Amends the Denver Revised Municipal Code by adding a new Article XII to Chapter 10 concerning construction defect claims in common interest communities.
owners in a common interest community to institute a claim for construction defects. Taking out the words at least, makes it very clear that a simple majority is all that is required, and that no more than, say, a supermajority or even unanimity can be required to proceed under our ordinance. Thank you. Thank you. Councilman Flynn, any other comments on the motion to amend? CNN. Madam Secretary, welcome. Oh, I'm so sorry, Councilwoman Gilmore. I looked away. Go right ahead. Thank you. You make fun? Microphone. Thank you, Mr. President. I wanted to ask David Broadwell with this change. Any issues or how will that affect when you're talking about deleting the words at least and simple majority, how how that affects this ordinance? David Broadwell, assistant city attorney. I believe the meaning of the ordinance will be the same with with the words in or with the words out because and I went back and kind of did some reality checking on this in terms of some other state laws and so forth. And often a law will say you need at least a majority to do such and such. Meaning the same thing is you need a majority to do such and such, right? It's just a different way to express it. I think Councilman Flynn and perhaps some others were concerned that the use of the word at least might appear to green light something beyond what the ordinance intended. But but I think it's still, at the end of the day, has essentially the same meaning. And if you all agree, it's a clarification worth doing. The intent here absolutely is to say city law requires in future common in interest communities that there be a simple majority before a claim is brought. Thank you. Thank you, Councilman Gilmore. Councilman Espinosa. I apologize if I got something. Clarification on this. Was there a clarification on how ownership would be handled in multiple building situations? Not in this amendment. There was some other offline discussion about that issue with a couple of your colleagues. But unless something else happens here tonight, that that issue is not subsumed in this amendment. I understand that. I may be asked about that comment on that issue a little bit further later on when you get past this amendment , there may be other discussion of the bill where we'll talk about the issue of multiple building type condominium developments. Okay. Thank you. Thank you. Councilman Spinoza, Councilman Flynn, you back up. Thank you, Mr. Brennan. Just to clarify for Councilman Espinosa, he's exactly correct. We did have some discussions and we may have some down the road about the ability to separate out a multiple building project. Mostly, we've had in mind with this bill, we've had in mind single buildings, high rises, etc. But I have some projects in my district that consist of 30, you know, 25, 30 buildings and where defects affect only a portion of that. We wanted to maybe look for a path forward to proceed with how best to deal with resolving those, but it's not necessary to do that tonight. All right. Thank you. Thank you, Councilman Flynn. Any questions? Comments currently on the motion. And then we'll get to the bill as amended, seeing none. And I'll wait a second. I'm Secretary Rocco. Flynn. I Gillmore. I Cashman. I can ege Lopez. I knew Ortega. I Susman Black. Brooks Clark. All right. Espinosa. Hi, Mr. President. I. Councilman Cashman. I thank you, Mr. President. Got it. Thank you, Madam Secretary, please. Because of only now, the results. 3939 as councilor 811 has been amended. Now, Councilman Ortega, we a motion to pass has amended. Are we not going to talk about the the bill before we pass it as amended? You have. We have to first put on the floor. A move that council bill 811 be ordered published as amended. A place on final consideration. Be placed on final consideration and do pass as amended. Got it. Moved in second. Councilwoman Ortega, you're up. I wanted to speak more about the issue that was just raised a few minutes ago about the multiple building situation. We've got a number of large developments that will be happening that have been approved by this body. Those projects have not yet been constructed. We don't know what the ownership is going to look like. So several of us were engaged in conversations with our city attorney, looking at how we might address that particular issue, where multiple buildings are under the same ownership or the same way, where a defect may only exist in one building. But in conversations with our city attorney and I'll let David speak in just a minute. He was explaining that even though the so you would have to engage the whole way for the entire complex, even though it might only affect one building. But the fact that a claim would be filed through the highway, in turn affects all those other buildings. And, you know, there may be some things that the state legislature will be looking at related to this or some other concerns, because this particular issue was raised by one of our state senators, and we know that more than likely they're going to be dealing with this particular topic again in this next legislative session. And, you know, whether they get there or not is yet to be seen because we know they've been dealing with this particular legislation for the last couple of years. But, David, I'd like to ask you to just elaborate a little further on the conversations we've had about why it would be challenging to try to do an amendment that really would not have the effect that we're hoping that it would have where we have multiple buildings under the same nature. We. Yes. How come it briefly and then be happy to answer any follow up questions as well. Bear in mind that the 50% consent by the unit owner unit owners applies to claims brought by the association so that the Board of the association can't just would not be able to do it unilaterally if if a claim is going to be brought in the name of the entire association. That's what would trigger the need for 50% consent. So that's exactly what the bill applies to and all that it applies to. Now, a couple of