A number of developers have indicated they will no longer build residential projects in Colorado if a bill in the legislature becomes law, according to testimony before a Senate committee Wednesday.
Senate Bill 246 would allow homeowners who bring legal claims for construction defects against their builders to receive 6 percent interest on collections for a defect from the time they buy the house and 8 percent after the legal process begins.
Sen. John Morse, D-Colorado Springs, is sponsoring the bill.
If passed, the bill would overturn a 2008 Colorado Supreme Court decision holding that pre-judgment interest begins accruing in construction-defect actions on the date the defect is repaired or the property is replaced.
Testimony on the bill before the state veterans and military affairs committee ran late into Wednesday even ing. Much of the opposing testimony focused on mixed-use projects, though the bill would affect all homebuilders.
Attorney Jim Mulligan said a number of his clients would stop doing mixed-use projects if the bill passes. Bob Moody, vice president of government affairs for commercial-real-estate-development association NAIOP Colorado, said a number of his members have told him the same thing.
A proponent of the bill, who testified Wednesday night, told The Denver Post that mixed-use communities were being developed before the Supreme Court decision.
“They were subject to pre-judgment interest on construction defects” before, lawyer Scott Sullan said. “What’s changed between then and now other than they got a gift from heaven in this Supreme Court decision? ”
Opponents say the legislation increases contractor risk and drives up general-liability insurance premiums for contractors. It also undermines the ability of contractors and builders to provide multifamily and affordable- housing products because it creates additional risk for lenders that may resist loaning money for such developments, they said.
Opponents also said the bill provides a disincentive to homeowners to efficiently settle cases because they would be able to obtain interest on money they never spent, loaned or invested.
“This appears to be an effort to provide money for attorneys’ fees by providing interest,” said Don Bain, a lawyer who serves on the board of the Denver Metro Chamber.
Margaret Jackson: 303-954-1473 or mjackson@denverpost.com
