Colorado Gov. Jared Polis (D) on May signed a bill into law that
incentivizes builders to construct much-needed multifamily housing through a
program that makes construction defect liability insurance more
attractive by lowering their premiums.

The 2025 law
creates a warranty program that contractors can opt into that covers
defects at no cost to the homeowner for a minimum of one year for work
quality and materials, two years for plumbing and electrical work and
six years for major structural components. It also requires a
third-party inspection during construction that will result in a
certificate of occupancy and provide for various remedies in case a
defect is discovered.

Prime bill sponsor Rep. Shannon Bird (D) said the legislation aims to address the need for an increased supply of multifamily homeownership opportunities. “The bill we passed this year is intended to incentivize construction of higher-quality homes and to improve the dispute resolution process when a construction defect has been identified,” she said. “These mechanisms together will give more builders confidence in their litigation risk assessments. We believe that this is an important step towards giving more consumers the opportunity to buy a quality home at an affordable price.”

Condominium construction in Colorado has been stymied since the 2001 Construction Defect Action Reform Act
set up a process for homeowners to sue builders when they found defects
that could range from minor complaints about finishes to serious
structural or HVAC issues. As a result, high construction defect
litigation costs had all but halted middle market condo construction in
the state for years.