In order to reform Colorado’s construction defect laws, Colorado’s legislators enacted the original Construction Defect Action Reform Act (CDARA-I) in 2001 and CDARA-II in 2003. The intent of these laws was to preserve adequate rights and remedies for property owners bringing construction defect claims against construction professionals while also curbing perceived abuses related to such litigation. Although the laws were wide-ranging and touched upon a number of issues in the area of construction defect litigation, one of the most obvious effects of CDARA was the creation of a new Notice of Claims Process (NCP) required before a property owner can bring a construction defect claim against a construction professional.
Under CDARA, a property owner must follow the Notice of Claims Process before a construction defect claim may be filed in court against a construction professional. CDARA defines “construction professional” quite broadly: “an architect, contractor, subcontractor, developer, builder, builder vendor, engineer, or inspector performing or furnishing the design, supervision, inspection, construction, or observation of the construction of any improvement to real property.” Under the provisions of CDARA, a property owner must provide written notice of a construction defect claim to a construction professional before filing an action against the professional in court. This notice must be sent to the last known address of the construction professional and must include a detailed description of the claim, a description of the type and location of the alleged defect, and a description of any damages claimed. The notice must be filed no later than 75 days before filing an action for residential property and no later than 90 days before filing an action related to commercial property. While the notice should list all alleged defects and damage known as of the date of the filing, it may be amended to include any newly-discovered defects that arise after the initial notice is sent. This notice of claim should be sent to each known party that might be responsible for the defect.
After receiving a Notice of Claim, a construction professional may request reasonable access to the property in order to conduct an inspection of the claimed defect. This inspection must be completed within 30 days of receiving the Notice of Claim. After completing the inspection, the construction professional may submit an offer to the claimant to resolve the claim, either by paying a specified amount of money or by agreeing to remedy the alleged defect. The offer must be made within 30 days of the inspection for residential property and within 45 days of the inspection for commercial property. The offer must include the following: a report on the scope and findings of the inspection; description of additional work needed to remedy the defect and any damage caused by the defect; and a timetable for completing repair work (if applicable).
If a property owner is satisfied with the offer to resolve the claim, the owner can submit written acceptance of the offer within 15 days of receiving the offer. If no written notice of acceptance is given, the offer is deemed to have been rejected, and the claimant can move forward with filing the action for a construction defect. Similarly, if the construction professional does not make an offer to resolve the claim within the applicable timeframes, the claimant may file the action with the court.
The Notice of Claims Process is intended to provide an opportunity for construction professionals to address alleged construction defects themselves and to avoid costly and time-consuming litigation when possible. While the NCP does add some additional steps to dealing with construction defect claims, when it works well, the process can save a significant amount of money and frustration. However, there will always be situations that are not amenable to out-of-court resolution, and it is wise to consult an attorney for advice whenever you are faced with a potential construction defect claim, whether as a property owner or a construction professional.