On May 9, 2025, Governor Jared Polis signed House Bill 25-1272, known as the “Colorado Dream Act” into law. The Colorado Dream Act will take effect on January 1, 2026, and aims to remedy the well-documented shortage of for-sale multifamily housing in Colorado. Specifically, legislative findings indicate Colorado is short at least 100,000 housing units. Construction professionals cite Colorado’s climate for construction defect litigation as a barrier to condominium development. The bill, therefore, is an attempt to provide a more predictable litigation framework for builders thereby encouraging construction of condominiums and townhomes into the market.
The Colorado Dream Act provides some significant changes to the Colorado Common Interest Ownership Act (“CCIOA”) regarding when a construction defect action can be brought by a homeowners association and how the proceeds of any claim must be used. The law also provides some significant changes to Colorado’s Construction Defect Action Reform Act (“CDARA”) for multifamily projects if the contractor opts in to the Multifamily Construction Incentive Program (“MCIP”) under C.R.S. §13-20-803.3.
Changes to the CCIOA include an increase in the percentage of owners needed to approve proceeding on a construction defect claim. Specifically, commencing January 1, 2026, the Colorado Dream Act will require sixty-five percent (65%) of all owners to approve proceeding with a claim, and will also require HOA’s to use any proceeds from a claim to effectuate repairs of the alleged defects prior to using the funds for any other purpose.
Changes to CDARA only apply for multifamily, attached housing projects if multifamily developers/builders opt into the MCIP. “Opting in” is effectuated by recording a notice of election in the real property records prior to issuance of the final certificate of occupancy. When a project proceeds under the MCIP the following changes will apply:
- Requirements for warranties: Written warranties must be provided for:
- One year for workmanship and materials;
- Two years for plumbing, electrical and mechanical systems; and
- Six years on structural components
- Requirements for Inspectors:
- Third-party inspectors must be licensed construction professionals or certified inspectors (e.g. ICC-certified); and
- Third-party inspectors must have no connection to builder.
- Requirement To Exhaust Warranty Remedies:
- Prior to filing a suit for defective work, claimants must pursue all reasonable remedies available under the warranty process.
- Requirements for Providing Records To Claimant:
- Within sixty (60) days of receipt of a notice of claim or when a construction professional makes and offer to settle, whichever is earlier, the construction professional must disclose:
- All plans, specifications and soils reports related to the claim;
- Maintenance and preventative maintenance recommendations;
- The name, last-known address, and scope of work of each construction professional who contracted to perform work;
- Failure to provide this information in a timely manner results in a waiver of the ability to designate those professionals as non-parties at fault
- All documents related to third-party inspection of the property; and
- Copies of each insurance policy purchased by the construction professional related to the claim.
- Within sixty (60) days of receipt of a notice of claim or when a construction professional makes and offer to settle, whichever is earlier, the construction professional must disclose:
- Alleged Litigation Protections (if developer/builder complies with MCIP’s requirements):
- When filing a claim against an architect or an engineer, a Certificate of Review will still be required, but now must be filed with the complaint naming a licensed professional;
- Any Certificate of Review for architects and engineers must be filed by developers/builders designating design professionals as a non-party at fault at the time of designation;
- Actionable claims for defects are limited to:
- Actual damage to real or personal property;
- Actual loss of the use of real or personal property;
- Actual bodily injury or wrongful death;
- An unreasonable reduction in the capability of, or an actual failure of, a building component to perform an intended function or purpose; or
- An unreasonable risk of bodily injury or death to . . . the occupants of the residential property.
C.R.S. §13-20-803.3(6).
- Rebuttable Presumption from Certificate of Occupancy:
- If a project receives a certificate of occupancy from a governmental entity, this creates a rebuttal presumption that the property does not contain construction defects.
- Statute of Repose: The statute of repose is reduced to six years if the construction professional provided a consumer warranty that meets the MCIP requirements.
- Note that tolling is available for both the notice of claim process and during mitigation efforts, but capped at one year.
- Affirmative Defenses: The statute purports to add additional affirmative defenses that can be pled, including:
- Extreme weather or third-party actions beyond design criteria;
- Owner neglect or failure to maintain;
- Post-sale alterations or misuse;
- A valid release; and
- A successful repair performed during the notice process.
- Attorney Fee-Shifting: For projects in the MCIP only, attorney fee shifting provisions will apply:
- If builder makes a written offer to repair or settle within ninety (90) days of receipt of a notice of claim, and claimant unreasonably rejects that offer, the court may award attorney’s fees to the builder;
- If the builder fails to make a reasonable offer, within ninety (90) days of receipt of a notice of claim, the court may award fees to the claimant.
- Reasonable is defined as:
- If claimant recovers less than or equal to the amount offered pre-suit, the offer is deemed reasonable, and the claimant’s rejection is deemed unreasonable.
- If the claimant recovers more than the offer or repair value, the offer is deemed unreasonable, and the rejection is deemed reasonable.
- Impact on Insurance: Insurers will be prohibited from cancelling or denying a liability insurance policy issued to a construction professional based on the professional’s offer to repair or settle a claim.
Conclusion:
Clients should work with legal counsel to review current practices and contracts to ensure alignment with any new requirements. Additionally, clients considering opting into the MCIP, or considering working on MCIP projects, should consult with legal counsel before signing onto these projects. Once committed to the program may increase exposure while limiting strategic flexibility and offering little to no substantive protections.
If you have any questions, please contact one of Woods Aitken’s Construction Attorneys. We encourage you to subscribe to our Construction Law E-Briefs for the latest construction news, tips, and updates.