Stuart D. Morse & Associates, L.L.C. Stuart D. Morse & Associates, L.L.C.
Colorado Insurance Defense And Business Litigation Attorneys
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Will recent Colorado high-court ruling bring more condo projects?

Judging from post-case comments, it is certainly not hard to see that a strong division of opinion exists regarding a recent Colorado Supreme Court ruling focused upon arbitration clauses in condominium project declarations.

According to one homeowners' advocate, the Court's holding in Vallagio at Inverness Residential Condo Association vs. Metropolitan Homes Inc. was "outrageously unfair." Other critics of the 5-2 decision in favor of builders claim that it will likely impede home owners' associations and condo-unit owners abilities to bring construction-defect claims in the future. 

However, contractors and developers take state that Colorado is facing an unprecedented shortage of homes in part due to how easy home owners associations and condo-unit owners can sue construction professionals. The recent ruling will likely help to spur growth for new construction, which may increase homes available on the market, and lead to more affordable housing options for Colorado's booming population. 

Builders across the state, as well as insurers, lenders, business groups, urban planners and many legislators see the Court's ruling "will lead to the development of attainable condo projects."

The ruling held that once a builder and homeowners association agree on bylaws requiring disputes to be resolved in binding arbitration, the home owners' associations cannot later seek to unilaterally modify project declarations in a manner that allows aggrieved unit owners to file a lawsuit in lieu of arbitration.  A clear majority of Justices ruled that home owners' assocations must obtain consent from the original contractor to file a suit in court rather than arbitration. 

The Court issued its ruling in early June 2017. A Denver Post article noted that the opinion "could stir near-dormant condo construction" across the state. Builders have long held that fear of litigation has rendered them hesitant to build condo-projects. 

Evidence seems to bear that out. Reportedly, about 20% of all housing starts in Colorado a decade ago were condo-related. Currently that number stands at around a mere 3%.

Builders say that an arbitration process provides for quicker and cheaper solutions than is the case when a matter is litigated in court.

Time will soon tell whether the court's decision will jump start condo construction in the state.

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