nuances of this that we didn't talk about last week. There are some situations in large and more complex developments where there may be such a thing as a master association and sub associations of unit owners. And if that were the scenario in a particular development, then the majority consent would potentially be in one of these sub associations, right? That the entire legal framework and structure of the entire development might allow for the vote to occur in some smaller unit because it's hierarchical and broke broken down that way. So that's a possibility. But but in those kinds of arrangements, but something else to emphasize, again, it's only majority consent for claims brought by the association on behalf of the association and not so other scenarios where it's conceivable that you could have claims by individual unit owners or by a group of unit owners regarding defects in the portion of of their unit they happen to own. There's no majority consent associated with those kinds of claims. Those are just being brought by the individual unit owners. So the whole 50% thing doesn't even apply to that scenario. Now, the main global legal explanation that we gave to Councilwoman Ortega and to others who have asked this question is that is that bear in mind that the purpose of one of the main purposes of the majority consent requirement is because in an association hall unit owners fate is tied together. They have a legal relationship all with one another, including assessments to pay for repairs and so on and so forth. If there are problems in the entire association, when an association brings a claim, even if it's related to the defects and only a part of a building or in one building and not others, all the unit owners are brought along in that claim. If they're all part of the same association, whatever cloud or whatever cost might be associated with the claim or borne by hall, even if the defects are only in a portion of the project or in one building and not another. So the rationale for the bill, having informed consent of everybody in whose name through the association the claim is being broad, would apply even in the multiple building scenario. Everybody's unit is going to be tied up in that. If the if if a claim is brought in the name of the association because they're all bound together index in that sort of a legal structure. So we urge you all to consider that and say and understand that the purpose of the bill still applies, whether it's one building or whether it's multiple buildings. And we urge you to to keep that particular provision intact for majority concern. Mr. President, if I may, I just wanted to clarify that some of us were concerned about how challenging it might be for people in one particular building that was affected where other buildings might not be. And again, we don't know what the make up of the buildings are going to look like for some of the future development . But in the case where that might exist, the concern was that to get 50% plus one of not only the people in your your building per se, but the entire h.O.H. To then move forward with a claim would be a little more challenging. And that's why we were looking at this as sort of a solution to not make it more difficult and more challenging for those folks in that particular building that are affected. Having heard the explanation, I chose not to move forward with an amendment at this time because it doesn't appear that it's going to make a difference. And I think it may be important to continue to look at other ways to try to solve this. I mean, I also want to make sure that other people who would be affected have the opportunity to know that a claim is coming forward and the entire complex, if you will, would be affected by the the fact that a claim is being filed. And if somebody wants to sell a unit, a unit there, they're not able to do so. So, you know, this may be a conversation that we continue into the future, but at this point in time, I am not bringing an amendment forward. Thank you, Councilwoman Ortega. Councilman Cashman, you're up. Thank you, Mr. President. As with most of my colleagues and probably most of you out there, I've tried over the last couple of months to come to grips with this issue of how we can nudge the development community into constructing well-built for sale condominiums by reducing the risk of high award lawsuits, while at the same time maintaining or bolstering protections that allow redress for homebuyers who are victimized by quality failures in the homes they've purchased. Hmm. Excuse me. The bill. The bill's been crafted clearly to stimulate construction, to provide additional home buying options to those who want to make Denver their home. While it does give a small nod to the interests of home buyers. When something goes missing in the construction process, the bill is not designed with protecting homeowners interests as its prime directive. The element of the bill that that's been discussed of informed consent does make it a bit more difficult to file legal claim instead of a simple vote of board directors. I recognize that the positive side of this is that homeowners won't be caught unaware of the situation that impacts them. But Section ten, Dash 203 that talks about this goes into great detail on the seven consequences of filing suit, all of these conditions, except one that lists an approximation of an award. They might look forward to focus on deadlines, costs and liabilities that point out the potential downsides of filing an action that might dissuade someone from going forward. This requirement of informed consent for me doesn't follow to the other side of the equation. Section ten Dash 204 states that by taking title to a unit, each owner acknowledges and agrees that the terms of the declaration requiring alternative dispute resolution of construction defect claims are a significant inducement to the declarant willingness to develop and sell the units, and that in the absence of the alternative dispute resolution provisions contained in the declaration, declarant would have been unable and unwilling to develop and sell the units for the prices paid by the original purchasers. Ten Dash 