It is no secret that Colorado is currently experiencing a housing crisis. As the Front Range grows, builders and developers are seeking to capitalize on the situation. While Colorado needs more housing, ensuring quality workmanship is just as essential. Otherwise, all of that building amounts to nothing more than an ineffective and very expensive band-aid.
Unfortunately, it is not uncommon for large building and development companies to cut corners and rush construction to maximize profits in times like these. On top of this, many of these companies use warranties for their work that dramatically limit their obligations to repair and otherwise address defects that arise from their own poor workmanship.
For example, companies may include provisions in their warranties that require home buyers to report defects within one year to trigger the company’s obligation to repair. In Colorado, the statute of limitations for pursuing a claim for construction defects is two years, and this period begins when a home buyer first notices the physical manifestations of the defect. After two years from noticing the manifestations of a defect, a home buyer can no longer pursue a claim against a contractor or other building professional for defects in their work.
Let’s look at an example. You hire a company to build a house that begins by excavating and compacting the soil and then pouring the concrete foundation. Five years later, you notice small cracks appearing at the top of the foundation. Another three years go by before you notice the cracks getting bigger and find out that the foundation is defective.
The statute of limitations in this situation would begin when you first noticed the crack 5 years after the construction of the home. It does not matter that you discover that the cracks are caused by a defective foundation three years after that. The statute of limitations begins when you first notice the cracks, and after two years, you are barred from asserting a claim against the contractor for the defective foundation.
Now let’s look at this example in the context of a company’s one-year warranty. Since the company building your house has told you that you must report defects for repair within one year, you are motivated to be as proactive in noticing and reporting any defects. By doing this, the building company is getting you to notice any potential flaws quicker than you would have otherwise and thereby forcing you to start the statute of limitations.
In other words, the warranty in this scenario makes it so that construction defect claims will expire quicker following completion of the home. Since home buyers are rarely familiar with these laws, these warranties can trick you into limiting your rights.
The good news is that laws exist in Colorado that not only render these sorts of warranties unenforceable but also have the potential to punish companies that attempt such deception. In 2007, Colorado passed the Homeowner’s Protection Act (HPA), which specifically made warranties that limit rights under the statute of limitations to be void as against public policy.
In addition, the Colorado Consumer Protection Act (CCPA) functions to punish companies that engage in a wide variety of deceptive practices by making it possible for a plaintiff to receive triple their actual damages.
The CCPA was further strengthened in 2019 thanks to an amendment that included in the list of deceptive practices a broad provision for “either knowingly or recklessly engag[ing] in any unfair, unconscionable, deceptive, deliberately misleading, false, or fraudulent act or practice” C.R.S. 6-1-105(1)(kkk). The amended statute also includes a provision clarifying that “recklessly,” for the purposes of this section, is a “reckless disregard for the truth or falsity of a statement or advertisement.” C.R.S. 6-1-105(4).
This is a new addition to the law, and its precise effect has not yet been determined. However, the addition of the term “recklessly” is very significant because it makes companies liable for practices that they have reason to know are deceptive.
Companies building homes have had ample time to become familiar with the HPA and understand the types of provisions that this law makes void. Therefore, when these companies try to rely on warranties they should know to be void, they are potentially violating the CCPA and are liable. Furthermore, past Colorado cases support the argument that a company using contractual provisions that they know, or should know, to be void is a deceptive practice under the CCPA.
If you feel you have been the victim of a deceptive trade practice concerning the purchase of your home or in another transaction, our construction law attorneys can help you. Contact us at (720) 615-0999 to discuss your case further.
This blog is intended to provide general information and, therefore, should not be treated as legal advice. You should contact a qualified attorney for questions about legal issues.