Home builders in Colorado vow to fight a new law that prohibits a builder from having a home buyer going through the notice and opportunity to repair (NOR) process waive his right to file a lawsuit for a construction defect.
The new legislation, known as the Homeowner Protection Act, was signed into law by Colorado Gov. Bill Ritter last month.
Rob Nanfelt of the Colorado HBA says the real issue is that the bill's proponents don't want home buyers to waive the "implied" warranty. An implied warranty, which is based on case law, states that the house must be built to code, in a workmanlike manner, and be habitable. Builders prefer an "express" warranty, which is set by the builder and clearly articulates the parameters of the contract. Such warranties are typically signed by the home buyer when the house closes.
"If we can't waive the implied warranty, then you lose the certainty of an express warranty and have more gray areas in the law, which will cause more litigation," Nanfelt says.
Builders say not having the ability to obtain the waiver will increase lawsuits, which will raise the cost of general liability insurance and ultimately result in higher home prices.
Nanfelt says the builders plan to track the new law's progress and report back to the legislature next year.
"We plan to have solid details on how this new law resulted in more lawsuits, higher home prices, and less ability to obtain general liability insurance," Nanfelt says.
Proponents of the new law say they just want builders to live within the confines of the state's NOR law, the Construction Defect Action Reform Act (CDARA) of 2003. The CDARA law set up an NOR process and capped punitive damages at $250,000, with additional damages being whichever is less: the cost of repairs, the replacement cost of a new home, or the market value of the home.
Clay Vigoda of the Colorado Home Alliance, the consumer group that lobbied for the legislation, says the new law is needed because since the state passed CDARA in 2003 builders have been adding clauses into their contracts that waive or limit the home buyer's right to sue for negligence or recover damages.
"Home buyers have to be covered by some legal rights," he concludes.