especially for low-to moderate-income households.
Second, real estate documentary fees, like transfer taxes are not a reliable funding source. Real estate documentary fees are extremely sensitive to market forces, making the frequency of transactions and value of property variable in relation to the strength of the economy, which makes real estate documentary fees a poor revenue source to fund affordable housing.
Finally, real estate documentary fees for affordable housing are likely unconstitutional under TABOR. The Colorado Supreme Court has weighed in on the issue of taxes versus fees, and ruled that fees levied must be directly related to the services being performed. New fees that pay or fund something not directly related to the cost of service are actually taxes, and as such, violate TABOR’s requirement that citizens are entitled to vote on new taxes.
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