Like many American cities, Denver has a housing shortage, particularly for first-time homebuyers. There are many reasons for this problem, but one driving force is the high cost of construction. And one of the factors driving up construction costs is insurance costs for the construction industry.
A new Colorado law could help with that issue — at least as it pertains to the multifamily housing sector of the market.
Warranty program
Signed into law by Gov. Jared Polis, the law is intended to lower premiums for construction liability insurance when building multifamily housing, such as condominiums. Among other things, the law establishes a warranty program that covers the cost of certain construction defects for specified periods of time. Contractors can choose to take part in the program.
Under the warranty, materials will be covered for at least one year, plumbing and electrical work for two years. Structural components can be covered for six years or more.
Proponents of the law say it will provide greater incentives for the building of multifamily housing. They say it is necessary to counteract the effects of a 2001 law that made it easy for homeowners to file construction defect lawsuits against builders. This 2001 law, they say, ended up driving up insurance costs, which made multifamily housing construction expensive.
Construction defects and litigation
Construction defect litigation can be extraordinarily expensive and complicated. Builders protect themselves against liability costs by taking out insurance, but this is only part of the story.
Contractors and others involved in the residential housing industry should be aware of their options for protecting themselves against construction defect claims.