Signed into law on May 23, 2017, HB17-1279 requires HOA executive boards to obtain the owners’ approval before filing a construction defect lawsuit on their behalf. Supporters and commentators have focused on the law’s aim of encouraging condo construction by reducing litigation against construction professionals. But a provision that has received little attention also gives builders and developers facing the threat of litigation a potentially powerful new tool.
As part of the mandatory procedure before an HOA can sue construction professionals, the law requires the HOA board to hold a meeting with homeowners to discuss the proposed lawsuit. The meeting must be announced by a written notice describing the proposed action, including its anticipated risks and benefits. After the meeting, owners may vote for or against filing the lawsuit.
Importantly, the would-be defendant must be invited to the meeting and given “an opportunity to address the unit owners concerning the alleged construction defect.” HB17‑1279, § 1(c)(II)(B). In fact, the law provides for a “presentation at the meeting by the construction professional or the construction professional’s designee,” id. at § 1(c)(II)(C), which creates a unique opportunity for a would-be defendant potentially to avoid litigation before a complaint is ever filed. Because construction professionals must also receive the meeting notice, they, along with their counsel, can use the meeting as an opportunity to tell their side of the story to unit owners who, in turn, may decide not to sue.
From the perspective of the builders or developers, this procedure presents a real upside. If they mount a strong but ultimately unsuccessful case at the meeting, they will have simply expended resources that would have been required in litigation anyway. On the other hand, if the construction professional dissuades the HOA from suing, he or she will have avoided the burdens of full blown litigation at a fraction of the time and cost.
Whether the law spurs a flurry of new condo construction remains to be seen. But at the very least, it lets homeowners speak for themselves before their HOA litigates on their behalf, and creates a new, meaningful, and low-risk opportunity for builders and developers to nip litigation in the bud.