Between 2007 and 2022, the number of condominium developers in Colorado dropped by 84%. The primary reason for that 15-year decline: condo-owner lawsuits against builders and architects.
These lawsuits have driven up the cost of liability insurance on builders as much as $30,000/year per condo unit, according to some in the industry. In fact, one report from September 2024 stated, “[I]nsurance costs for condominiums surged to 5.5% of a project’s hard costs, more than 233% higher than multifamily rental home projects, which had insurance costs as low as 1.1% to 1.65% of project hard costs.”
Condos are often seen as an affordable option for buyers looking to break into the housing market. However, Colorado’s condo prices have been increasing for years as condo construction halted and fewer units were available to purchase.
In 2008, 20% of new housing starts were condominiums, but as of 2024 that number was down to 5% state-wide. Worse, in 2024 only 42 permits were issued for condos in El Paso County—less than 1% of the total dwelling units built in the County.
At a recent hearing in the Colorado House Transportation, Local Government, and Housing Committee, a Habitat for Humanity representative explained that affordable development of condos as starter homes is sorely needed in our state: “We need more partners building starter homes and we need to create an environment to bring affordable condo development back to Colorado.” And that is exactly what the sponsors of HB 1272 hope to accomplish.
At a recent press conference in support of HB 1272, Governor Polis remarked that the only condos being built are at the high end of the market.
The most recent data from the Colorado Association of Realtors supports the Governor’s comments: over the past 15 years, statewide median condo prices have risen from below $200,000 to over $400,000, and in resort towns, the median cost of condos and townhomes has eclipsed $1 million.
With the passage of HB 1272, lawmakers hope that, by limiting the number of lawsuits against builders, they can revive condominium development and boost the supply of these starter homes.
If signed into law, HB 1272 would alter several statutes regarding condominiums. The statute of limitations for filing claims would change to ten years—unless the builder provides a warranty that meets the revised law’s requirement, then, the statute of limitations is six years. And under the bill, the approval for an HOA to pursue a claim will increase to 65% of its membership, instead of the current simple majority vote. Finally, the bill includes a “rebuttable presumption,” which can be used in a lawsuit, the presumption that a property has no construction defect when a state agency or local government has issued a certificate of occupancy.
Essentially, under House Bill 1272, condominium builders would be largely shielded from construction defect lawsuits so long as they meet several requirements.
These requirements include requiring a third-party inspector to check in on the home throughout the construction process and mandating warranties for homeowners for different aspects of the home, ranging from one year for workmanship to six years for major structural components.
Homeowners could still sue for several reasons, such as issues with a home’s functionality or safety, but they would first need to prove that they worked with the builder to fix the issue and took steps themselves to mitigate problems.
In April’s House vote, HB 1272 passed with bi-partisan support (59 yeahs – 5 neighs). After a few amendments in the Senate’s Local Government & Housing Committee on April 10th, the bill now heads to the Colorado Senate as a whole for a vote.