ColoradoBuilder Summer 2010
FORUM
Journal of the Colorado Association of Home Builders www.hbacolorado.com
Rocky Mountain Builder Conference new sessions, ideas give builders competitive edge
‘10 L egislative session Builders log wins in one of most-brutal on record
Natural Born Leader The GeoSpring™ hybrid water heater from GE® uses innovative heat pump technology to save you $320 a year without costing you a single drop of hot water. Only an industry leader like GE could bring you a water heater that dramatically cuts your home energy costs. An efficient 2.35 Energy Factor helps reduce water heater energy consumption up to 62%. Remarkable efficiency and savings are what make the GeoSpring hybrid water heater a Natural Born Leader. To find out how it works and where to buy, visit geappliances.com/GeoSpring *Based on DOE test procedure and comparison of a 50-gallon standard electric tank water heater using 4881 kWh per year vs. the GeoSpring hybrid water heater using 1856 kWh per year.
For additional information contact GE Appliances, 6130 Stoneridge Mall Road, Suite 300C, Pleasanton, CA 94588, Phone: 925.730.6423.
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Setting the standard for custom linear gas fireplaces, the reD Series (acronym for rectangular european Design) takes modern design to a new level. a variety of stone and glass media options, enhanced LeD illumination, and stunning optional porcelain or granite refractory liners define this innovative series. Featuring 40 inch, 40 inch see-through, and 60 inch models, the reD Series offers 21 unique configurations with more options and styling than any modern fireplace on the market. the exclusive, state-of-the-art, intelliFire ignition system conserves fuel and saves money by providing a pilot flame only when needed. the Design Center at rio Grande Co. is your place to see the reD Series and where you will discover trend setting products with over 7,000 square feet of displays. • Thirty-five burning fireplace displays • 120 stone sample boards • H u n d r e d s o f d o o r, b a t h & c a b i n e t hardware displays • Custom ornamental iron samples • Glass block C a l l D e b b i e t o d a y t o s e t u p a p e r s o n a l t o u r. 303-218-6350
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w w w. r i o g r a n D e C o . C o m
features
ColoradoBuilder FORUM
contents »
summer 2010 vol. 14 no. 3
24 ‘10 Legislative session recap Builders win in some areas of toughest session in years
34 | Legislative wrapup A comprehensive list of bills sent to governor for signing and those that were killed
40 | A first for CAHB Builders, home owners partner to pass construction defects insurance coverage bill
44 | Green building initiative killed Innovative, ground-breaking pilot program shot down after overwhelming, bipartisan support
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‘ 10 Rocky Mountain Builder Conference: How relevant are you? New speakers, topics will help your business flourish
COVER PHOTO: iSTOCKPHOTO.COM
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Creative financing options help sell more homes Despite killed bill that would have protected consumers and builders, there are still ways to get your project financed
Great Floors & Finishes. Smart builders looking for increased profit and less headaches look to Saddleback Design. Saddleback helps homebuilders simplify the interior finish process for their buyers by offering a huge selection of materials, professional in-house interior designers, and the highest quality installations. The result ? The ultimate customer service experience for your buyers, and higher margins equaling greater profitability for you the builder. Give us a call today and see how we can help you.
SADDLEBACK
D E S I G N 2901-A Walnut St. • Denver, CO 80205 • 303.940.3932 • FAX 303.940.3794
departments contents »
10
President’s Letter
12
From the Hallway
54 60 62
In face of adversity, CAHB persists
Let’s clear up misconceptions about HB-1394
Giving Back
No down market here: Habitat for Humanity Colorado poised to build more homes this year than in any of previous three years
What’s cookin’?
As home owners stay put, kitchens are getting surprising face lifts
Protect Yourself
Recent Colorado Supreme Court decision could have a major impact on construction defects cases
Colorado Builder Forum is printed on elemental chlorine-free paper in conjunction with the International Joint Commission and is consistent with the U.S. Environmental Protection Agency’s standards.
Please recycle this magazine.