204 goes on to say in harmony with the Village Court decision that the ordinance, quote, expressly prohibits any future amendment to the declaration that would modify or eliminate the requirement for alternative dispute resolution absent the consent of the declarant. My my researches has brought forth the fact that these declarations often include provisions that might tilt arbitration in favor of the builder by limiting the scope of the arbitration proceedings tend to allow for means that not only can the HRA not remove the requirement for arbitration, as was the landscape possibility before of LIGO. But it also means as well that any conditions that are part of the declaration that may limit the scope of the arbitration may not be altered either. With all of these warnings in mind, I would think similar codification of the seller's responsibility to inform homebuyers, with similar emphasis about the precise meaning and implication and limitations that might be inherent in the arbitration agreement. In the sales agreement in a true way declaration, including in-depth explanation of the fact that arbitration is a means of dispute resolution, does not necessarily carry with it the same protections of a trial in a court of law and may carry with it substantial costs, not necessarily attendant to a court proceeding. It appears to me that the things that I'm looking for that would provide the consumers the most, the support they're craving require changes to Colorado's Uniform Arbitration Act. It is this act is my understanding, that allows the arbitrator to establish the format that will govern dispute resolution. And that format has no requirement to follow the structure. You may be. Miller with in a court of law important to changes important changes to state law are needed before I will be able to play the role I had hoped to play in support of this bill. So I will be unable to support it this evening. Thank you, Councilman Cashman. Councilman Espinosa. So, you know, there I, I have several developments in my own district that have a sort of combined two building scenario, one where one building is, in fact, bigger than the other. So if you had a problem in the smaller building, meaning in the let's say the larger building, you could, then what you're saying is get get the majority of that one building. And then if they're all part of the same H okay, encumber the other building. Is that correct? The vice versa. If majority consent, if there's one association and majority consent is obtained from the unit owners in that association, a claim can go forward. Okay, so then can the covenants, the initial covenants be written to prevent sub associations from being created? It's sorry to prevent what from being created by association. So say you say you're in that situation where one building is is is got the problems and the other building doesn't because maybe there was a contractor change after recognizing that the failings of one and so let's just say that everyone in the development is altruistic enough to sort of agree that we're going to let we're going to we're going to split our away. We're going to hit our 51% and divide one building from the other. Could could the covenants be written to actually prevent that from happening? Well, at some point I may have to beg off in terms of some of the technical hypotheticals you're raising. But as I understand it, they basically, if it's hard wired in originally to the covenants that there's going to be one association you buy in this development, you're a part of the association and you wanted to change to a different structure that would require an amendment to the covenants. And the Colorado Common Interest Ownership Act very specifically says amendment can occur without majority consent or up to 67%, depending upon how it was written originally. Right. But but you'd have to go through the an amendment process for the original covenants to be able to go to a different governance structure. I think in answer to the hypothetical that you're raising. No, that's good. And it means the same threshold to subdivide is the same threshold to to agree to to get into the claim to file a claim. Well, just to be clear, hypothetically, it could be more because Kiawah allows covenants to put in in order to amend has to be at least 50 can be up to two thirds. So and I understand and others, again, have more real world experience in the room than I do, but that that is fairly common to have a higher threshold for amendments to the covenants, because Kiawah allows that to to be true in Colorado generally. Hmm. Okay. Council President, are we offering our comments at this point? Yes. Okay. So that's that's good information, sort of. Uh, I'm still that's not going to change my own thoughts on this matter. So I'm going to say my sort of prepared remarks here, because this directly, my concerns, I do have concerns based on what we were just talking about. But I do think that there's an opportunity to correct that down the road if, in fact, these manifest themselves in some sort of way. So the current defect, the current construction defects laws have not stopped construction in this boom. We have built lots of single family homes, townhomes, commercial low rise to high rise. One market segment is lagging behind the one market segment that's lagging behind as condos. So this really is, in my opinion, condo defect reform. There are no guarantees, but this law is at least an attempt to break the stalemate, making the development process more predictable for the buyer and the contractor alike. I am strongly pro-consumer and pro homeowner, so I will play. I will pay close attention to the market and the industry. And if it becomes apparent that buyers are being taken advantage of by this change in a way that is negatively impacts them, I would advocate that Council revisit this law when that if that starts to occur, because I, I do think, you know, there are things like this that that give me pause, but not enough because of the sort of strength and transparency of this proposal. Thank you. Thank you, Councilman Espinosa. Councilman, do. I want to thank David Rowell and our work on our amendment to