Many Colorado communities are in desperate need of affordable housing for their residents. Condominiums and townhomes are viewed as an affordable middle-market alternative for homebuyers, and there is a shortage of these units across the state. Experts have identified the comparatively high insurance costs and risk of litigation associated with building condominiums and townhomes as deterrents to new construction. Legislative efforts to address this problem failed in 2024.[1] Undeterred, legislators succeeded in passing amendments to the Colorado Construction Defect Action Reform Act (CDARA) [2] and the Colorado Common Interest Ownership Act (CCIAO) in 2025 in a renewed effort to address the shortage of condominiums and townhomes. For property owners and developers considering the construction of new condominiums or townhomes, this article summarizes CDARA and CCIAO and the recent amendments to those statutes, which took effect on August 6, 2025.
What is CDARA?
CDARA governs all actions for damages, indemnity, or contribution in connection with alleged construction defects. Under the previous version of CDARA, property owners could not file a lawsuit against a builder without first giving proper written notice to the builder. The builder then had the option to repair the defect or make a settlement offer. If that process did not resolve the issue, the property owner could then file a lawsuit or arbitration proceedings against the builder. CDARA restricted some (but not all) construction defect negligence claims related to the builder’s failure to construct an improvement in substantial compliance with an applicable building code or industry standard. It also included a six-year statute of repose that limits the time in which a construction defect action may be brought against the builder. CDARA also limited the amount of certain damages that a property owner may claim and included provisions governing insurance policies issued to construction professionals.
2025 CDARA Amendments
The General Assembly passed HB25-1272 [3] during its 2025 legislative session, amending CDARA in a variety of ways, although many provisions in CDARA remain unchanged. The new amendments are complicated and nuanced and may be subject to interpretation and challenge. The following discussion highlights some of the major changes to CDARA.
HB25-1272 creates an incentive program for builders to construct condominiums and townhomes. A builder may choose to participate in the program by taking certain required steps, including: (1) providing the homeowner with a warranty that covers any defect and damage at no cost to the homeowner during set time periods; [4] (2) having a third-party licensed construction professional or certified inspector perform an inspection on the property; and (3) recording a notice of election to participate in the program in the real property records where the property is located before offering the property for sale. A claimant must exhaust its remedies under the warranty before filing a lawsuit.
HB25-1272 makes it more difficult for homeowners to bring construction defect claims against participants in the incentive program. For example, the new law requires a homeowner or claimant to file a certificate of review with the complaint if the complaint is against an architect or engineer (instead of waiting until after the complaint is filed to do so). In addition, the new law limits actions against a construction professional that is a participant in the incentive program to claims that have resulted in: (1) actual damage to real or personal property; (2) actual loss of the use of real or personal property; (3) actual bodily injury or wrongful death; (4) an unreasonable reduction in the capability of, or an actual failure of, a building component to perform an intended function or purpose; or (5) an unreasonable risk of bodily injury or death to, or a threat to the life, health, or safety of, the occupants of the residential property.
HB25-1272 also establishes that if certain circumstances are present, a claimant is prohibited from bringing a lawsuit not later than six years after the substantial completion of the improvement.
In addition, HB25-1272 sets forth affirmative defenses that a construction professional may assert to bar a homeowner’s claims. For example, a construction professional may not be liable if the damage or defect was caused by: (a) weather or a natural disaster; (b) a human-caused event, such as war, terrorism, or vandalism; (c) a homeowner’s unreasonable failure to timely mitigate damages as required by the statute; (d) the homeowner’s failure to follow the builder’s or manufacturer’s maintenance recommendations or to do commonly accepted homeowner maintenance obligation; or (e) alterations made by the homeowner, ordinary wear and tear, or misuse, negligence, or abuse of the structure or component b the homeowner, after sale or transfer of ownership.
HB25-1272 also requires that a construction professional send or deliver to the claimant an offer to settle the claim or a written response that identifies the standards that apply to the claim and explains why the defect does not require repair. If a construction professional fails to do so, it may waive one or more of the protections described above. On the other hand, if a claimant unreasonably rejects a reasonable written offer of settlement, a court may award attorney fees and costs to the construction professional. The new law also lays out a process by which a claimant may propose an alternative proposal.
HB25-1272 also makes a series of changes applicable to all construction defect claims. For instance, a claimant now has a statutory duty to mitigate an alleged construction defect, and the new law details how this duty is satisfied, as well as creating consequences for a claimant who fails to satisfy this duty. In addition, the new law tolls the statute of limitations or repose during a claimant’s mitigation of an alleged construction defect. HB25-1272 also requires the construction professional who is a defendant in a construction defect lawsuit to give specific, detailed information about the work to the claimant.
Regarding insurance, HB25-1272 prohibits an insurer from cancelling, denying, or reducing coverage based on any claim for benefits covered by an existing liability insurance policy issued to a construction professional based on the construction professional’s offer to repair or settle a construction defect claim.
HB25-1272 requires a local government to establish a fast-track approval process for an application for for-sale multifamily condominium projects to qualify for assistance from the state affordable housing fund.
What is CCIAO?
CCIOA is a complex series of laws governing the formation, management, and operation of common interest communities in Colorado through a homeowners’ or unit owners’ association. [5]
2025 CCIAO Amendments
HB25-1272 also made changes to CCIAO to encourage the development of condominiums and townhomes. For example, the new law changed the percentage of homeowners from whom the executive board of the homeowners’ association must obtain approval before it can initiate a construction defect claim on behalf of the homeowners from a majority to 65%. HB25-1272 also requires the executive board of a homeowners’ association that wins a construction defect claim or settlement to first use the net monetary damages or net proceeds received because of the claim to repair the construction defect.
Final Note
With the enactment of HB25-1272, it is hoped that property owners and developers will consider constructing new condominium and townhome projects. Understanding the scope of available protections provided by new and existing law, however, is an important first step in determining whether to go forward with such projects. Given the nuances and complexities of both CDARA and CCIAO, property owners and developers are encouraged to consult with an attorney before moving forward with any project.
Our Team
BHGR’s Real Estate Group guides commercial and residential developers, landowners, and contractors through the complexity of land use applications, entitlements review, and compliance disputes. Our attorneys are also experienced in the creation of common interest communities for commercial and residential development projects and assist in the preparation of condominium maps and subdivision plats, draft restrictive covenants, and organize condominium and homeowner associations.
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[1]See BHGR article, Condominium Construction and Colorado’s Construction Defect Reform Act, discussing the failed 2024 legislation.
[2] Colo. Rev. Stat. §§13-20-801 to 13-20-808.
[3] HB25-1272 took effect on August 6, 2025, and is codified at Colo. Rev. Stat. §§ 13-20-802.5, 13-20-803.3, 13-20-803.5, 13-20-805, 38-33.3-303.5, and 29-32-105.
[4] HB25-1272 requires a one–year warranty on workmanship and materials, a two–year warranty on plumbing, electrical, and mechanical systems, and a six–year warranty on structural components.
[5] Colo. Rev. Stat. §§ 38-33.3-101 to 38-33.3-402.