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Combining 220 years of employee experienCe in plumbing and hardware
The Finest Hardware in Denver 3200 Walnut Street • Denver, Colorado 80205 303.292.3550 • www.denhw.com
President’s Letter
Legislatively, educationally, CAHB presses on for us
ColoradoBuilder
FORUM
www.hbacolorado.com Spring 2010 vol. 14, no. 2
Official Publication of the Colorado Association of Home Builders
CAHB Senior Officers President Emil Wanatka
Emil Wanatka CAHB President
Traveling to Denver these past few months to attend board and committee meetings has provided me ample time to contemplate the state of the home building industry and how to go forward in this tough economy. To provide direction, I’ve looked to our mission statement, which states: As the voice of the building industry, we will work to meet the housing needs of all Coloradoans through advocacy, education, stewardship and professional development. With unprecedented numbers of builders unemployed and the industry in flux and working to shape a new paradigm for how we build and sell homes in the future, our commitment to executing this mission is more important than ever. As advocates and stewards of the industry, it is imperative that CAHB continue to work diligently at the state capitol to author legislation that helps us remain viable, and to fight against onerous laws that threaten the industry’s ability to recover from this unprecedented recession. To demonstrate how CAHB’s advocacy directly helps our members, I’d like to highlight two bills that worked their way through our last legislative session. In the unfortunate event that a construction defects lawsuit is filed against a builder, the passage of House Bill 1394 will help ensure that they are provided coverage under the terms of their general liability insurance policy. Where Colorado court decisions have been ambiguous in deciding whether construction defects are an occurrence under the terms of commercial general liability policies, this bill provides the necessary clarification. Only in effect a few weeks, this law has already been responsible for keeping several builders out of bankruptcy. As another example of how CAHB works on our behalf, I point to the defeat of House Bill 1012. This piece of legislature would have restricted the amount and type of surveillance an insurer could perform on a suspected fraudulent workman’s compensation claimant. With the threat of surveillance removed, the outcome of this law would have been higher insurance premiums for everyone to cover the inevitable increase in fraudulent workman’s compensation claims. These, and other successes at the capitol this year are due to the hard work and commitment of a dedicated staff, our Government Affairs Committee and our lobbying partners at Colorado Winning Edge. Thank you for your efforts! To further our mission of providing educational opportunities and promoting professional development, we will once again be hosting the Rocky Mountain Builder Conference in Beaver Creek, CO. When considering whether to attend this year’s conference, I urge you to think about not only the more apparent benefits of the educational seminars and opportunities to meet with exhibitors, but some of the intangible benefits, such as networking and sharing experiences with other builders who are not directly competing against you in your market. Besides attending the conference to help me succeed in business, I find this a great opportunity for my wife and I to spend a few days together relaxing in a world-class resort at very reasonable rates. Lastly, your participation in the conference will help ensure our organization’s financial success, allowing us to continue working effectively on your behalf into the future. See you there!
President-Elect Peter Tobin Treasurer David Tschetter Secretary Jeff Piper Immediate Past President David Hansen Government Affairs Chair Chris Elliott Executive Officers Council Chair Roger Reinhardt State Representative to NAHB Skip Howes
CAHB Staff Executive Vice President Rob Nanfelt Vice President of Public Affairs Amie Mayhew Executive Secretary Sally Kemp
CAHB editorial board Tom Brinkman, Chair Bill Armstrong Randy Feuerstein
Tom Hayden Duane Marlatt Peter Tobin Merlin Widick
600 Grant Street, Ste 550 Denver, Colorado 80203 P: 303.691.CAHB (2242) F: 303.639.4954 www.hbacolorado.com Dedicated to the advancement of the home building industry, Colorado Builder Forum is published five times a year for members of the Colorado Association of Home Builders. Copyright © 2010 by CAHB. No material may be reproduced without the express permission of CAHB. Acceptances of advertisement in Colorado Builder Forum do not imply endorsement or approval of the product or service advertised.