craft this fine amendment? I think this ordinance would do a great have great effect on increasing the number of condominiums we have constructed for especially for middle income families, as well as for senior citizens. I'm looking forward to this passing tonight. I think the thing to remind is the state law schools is closed here. There, gives full protection to homeowners. And this law has no effect on the protections given by the state law to homeowners. Homeowners must be protected and they will under the construction defects legislation by the state. I'm hoping that our will be a are willing go along with other municipalities in encouraging the state to look at the state law and and make changes. I intend on supporting this tonight and I encourage my colleagues to do so. Thank you. Thank you, Councilman. Councilwoman Ortega. Thank you, Mr. President. I just wanted to add that why is this important? It's because right now for many people who are wanting to buy. There. There is limited new construction for sale housing being built in this city and. We have an inclusionary housing ordinance. So anybody that's building over 30 units in the city of for sale units would have to include affordable units within that development. I don't have to tell any of you what a challenge it is for individuals who are trying to purchase in this city, what the price of housing has done to making it unattainable for many, many families. And by allowing this to move forward tonight, it ensures that as our development community moves to build more condos in this city. And our hope is that this legislation will assist to some degree in addressing the insurance issue that would then allow these units to move forward. It means it it opens up other opportunities for individuals and families who are trying to find something they can afford. Besides the fact that the city has worked very hard and I want to commend my colleagues. Councilwoman Connie Chung, Councilman Brooks, in working with the administration to identify resources and to look at a dedicated revenue stream that will assist us in producing more affordable units in this city. It takes time for the units to come online. And, you know, as I indicated earlier, we've got a number of development projects that this body has approved that have not yet been constructed. There's a potential that some of those developments can be for sale, as well as rental housing. But it's important that we have a mix of different type of housing in this city that increases or creates the opportunity for a variety of income levels of people to live in this city. I don't want to see us become like a manhattan where the only people who can live in Denver are the people who have high incomes and can afford the price of housing. I think it's vitally important to having, you know, the kind of diverse city that we have always been to have that mix of income levels. And so that's why I will be supporting this tonight. I will also pay very close attention to the effects that this will have on the purchaser, the consumer. We know that this legislation won't do anything for people who have already purchased and who may have been dealing with issues. This only deals with projects moving forward after the legislation is adopted. And so some of us will will look at that carefully. And if we need to bring this legislation back in and deal with it further, will do it. We'll do it at that time. You know, some of us are crossing our fingers and hoping that this will result in more units being constructed. We've heard some developers saying they want to wait until there are further changes at the state house before they will, you know, take any steps to build for sale units. But, you know, this is all kind of in hopes that this takes moves the needle a little bit further in encouraging developers to take that step and build these for sale units. So thank you, Mr. President. Thank you, Councilwoman Ortega. Councilman Brooks. Thank you, Mr. President. You know, I made most of my comments when we were in the as I chair the business committee. But I just want to again and my support behind this bill, I think I want to thank David Bravo for putting a well-crafted bill together, one that I think sets a great example for other municipalities who are dealing with this in the in the state and also. Sheds light. To our to our state. Capitals. The folks in the legislators saying, hey, our capital city has taken a bold step in the right direction. You know, in light of the conversation tonight, though, I do want to say that the Business Development Committee would like to revisit this in June after let after the legislature meets so that we can review how we're doing on our folks coming to the table on construction and some of these issues and. Concerns that I think. Council members have that we can address. Some of those as well. So I stand. Support behind this and I hope that all the colleagues as. Well can get on board. Thank you. Thank you, Councilman Brooks. Any other comments? 811 as amended. Steve Nunn Madam Secretary, roll call. Flynn I. Feel more. Cashman. No. Kenny Lopez. I knew Ortega Susman. I black Brooks Clark. All right. This Wednesday. Mr. President. I. Madam Secretary, please close the voting. Announce the results. 12 eyes one day. 12 eyes one day. 811, as amended, has been placed on final consideration and does pass. I believe that was all the bills that were called out. So we were ready for the block votes. All of the bills for introduction are ordered published. Councilwoman Ortega, will you please put the resolutions on the floor for adoption in a block. And move that the following bills be placed on final consideration and do pass in the block vote? Council Bill 829 eight 3839 eight 4841. Councilwoman Um, those are the right ones, the ones I'm looking at. Are you reading bills on final or the bills for introduction? Resolution URIS You're in. The bills were final. Councilwoman Okay, we're gonna get to those right now. It's just the resolutions. Oops. I started backwards. Okay. Resolutions. Council. Will they move for the adoption of Council Bill 867. It's 857 858, 859 868, 64, eight, 66, eight, 55, eight, 61 and 69.