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Colorado Supreme Court clarifies statute of repose rules

Developers and contractors know how frequently construction laws in Colorado can change. A recent court ruling illustrates just how quickly change can occur.

Last December, we wrote about how a ruling from the Colorado State Court of Appeals changed the statute of repose (SOR) laws. A recent ruling from the Colorado Supreme Court has amended the SOR laws just a few short months after that appellate ruling emerged.

The appeals court had previously ruled that the six-year SOR clock begins when an individual contractor completes their work on a project. The new ruling allows for litigation of subcontractors to continue even after the six-year window has closed.

Changes to Colorado's statute of repose laws

The case of Goodman v. Heritage Builders focused on the construction of a single-family house. Heritage was brought on by the original owners of the property to serve as the contractor for the construction. A certificate of occupancy was issued in 2006, and the home was eventually sold in November 2011.

During the spring of 2012, a construct defect was found by Goodman, and Heritage was notified of the defect in July 2013. On October 8, 2013, Goodman sent a formal claim letter to Heritage. After receiving notification, Heritage filed lawsuits against several subcontractors for the construction defect on December 20, 2013.

In previous cases, claims against subcontractors made after the six-year window had closed were barred. Based on those past rulings, the subcontractors sued by Heritage argued that the lawsuit should be vacated.

In an important change, the Colorado Supreme Court ruled that general contractors could sue third parties if action is brought within 90 days of the date of judgment or settlement. These lawsuits can continue even after the six-year SOR period has elapsed. Because the lawsuit targeted toward the third parties occurred prior to any judgment or settlement occurring, Heritage could bring lawsuits against the subcontractors.

Implications for developers and contractors

This ruling should provide more clarity for all members of the construction industry going forward. Previously, there was some uncertainty whether a subcontractor could or couldn't be sued by a general contractor. Now, contractors can wait and see how the defect judgment plays out in court without feeling rushed by the six-year SOR.

This is an important change, but it won't be the last time the laws surrounding construction defect litigation change. Staying up to date on the latest laws can help contractors understand what their liability may be in a construction defect lawsuit.

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