The rise and fall of the condominium

Can lawmakers bring home a win on ‘construction defects’?

BY PETER JONES
NEWS EDITOR

“It’s interesting when a phrase like ‘construction defects’ becomes really kind of a Main Street or mainstream phrase in our city,” said Mike Kopp, co-chair of Colorado’s Homeownership Opportunity Alliance, during a forum last week at the South Metro Denver Chamber.

The two words have increasingly become watercooler fodder. With the litigious status quo arguably infesting the woodwork, some say Colorado’s first-time homebuyers are finding it increasingly difficult—if not impossible—to buy a condominium or townhome.

It has not been for lack of trying. While such high-density, often affordable, starter homes comprised about 20 percent of Colorado’s home construction a decade ago, the number has since slipped to less than 3 percent, just as millennials are starting to dominate the workforce.

Developer Buz Koelbel, whose family firm was a mover in the early Denver Tech Center, told the March 15 panel that his company has virtually abandoned the for-sale housing market.

“Right now, I have projects at [light rail] station stops around the Denver metro area. We are doing [affordable] residential at every one of those five. Not one of them is for sale,” he said.

Industry leaders say the threat of pricey litigation by homeowner associations over construction defects has effectively evicted the condo industry into less risky for-rent apartments. Koebel, for one, noted he had been sued every year since the early 2000s.

Although the state Senate approved a bill earlier this month that would have moved such buyer-seller disputes into less expensive arbitration, the idea was killed in the Democratic-controlled House of Representatives, with opponents arguing it would have allowed developers to dodge their responsibility to financially vulnerable homeowners.

“[Those] who are unfortunate enough to purchase a new home with construction defects should have equal access to the court system if needed …,” Jonathan Harris, chairman of Build Our Homes Right, said in a prepared statement. “It’s scandalous that developers want to shift the responsibility for their own mistakes on to innocent homeowners.”

Even so, it was the ostensibly not-so-innocent attorneys that had some panelists scratching their heads in frustration. State Rep. Cole Wist, R-Centennial, an attorney himself, conceded that his own profession had played a significant role in the problem.

“None of us are for construction defects and all of us believe builders should be held accountable, but this problem has been created because our litigation process is not being effectively used to resolve disputes,” Wist said. “… Lawyers are opposed to this reform because they are making a lot of money.”

Koelbel said he was “disgusted” that a potential solution had been sent to a “kill committee.”

“This should be totally nonpartisan,” the developer said. “This is about community and this is about jobs and it’s about sustainability in communities. … You have 50 percent turnover a year [in apartments]. That’s not building a stable community.”

State Sen. Angela Williams, D-Denver, a former insurance agent, expressed the need for balanced legislation and compromise on both sides of the aisle, noting her own northeast Denver district has seen a dearth of condominiums too.

“One of the biggest … investments that people of Colorado make is their homes,” she said. “If there are defects, I want to make sure consumers have a path to have their homes fixed.”

Until the much-debated issue of reform is settled, no quarters in the debate are optimistic about startup homeownership. What’s worse, the few condos still being built in Colorado are not necessarily doing much for a sustainable community of ownership, according to Patrick Leighty, vice president of the Colorado Association of Realtors. 

“They’re not being bought by young professionals or the seniors that are trying to downsize or the single mother,” he told the panel. “They’re being bought by investors who can pay cash and go into bidding wars.”