6160 S. Syracuse Way, Ste 300 Greenwood Village, CO 80111 T: 303.662.5322 F: 303.397.7619 www.custompublishingco.com vice president – group publisher
Maureen Regan-Cannon 303.662.5215 mregan@wiesnermedia.com project manager
Martha Dickenson 303.662.5280 mdickenson@wiesnermedia.com editor
Kim Jackson kim@writingwerks.com art director/advertising production
Lindsay Hayes
account executive
Martha Dickenson
marketing coordinator
Kelly Trujillo 303.662.5208 ktrujillo@wiesnermedia.com Dan Wiesner Jon Rich vice president – production/operations Amy Korb credit manager Patty Barbosa accounting specialist Amber Stroud director of first impressions Christy Markley chief executive officer
chief financial officer
Emil Wanatka CAHB President 10
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There is only one. Come visit our booth for your FREE cigar.
(oh, and we do mortgages!)
5941 So. Middlefield Rd, Suite 100, littleton, ColoRado 80123
303.798.6100
from the hallway
clearing up Misconceptions about HB-1394 Although things were tough this year, we did produce some significant accomplishments during this bruising session, one of which was the passage of HB-1394. The bill overturned several recent decisions handed down by courts in Colorado, both at the state and federal levels. Later in this issue, there is a story about the new law and why it was so important that we acted. I will use this opportunity to clear up several of the misconceptions that arose during the time the bill was going through the process. First, those opposing the legislation asserted the bill would allow the “stacking” of insurance policies. Under the new law, insurance companies will not be able to exclude coverage for damages the builder didn’t know about but became apparent during the policy’s term. HB-1394 does not let insurance companies exclude damages that a builder knew existed in subsequent insurance policies to cover construction defects.
“Years on the Risk” is unaffected The law also does not affect Colorado law’s “years on the risk” percentage formula that insurers have relied on when dividing up a covered loss remains unaffected. Builders obtain and pay for policies on an annual basis. Each policy is responsible only for damage that occurs within that policy period. Unlike a car accident where all of the damage occurs at once, damage to a building can progress, for example from a roof leak, to the roof leak rotting the support beams, to a roof leak causing rot to roof beams that then collapse. Under such circumstances, the builder’s policy covers the damage that occurs within the policy period, not the entire damage. So the insurer that insured during the year when the roof leak began only pays for that damage. The insurer that provided coverage for the year in which the rot occurred pays only for that damage, and the insurer that provided the coverage for the year of the collapse pays only for that damage. That is not stacking. It is simply giving the builder
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Rob Nanfelt what it paid for CAHB Executive when it bought Vice President the policies. Another allegation levied by opponents was that the bill would turn commercial general liability insurance policies into performance bonds. The law is limited simply to reaffirming the insurance industry’s admitted intent, as expressed in its own interpretive and marketing materials going back to 1986: That their liability policies cover property damage resulting from the insured’s negligence. In no way does HB-1394 require a liability insurer to pay: 1. to remedy defective work that does not cause property damage. 2. for the completion of unfinished or non-conforming work. 3. delay damages. 4. for punch list or warranty repairs.
Bill allows Montrose exclusions Finally the law expressly allows “Montrose exclusions” as the insurance industry originally adopted them, following the Montrose decision in California. This exclusion bars coverage for lawsuits and claims that the insured was aware of before his insurance policy was issued. However, the law limits recent and unfair changes to this exclusion, which disregards whether the insured had any knowledge of such lawsuits or claims before purchasing his policy. These more recent and unfair provisions — when combined with Colorado’s pro rata rule that limits each insurer’s liability to that percentage of the property damage that occurs during its particular policy — were letting insurers keep the insured’s multiple premiums, while simultaneously squeezing all of the insurance liability under a single policy. That left the construction professional completely uninsured for its liability for property damage occurring afterwards. THAT is what we fixed with HB-1394.
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Want to flourish? Be relevant to your buyers. Want to know how? Find out at the ’10 Rocky Mountain Builder Conference. Relevance. It’s how businesses in every industry are defining themselves today. If you want to prosper in today’s home building industry, you must stand out from yesterday’s “usual,” and lead your customers into tomorrow’s home buying paradigm. That means doing things differently, more so than you could have imagined even just two years ago. That’s why you need to go to the Rocky Mountain Builder Conference October 6-9 in Beaver Creek. Fresh topics, new speakers bring relevance to education sessions It’d be easy to fill education sessions with what’s always been done — over and over and over. Yet the RMBC’s education needed to be more relevant, more reflective of what builders really need in today’s marketplace. As such, this year’s sessions offer new ideas for builders to gain — and keep — that always-important competitive edge. Several new speakers will present fresh topics that can make the difference between surviving and flourishing in the new home building paradigm.
