SB 17-156

Senate Bill 17-156, also known as the Homeowners' Association Construction Defect Lawsuit Approval Timelines bill, requires homeowners' associations in Colorado to obtain unit owners’ consent before filing a construction defect lawsuit. The bill mandates that any such claims must first go through mediation and that at least a majority of unit owners must agree in writing for legal action to proceed. It also sets rules for arbitration, including where it takes place and how arbitrators are chosen. This bill is now signed into law, meaning homeowners' associations must follow these new requirements when dealing with construction defect claims.

Official Summary

The bill states that when the governing documents of a common interest community require mediation or arbitration of a construction defect claim and the requirement is later amended or removed, mediation or arbitration is still required for a construction defect claim. These provisions are in section 3 of the bill. Section 3 also specifies that the mediation or arbitration must take place in the judicial district in which the community is located and that the arbitrator must: Be a neutral third party; Make certain disclosures before being selected; and Be selected as specified in the common interest community's governing documents or, if not so specified, in accordance with applicable state or federal laws governing mediation or arbitration. Section 1 of the bill specifies that, in the arbitration of a construction defect action, the arbitrator is required to follow the substantive law of Colorado with regard to any applicable claim or defense and any remedy granted, and a failure to do so is grounds for a district court to vacate or refuse to confirm the arbitrator's award. Section 4 of the bill requires that, before a construction defect claim is filed on behalf of the association: The parties must submit the matter to mediation before a neutral third party; and The board must give advance notice to all unit owners, together with a disclosure of the projected costs, duration, and financial impact of the construction defect claim, and must obtain the written consent of the owners of units to which at least a majority of the votes in the association are allocated. Section 5 of the bill adds to the disclosures required prior to the purchase and sale of property in a common interest community a notice that the community's governing documents may require binding arbitration of certain disputes.(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)

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