Colorado’s Homeowner Protection Act (“HPA”), C.R.S. § 13-20-806(7)(a), renders void as against public policy a contract’s limitation or waiver of a “residential property owner’s” rights and remedies provided under Colorado’s Construction Defect Action Reform Act (“CDARA”). Void provisions include any restrictions to a statute of limitations or a statute of repose with regard to residential properties.

In 2017, the Colorado Court of Appeals held that a senior living center, operated as a commercial business by a commercial business owner, was a “residential property” for the purposes of the HPA because it was designed and zoned for residential use under a plain language interpretation of the term “residential” as a “structure where people live.” Broomfield Senior Living Owner, LLC v. R.G. Brinkmann Co., 413 P.3d 219 (Colo. App. 2017). In Broomfield, the relevant contract provided that “accrual” of claims was triggered by the substantial and final completion dates. However, the CDARA provides that “accrual” of claims is not triggered until actual discovery (or, alternatively, when the claim should have been discovered through the exercise of reasonable diligence). C.R.S. § 13-80-104(1)(b)(1). Acknowledging that the CDARA did not define “residential property,” the court employed the tenants of statutory construction and considered the common usage of the phrase, residential property, holding that “residential” plainly means “using or designed for use as a residence” and a “structure where people live.” The Court noted that the CDARA appears to define “commercial property” as “property that is zoned to permit commercial, industrial, or office types of use.” C.R.S. § 13-20-802.5(4). The Broomfield court interpreted this definition to mean that the legislature considered a property’s zoning relevant to its intended purpose. As the subject building was specifically designed for multi-family residential use and was zoned for residential uses only, including senior housing, the Court deemed the property “residential property.”

More recently, in May 2023, the Colorado Court of Appeals seemingly expanded application of the HPA when it found a senior facility on a parcel zoned for commercial or mixed use as “residential” and subject to the HPA. In Heights Healthcare Co., LLC v. BCER Eng’g, Inc., 534 P.3d 939 (Colo. App 2023)¹, the relevant contract included a limitation of contractor’s liability equivalent to its fee. The contractor argued the provision was enforceable and not void as against public policy since plaintiff’s property was “commercial” as defined by CDARA, and therefore the HPA did not apply. The Court, however, concluded that the senior living facility was “residential” notwithstanding the applicable zoning designation. The Court held the definition of “commercial property” contained in C.R.S. § 13-20-802.5(4), was not applicable because the definition was within and thus only applicable to the definition of “construction professional.”

The court found that the definition of “commercial property” in C.R.S. § 13-20-802.5(4) was thus not applicable to the entirety of CDARA and only applicable to the subsection defining “Construction professional” for the purposes of CDARA.

The decision in Heights Healthcare Co., and more specifically, the Court’s commentary regarding the limitation of the definition of a “commercial property” creates, at a minimum, some ambiguity in the reading of CDARA’s notice and timing requirements as between residential and commercial projects. C.R.S. § 13-20-803.5 sets forth the notice of claim process and distinguishes between residential and commercial properties. For example, timing for the inspection process under CDARA is 45 days for commercial property and 30 days for non-commercial property.

Although the ruling in Heights Healthcare Co. explicitly limits the definition of “commercial property” to the definition and context of “construction professional” in C.R.S. § 13-20-802.5(4), it does not offer any additional guidance as to whether mixed use properties, residential projects on properties zoned as commercial, or other not-squarely-commercial properties are considered residential or commercial with regard to provisions of CDARA aside from the HPA.

Accordingly, construction professionals should continue to keep a close eye on any case law challenging the Court’s decision in Heights Healthcare Co. or further guidance from the legislature or Courts. In the meantime, construction professional should consider developing strategies with their construction attorney with regard to CDARA claims, especially for mixed use projects.

Footnotes

1. No appeal or petition for writ of certiorari is pending in this matter.