In recent years, Colorado has faced an escalating housing crisis, characterized by soaring prices and a shortage of affordable options. As the demand for housing continues to outpace supply, legislators are now focusing on the root cause of the housing crisis. One is the significant legal impediments that hinder the construction of much-needed residential developments that provide Colorado residents with affordable housing options. Central to this issue are the complexities surrounding construction defect claims, tenant protections, and energy code regulations. These legal frameworks, while designed to safeguard the rights of homeowners and tenants, have inadvertently contributed to the stagnation of housing growth, particularly in the realm of attached housing products such as condominiums and townhomes.
Builders are finding themselves embroiled in protracted litigation over alleged construction defects, which, over time, has fueled a constricted market for insurance policies, a significant increase in insurance premiums, higher retention points, and reduced coverage. This all comes as an added cost to the consumer. Habitability protections and issues surrounding the eviction process make other jurisdictions more favorable places to build multi-family residential housing projects, as many suits are frivolous and cost the owners time and money.
With a growing outcry from constituents, legislative efforts are underway to address the impediments hindering residential development. Central to these efforts are two bills: Senate Bill 25-131 (SB 131) and House Bill 25-1272 (HB-1272). Both aim to reform construction defect litigation and related housing policies to stimulate the construction of affordable housing. This article examines the key provisions of SB 131 and HB 1272 and the potential implications for Colorado's housing market.
Senate Bill 25-131: Key Provisions
Construction Defect Claims
SB 25-131 proposes refining the criteria for construction defect negligence claims. Under current law, construction defect negligence claims are restricted unless the defect results in actual property damage, loss of use, bodily injury, wrongful death, or threat to occupants' health and safety. The bill further refines these standards to add requirements that actual property damage must be caused by a violation of a building code, manufacturer's instructions, or industry standards to qualify as a valid claim. Additionally, the bill narrows the threshold for claims based on health and safety risks, requiring them to present an imminent and unreasonable danger rather than a general risk. These changes aim to limit speculative or exaggerated claims.
Revisions to Warranty of Habitability Laws
Sections 2 through 12 of the bill roll back recent updates to Colorado's warranty of habitability laws, reinstating prior provisions. These changes include:
- Eliminating procedural protections for tenants and landlords in warranty of habitability disputes.
- Repealing the rebuttable presumption that a landlord has failed to address an uninhabitable condition under certain circumstances.
- Modifying notice requirements that tenants must provide before a landlord is obligated to remedy habitability issues.
- Adjusting laws governing rental agreements, records, and procedures for addressing uninhabitable premises.
Additionally, section 13 removes the Attorney General's authority to initiate independent legal actions to enforce habitability laws, and Section 14 modifies county court jurisdiction over tenant remedy claims. These changes may reduce litigation risks for landlords and property managers while requiring tenants to meet stricter standards when asserting habitability claims.
Eviction Law Repeals and Changes
Sections 16 through 20 repeal multiple residential tenant protections related to evictions, including:
- Eliminating mandatory mediation before eviction actions for tenants receiving cash assistance.
- Ending the 30-day delay on executing writs of restitution for cash-assisted tenants.
- Repealing disclosure requirements in rental agreements related to source of income discrimination and mediation rights.
- Striking bans on lease clauses that waive mediation rights or shift mediation costs to tenants.
These changes restore greater flexibility for landlords managing properties and lease payments while reducing administrative burdens and potential delays in eviction proceedings.
Energy Code Cost-Effectiveness Requirements
Sections 21 and 22 mandate that any energy code adopted by a county or municipality after Jan. 1, 2026, must be cost-effective, meaning the long-term financial benefits of new energy efficiency standards must outweigh their initial implementation costs based on a multi-year analysis. This provision could mitigate the financial impact of evolving energy efficiency requirements on developers and property owners.
The bill was introduced in the Senate on Feb. 5, 2025, and has undergone no amendments to date. It is currently pending in the Senate State, Veterans & Military Affair Committee.
House Bill 25-1272: Key Provisions and Amendments
HB 1272, titled, "Construction Defects & Middle Market Housing," focuses on mitigating risks associated with construction defect litigation to encourage the development of middle-market housing. Middle-market housing generally refers to housing falling between single-family homes and large multi-family apartment buildings. Examples include townhomes, duplexes and triplexes, construction of which is generally seen as a viable way to addressing housing shortage and affordability issues. The bill introduces several key measures:
- Affidavit Requirement: Claimants filing construction defect actions against architects or engineers for defects on the construction of middle-market housing must include an affidavit from a third-party licensed professional detailing the alleged negligence or errors.
- Presumption of No Defect: Establishes a rebuttable presumption that a property does not have a construction defect if a certificate of occupancy has been issued by a state agency or local government.
- Duty to Mitigate: Claimants are required to take reasonable steps to mitigate or prevent damage caused by alleged construction defects, with specified methods and consequences for failing to do so.
- Construction Professional's Response: Upon notification of a defect, construction professionals must either offer to settle the claim or provide a written response identifying applicable standards and explaining why the defect does not require repair.
- Statute of Limitations: Updates the statute of limitations for construction defect claims to ten years or six years if the construction professional provided a consumer warranty meeting specific requirements. This would become effective for middle-market housing sold on or after Jan. 1, 2026.
- Homeowner Association (HOA) Approval: Increases the required approval from unit owners for an HOA to initiate a construction defect claim from a simple majority to 65%.
As of March 31, 2025, HB 1272 passed the House and is now under review in the Senate. The bill did not emerge unchanged but went through seven amendments that included revisions defining who may act as a third-party inspector on multifamily developments, as well as adding a multifamily construction incentive program, which provides a warranty against defects or damage. The warranty extends one year for workmanship and materials, two years for plumbing, electrical, and materials, and six years for significant structural changes as determined by an approved third-party inspector.
Implications and Interactions Between SB 131 and HB 1272
While both SB 131 and HB 1272 aim to reform construction defect litigation to promote housing development, they approach the issue from different angles. SB 131 focuses on refining liability thresholds and modifying tenant-landlord laws, whereas HB 1272 introduces procedural requirements for claimants and construction professionals. The concurrent consideration of these bills reflects a comprehensive legislative effort to address Colorado's housing crisis by reforming construction defect litigation and related housing policies. These legislative efforts aim to balance the protection of homeowners and tenants with the need to encourage residential development.
This article originally appeared on Wood Smith Henning & Berman, LLP.
About the Authors:
Ryan Hicks is a managing partner at Wood Smith Henning & Berman, LLP. rhicks@wshblaw.com
Michael D. Simpson is a partner at Wood Smith Henning & Berman, LLP. msimpson@wshblaw.com