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“You can expect a significant breath of fresh air with educational sessions this year,” said Chair of the RMBC Committee, Ryan Warren. A first for CAHB, potential speakers submitted proposals, in response to an RFP, to lead educational sessions. “We worked very hard to carefully review the proposals and made sure we didn’t pick someone who was doing the staid old thing on any particular subject,” Warren explained. “We’ve very carefully vetted their proposals to make certain they’re presenting some of these issues in new and interesting ways.”
Exhibitors introduce builders to new products and services If you’re with a company that sells products or services to builders — and wants to be front and center with them — you’ll find your best, most interested audience at the RMBC. Emil Wanatka, CAHB’s president, observed, “I find that the builders who attend this conference are those who do a better job with their businesses. They’re interested in being educated. They’re interested in making their businesses more profitable, run better and provide better service to their customers. If I was a supplier or manufacturer of a product, those are exactly the people I’d want to be in front of. And at the RMBC, they’re all assembled in one place.” There will be more booths available this year. That’s good news, because the exhibitor space is nearly sold out. And like the speakers this year, builders will get to talk with some companies who have “some things we haven’t seen before,” Warren noted. “There’s nothing like talking directly to, having a cocktail and getting to know a builder. Personally, I don’t think there’s anything better than face-to-face marketing.” Wanatka added that as a builder, “I find going to a trade show is really beneficial because it gives me the opportunity to talk to suppliers one on one. I can take a specific problem I might have and work out a resolution face to face. That can be really huge.”
Networking is at heart of RMBC At the heart of the RMBC, what pumps life through the education sessions and exhibit hall is the networking that takes place while there. “You have the opportunity to network with other builders who may not directly compete with you,” observed Durango-based Wanatka. “I may hesitate to share proprietary information with a builder down the street from me, but I’m probably not worried about sharing that information with a builder from Denver. We can help each other, find out what things are successful or aren’t working and apply them to our own businesses.”
Support CAHB. Go to the RMBC. The RMBC is the only event the association holds each year so it can continue to defend the industry at the state capitol. “Participation is key to keeping this organization vibrant, alive and helpful to the membership,” Warren said. “Participation can be as simple as showing up at the conference. And staying involved is just as huge as education, exhibiting and networking.” Wanatka added, “The industry is still going through challenging times. It’s more important than ever to keep yourself educated, to be aware of what is happening in the marketplace and to understand trends where there may be opportunities for you or your company. I typically come back from the conference charged up; it helps to keep me in a positive state of mind and resets my perspective.”
Schedule of Events Wednesday: October 6th 8:00 am - 7:00 pm
Registration
8:00 am - 4:00 pm
NAHB Certification Class TBD
8:00 am - 4:00 pm
Exhibitor Move In
9:30 am - 11:30 am
Government Affairs Meeting
1:00 pm - 4:00 pm
Board of Directors Meeting
5:00 pm - 8:00 pm
Opening Reception
Thursday: October 7th 7:00 am - 6:00 pm
Registration
7:30 am - 10:00 am
Breakfast
8:00 am - 9:30 am
Political Funding Committee
10:00 am - 11:30 am
Opening Session
11:30 am - 1:30 pm
Lunch
1:30 pm - 3:00 pm
Education Sessions
3:15 pm - 4:45 pm
Education Sessions
5:00 pm - 8:00 pm
Reception
Friday: October 8th 8:00 am - 12:00 pm
Registration
8:00 am - 4:00 pm
NAHB Certification Class TBD
8:00 am - 10:00 am
Breakfast
8:00 am - 10:00 am
Local HBA EO Council
10:00 am - 11:30 am Education Sessions 11:30 am - 1:00 pm
Lunch
1:00 pm - 2:30 pm
Education Sessions
5:30 pm - 7:30 pm
Closing Reception
Saturday: October 9th 8:00 am - 4:00 pm
NAHB Certification Class TBD
Colorado Builder Forum
Summer 2010
15
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The following is a partial list of education sessions that will be offered at the 2010 Rocky Mountain Builder Conference. Additional education sessions will be announced in the coming weeks!
