Colorado Supreme Court rules in favor of developer over arbitration clause

Denver Post’s John Aguilar reports on a recently decided case that will set a precedent for how condominium associations in Colorado address construction defect issues with the developer of a given project:

The Colorado Supreme Court gave builders a reason to cheer Monday, ruling that a homeowners association in Centennial was wrong to ignore a requirement that it first get consent from the developer before changing the way disputes over construction defects claims are handled.

The 5-2 ruling in Vallagio at Inverness Residential Condo Association v. Metro. Homes, Inc. upholds a “consent-to-amend” provision that the builder had placed in the declarations for the project, which stated that binding arbitration would be used in any construction defects disputes and that changing that stipulation would need the consent of the builder.

The Vallagio homeowners association decided to move ahead with a lawsuit against the builder without first getting its consent to change the dispute resolution method from binding arbitration.

Just last month, the Colorado Governor signed a bill into law requiring a majority of a homeowner association’s members to agree to join a lawsuit. Even with the new law, and this new case law, don’t expect a rush of new condo construction in Colorado any time soon.