Amendment 34 |

Amendment 34

Daily Staff Report

This statewide initiative proposes amending the Colorado Constitution to allow property owners to recover damages from construction companies that do shoddy work. The amendment also seeks to prohibit laws that limit a property owner’s right to recover damages.

Opponents say existing state law that encourages good faith negotiations between homeowners and homebuilders is adequate, and that it limits lawsuits. The opponents also say the amendment was written by tort lawyers to encourage lawsuits and that it will result in higher insurance premiums.

Proponents say the proposal will no longer limit the amount of damages they can seek for faulty construction. They say the current system favors the construction industry over individual property owners.

Amendment 34 Construction Liability The proposed amendment to the Colorado Constitution: with some exceptions, prohibits limits, including limiting damages for pain and suffering to $250,000, on a property owner’s ability to recover damages when improvements to property are not constructed in a “good and workmanlike manner”; and defines an improvement constructed in a “good and workmanlike manner” as an improvement that is suitable for its intended purposes. Background Currently, state law establishes a procedure to recover damages from a construction professional when construction is defective. Under this law, a property owner may sue the responsible construction professional after giving notice and providing an opportunity to fix the defect. Construction professionals include architects, contractors, developers, and others involved in the construction business. If an agreement to fix the defect is not reached within 75 days in the case of residential property, or 90 days in the case of commercial property, the property owner may sue the construction professional responsible for the defect. A property owner who sues, and wins, may be reimbursed for the lesser of the following three dollar amounts: 1) the value of the property without the defect, 2) the cost to replace the property, or 3) the reasonable cost to repair the defect. Medical expenses resulting from an injury are fully reimbursable. Awards for “pain and suffering” for bodily and personal injury are capped at $250,000. In addition, if the owner can show that the construction professional knowingly violated the law that protects consumers from fraud, he or she may be awarded up to an additional $250,000. Damage awards may also include the costs associated with moving, interest, or legal fees. Under this law, a lawsuit must be filed within two years from the date of discovering the defect or six years from the date the construction occurred. The proposal. This proposal creates a new section in the state constitution that repeals current law. It removes limitations on the amount of money a property owner can collect in damages, except for punitive damages and lawsuits against governments. It also sets in the state constitution the current time frames for filing a lawsuit. Finally, the proposal eliminates the current requirement that a property owner and construction professional try to resolve the problem before bringing a lawsuit. In addition to these changes to current law, the proposal restricts the types of laws the legislature can pass in the future concerning construction liability. Arguments For 1) The proposal protects property owners by ensuring they can be fully compensated for faulty construction. For the past three years, property owners have been limited in their ability to recover damages. Damages will be determined on a case-by-case basis in a court of law, rather than through a formula that treats all property owners the same. Property owners will be eligible for compensation for the pain and suffering caused by a defect. 2) The proposal changes a system that favors construction professionals at the expense of property owners. Individual property owners do not have the necessary time or resources to effectively negotiate with construction professionals or corporations that may be responsible. It creates constitutional standards that safeguard property owners from laws that limit their ability to collect damages. Arguments Against 1) The proposal will drive up the cost of housing. An increase in the number of lawsuits, and the awards that result from those lawsuits, could make insurance costs prohibitive. In addition to construction professionals, this proposal allows for lawsuits against anyone who makes improvements to property, not just construction professionals. The proposal creates a fundamental change in liability to include construction professionals and non-professionals alike.

2) A process already exists for property owners and construction professionals to resolve construction defect disputes without immediately turning to the courts. The current system also defines damages in a way that is fair to both property owners and construction professionals: it compensates property owners for the actual cost of fixing their property but limits excessive compensation. Estimate of Fiscal Impact This proposal may affect the time devoted to constructionrelated cases by Colorado courts. If the proposal increases the incentive for property owners to pursue claims, the caseload and the time spent per case may increase. On the other hand, if it increases the incentive for construction professionals to either increase construction quality or settle claims out of court, the time devoted to construction-related cases may decrease. Ultimately, the effect of the proposal on the courts will depend on the number of claims filed, the portion of those claims settled out of court, and the time devoted to each case that goes to trial. ANALYSIS

Ballot Title: An amendment to the Colorado constitution concerning recovery of damages relating to construction of real property improvements, and, in connection therewith, prohibiting laws that limit or impair a property owner’s right to recover damages caused by a failure to construct an improvement in a good and workmanlike manner; defining “good and workmanlike manner” to include construction that is suitable for its intended purposes; and permitting exceptions for laws that limit punitive damages, afford governmental immunity, or impose time limits of specified minimum lengths on filing lawsuits. Text of Proposed Amendment: Be it Enacted by the People of the State of Colorado: Article XVIII of the constitution of the state of Colorado is amended BY THE ADDITION OF A NEW SECTION to read: Section 15. Protection of property owner’s right to workmanlike construction. NO LAW SHALL LIMIT OR IMPAIR A PUBLIC OR PRIVATE PROPERTY OWNER’S RIGHT TO RECOVER DAMAGES, OTHER THAN PUNITIVE DAMAGES, CAUSED BY THE FAILURE TO CONSTRUCT AN IMPROVEMENT TO REAL PROPERTY IN A GOOD AND WORKMANLIKE MANNER. STATUTES OF LIMITATIONS OF NOT LESS THAN TWO YEARS AND STATUTES OF REPOSE OF NOT LESS THAN SIX YEARS, AS WELL AS LAWS AFFORDING GOVERNMENTAL IMMUNITY, SHALL BE PERMITTED. CONSTRUCTION IN A “GOOD AND WORKMANLIKE MANNER” SHALL INCLUDE, WITHOUT LIMITATION, CONSTRUCTION SO THAT THE IMPROVEMENT TO REAL PROPERTY IS SUITABLE FOR ITS INTENDED PURPOSES. THIS SECTION SHALL BE STRICTLY ENFORCED.

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