Thursday: October 7 1:30PM - 3:00PM Insurance and Construction Defects Jon Lindstrom, Willis of Colorado David McLain, Higgins, Hopkins McLain & Roswell
Closing the Circle … Invoking the Proactive Approach to the Development of your Financial Partner “Dream Team” As markets continue to change and evolve it is critical that the financial services partners (Mortgage Company, Title Company and REALTOR) are all on the same page to drive business and create velocity for the homebuilder. Each one of these partners brings a special acumen to the table and it is imperative that these partners all work in harmony to create business through the generation of qualified traffic. Learn the steps in making this formula a reality and how to develop your “dream team” for success and profits. Peter Garvin, Borrower’s First Choice, A Division of Cherry Creek Mortgage
Thursday: October 7 3:15PM - 4:45PM Common Construction Defects and Tips for Avoiding Them Construction defects can occur throughout all areas of a property, including the structure, the civil grading around the building, and within the building envelope itself. There are repeated defects seen in litigation, from a lack of vents in the crawlspace to non-compliant joints, and façade clearance that does not meet Code requirements. These defects are preventable from the start. Attendees will learn common mistakes found, how to recognize that they might have construction defect issues, and solutions for avoiding these or effectively repairing these mistakes. Edward L. Fronapfel, SBSA, Inc.
How to Go Green Without Seeing Red 970.241.7682 To learn more or to download a free catalog
www.cabparts .com HIGH QUALITY COMPONENT MANUFACTURING
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This session will provide attendees with information regarding Federal, state, and local tax incentives and government grant incentives available to the homebuilding and construction industries to encourage green building and design. Attendees will also learn about the tax strategies available to building owners to recover the cost of their buildings more quickly. Finally, attendees will hear more about recent developments in the tax laws and prospective tax law changes which will impact companies in the home building and construction industries and their owners. Lee Johnson, Clifton Gunderson, LLP Mike Noyes, Clifton Gunderson, LLP Ronda Palsulich, Clifton Gunderson, LLP
Friday: October 8
Friday: October 8
10:00AM - 11:30AM
1:00PM - 2:30PM
Legal Implementation of Green Residential Development in a Troubled Marketplace This presentation will explore the roe and evolution of legal development standards for green residential commmunities following the housing bubble phenomena. the topics to be considered and evaluated may include the relative merits and limitations of compulsory (so called “command and control”) regulatory structures versus incentive-based programs; types of legal incentive mechanisms, including those of both a monetary and non-monetary nature; the limitations and shaping of zoning regulations for accomodtaing green devleopment; public and private enforcemtn of green legal standards; the use of homeowners’ associations to achieve or administer goals and targeted efficiencies, and associated liabilities of master developers; the regulation of decpetive marketing practies in the green building industry; and the contractual and other means that may be availble to homebuilders to avoid or reduce attendance legal risks. Robert Fisher, Otten, Johnson, Robinson, Neff & Ragonetti, PC Kimberly Martin, Otten, Johnson, Robinson, Neff & Ragonetti, PC Carolyn Hoyt. McStain Communities
Micro Outsourcing Presentation/Panel Discussion Outsourcing — whether local, regional or global — is a trend that will affect virtually every business owner in coming years. Big-business has used outsourcing for many years but smaller companies can now use it to accomplish more, control costs and increase their value. Based on his extensive research and testing, Laddie shares why every business owner and professional should know about outsourcing, what you can do to gain an edge over your competitors, what kinds of tasks can be outsourced, and how the process works. Following Laddie’s presentation, a panel discussion on outsourcing will take place. Laddie Blaskowski, BusinessTruths Consulting, Inc. Bill Armstrong, ProHome Colorado Mark Henderson, Builder Purchasing Services
