On Monday, October 13, 2014, the City of Lakewood became the first Colorado municipality to adopt legislation intended to encourage construction of “for sale” multifamily projects by mitigating the risks to developers and builders associated with construction defect litigation. While the impact of this new ordinance may not be known for some time, developers, builders, contractors, designers, homeowners associations, and condominium owners in the City of Lakewood need to be aware of the requirements of the new legislation. Additionally, this new law may influence the actions of other municipalities in Colorado seeking to encourage construction of “for sale” multifamily projects within their boundaries.

In recent years, construction of new “for sale” multifamily projects in Colorado has declined significantly. According to the City of Lakewood Planning Department, Lakewood currently has nearly 2,000 new multifamily projects in its development and planning pipeline—but none of those projects include any “for sale” units. According to Metrostudy, “for sale” multifamily projects represented only 4.6 percent of total new home starts in metro Denver during the second quarter of 2014, compared to more than 26 percent in 2008. This decline is often attributed to a rise in construction defect litigation and the resulting verdicts against developers, both of which have increased insurance costs and made construction of many “for sale” multifamily projects financially infeasible.