LAKEWOOD — A crowd of more than 100 gathered Monday evening in front of Lakewood City Hall to denounce a proposed measure designed to soften the effects of Colorado’s controversial construction-defects law.
But nearly six hours later in an early-morning vote Tuesday, the Lakewood City Council passed the ordinance 7-4 with some slight changes — making the city the first community in Colorado to take on the law.
The 2005 law, which many builders say has made it exceptionally easy for homeowners to sue over property defects, has been cited by critics for the dramatic shrinking of the new condominium market locally.
Lakewood’s measure, which drew nearly two hours of public comment, gives developers and builders a “right to repair” defects before facing litigation and would require condominium association boards to get consent from a majority of homeowners — rather than just the majority of the board — before filing suit.
But a gathering of homeowners, many from Lakewood, waved signs before the City Council meeting saying the ordinance is “anti-homeowner and anti-consumer.” They say it would jettison consumer protections that allow homeowners to hold builders accountable for shoddy construction.
“It protects builders and big business at the expense of homeowners,” Chad Otto, former president of the Grant Ranch homeowners association, told the crowd. “Does Lakewood want to be known as the mecca of poorly built condos?”
Arguments on the council Monday night shifted between whether Lakewood should be plowing new legal ground that may conflict with state law and whether it is the city’s duty to make a bold and first-of-its-kind move to strengthen the diversity of its housing stock.
“This is clearly a legislative matter — not a municipal matter,” said Councilwoman Ramey Johnson, who voted no.
She said Lakewood’s ordinance surely will invite legal challenges.
But Councilman Tom Quinn said he supported the measure because having diverse housing opportunities in a city that is rapidly aging “is very critical.”
The council cast its vote a few minutes after midnight.
The ordinance passed after council members agreed to a series of amendments that give homeowners a bit more leverage, including an opportunity for homeowners to object to a repair offer from a builder and to vote by proxy on whether to pursue litigation against a builder.
Lakewood Mayor Bob Murphy, who backs the measure, said it resolves several issues now dogging the condo market in Colorado. For starters, he said, the measure empowers homeowners who are unable to refinance or sell their unit because their building is enmeshed in litigation about which they never had a say.
“This is an effort to enhance the consumer protection of homeowners,” Murphy said.
Colorado’s defects law, critics say, has forced up insurance premiums on new condo projects to the point where they are no longer feasible to build. Condos represented only 4.6 percent of total new home starts in metro Denver in the second quarter of 2014, versus more than 26 percent in 2008, according to Metrostudy.
Of the nearly 2,000 new multifamily units working their way through Lakewood’s approvals process, not one is a for-sale unit, according to the city’s planning department.
Backers of the Lakewood measure said it is critical to bringing more diverse housing options to the city, especially around stations along the Regional Transportation District’s West Rail Line. The lack of owner-occupied units near those stops, which they say are perfect for young professionals and empty-nesters alike, is because of the defects law.
“The construction boom is awesome, but you can’t buy anything,” said Chuck Ward, vice president of public affairs at the Denver Metro Chamber of Commerce. “For that first generation of new home buyers, we’re kind of keeping them from having that opportunity to start their wealth-building.”
Builders have found it so burdensome and convoluted dealing with defects lawsuits, Ward said, that they pass by Colorado for condo projects and put their focus on developing rental properties.
Denver Metro Chamber of Commerce executive vice president Tom Clark told the council that while developers might still get financing for luxury projects, more affordable condo stock is boxed out of the market by Colorado’s law.
But opponents of the Lakewood measure say it gives builders a right to unilaterally decide what repairs to perform and takes away a homeowner associations’ right to govern itself or retain its constitutional right to a jury trial.
They also say the measure doesn’t address the possibility that developers will simply hold on to the units they build until a vote on defects is held, effectively forming a majority bloc against legal action.
“The devil is in the details, and when you look at this ordinance closely it enables builders to build a substandard product, immunizes them from accountability for the defects, and places repair costs onto homeowners,” said Molly Foley-Healy, legislative liaison for the Community Associations Institute.
Several speakers Monday told the council about nightmarish construction defects — cracking foundations and mold infestation — that were caused by substandard work.
A few builders said Lakewood’s measure would allow them to untangle themselves from the constraints of the state’s law and build affordable owner-occupied units in the city.
The topic of construction-defects reform is a political hot potato during this election season, with the issue becoming a point of discussion during a gubernatorial debate last week. Republican Bob Beauprez said the law is pushing up home prices in northern Colorado, while Gov. John Hickenlooper disagreed but acknowledged that some kind of reform is due.
The Colorado General Assembly earlier this year tried to move forward a trio of bills to amend the law, but the sponsors of that legislation were ultimately unsuccessful.
It’s likely the issue will come up in the legislature again next year.
John Aguilar: 303-954-1695, jaguilar@denverpost.com or twitter.com/abuvthefold