Building Science: the Performance Path for Code and Program Compliance The simulated performance path for code compliance utilizes the same applied building science that is used to verify Energy Star or a green building program. This underutilized pathway for energy code compliance relies on performance matrix’s that demonstrate how cost effective construction techniques can not only create a house that is energy efficient but one that meets the intent of code and is truly marketable. Come learn the story. Robby Schwarz, EnergyLogic
Boomers on the Move... Homes and Assets That Will Last! Colorado’s Baby Boom population continues growing as the largest percentage of our homeowner market. However, their home values have dwindled significantly, as has their potential equity to put toward their “Dream Home.” In late 2008 HUD/FHA unveiled a new program allowing buyers 62+ to utilize the Home Equity Conversion (Reverse) Mortgage to purchase another home. We will compare and contrast the longer, better-known reverse mortgage financing vehicle with this newly-established purchase counterpart. We’ll address how one of Colorado’s best-known homebuilders as well as a small remodeler have used these programs, in conjunction with Universal Design for Aging In Place, to grow their businesses and help their customers achieve their dreams Larry Armstrong, MetLife Reverse Mortgage Matt Osborn, Village Homes Erik Listou, National Building & Remodeling
You’d Better Get FRESH!... design and floorplan ideas that capture today’s buyers! When the typical new home buyer looks at 20 homes before making the decision to buy, do your homes make the cut? Are they memorable? Do they fit the needs of today’s buyers? Just offering the same thing that your competition offers doesn’t work anymore. The same old thing isn’t enough! Learn what floorplan features, colors, details, finishes and design ideas will capture the heart of your potential buyers. Getting FRESH doesn’t have to be expensive! Many of the ideas you’ll see are affordable….some are FREE! Don’t miss the chance to stay on top of the latest design trends learn new ways to set your homes above the competition. Anne Olson, A.I.A., CAASH, Olson Architecture, Inc. Doris Pearlman ISID, MIRM, President, Possibilities for Design
www.builderconference.com Colorado Builder Forum
Summer 2010
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Exhibit Hall Opportunities Prime Exhibit Booth: $ 1,750 • 8' x 10' booth close to food, bar or entrance • Carpet, table, 2 chairs and signage • Option to have marketing materials in each registration bag • Pre- and post-RMBC attendee electronic mailing lists • Company name on RMBC Web site • 1 Full RMBC Registration
Standard Exhibit Booth: $ 1,500
REGISTRATION
• 8’ x 10’ booth • Carpet, table, 2 chairs and signage
MAIN ENTRANCE
• Option to have marketing materials in each registration bag • Pre- and post-RMBC attendee electronic mailing lists • Company name on RMBC Web site • 1 Full RMBC Registration
Food & Bar Sponsor: $ 1,000 (4 available) • Company name and logo on signage in Food & Beverage booth space (as shown on the exhibit hall floor plan) 18
Summer 2010
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PRIME STANDARD FOOD & BEVERAGE SOLD
For more information on exhibiting and/or sponsorships for the 2010 RMBC, please visit
www.builderconference.com
5 Rebuilding confidence in our time proven product and the most economical method for a aesthetically cost effective way to meet egress requirements.
A five year warranty for labor and material for replacement of areawells will be provided to the home builder upon completion of proper installation, testing, and registration. See reverse for details
The Only ICC Approved Basement Window System in the Industry!
ICC Approved ESR# 1856 See Boman Kemp Representative for Details Boman Kemp is proud to announce the Easy-Buck, Easy-Well Basement Window System is now ICC approved. The Boman Kemp system is the ONLY one in the industry to receive an ESR number! Just another reason why Boman Kemp continues to be an industry leader!
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Basement Window Systems National Association of Homebuilders
Concrete Foundation Association
Thanks to the Sponsors and Exhibitors who are making the 2010 Rocky Mountain Builder Conference possible! (As of 5/20/2010)
Title Sponsors:
gold Sponsor:
accomodations Park Hyatt Resort & Spa Pamper yourself with warm Beaver Creek accommodations, reminiscent of a mountain chateau. Inviting, suite-style guestrooms with marble bath, thick terry robes and signature Allegria Spa amenities are complemented by a generous work table with enhanced lighting, comfortable armchairs and one king signature Hyatt Grand Bed™, fitted with sumptuous linens and down duvet piled atop a plush pillowtop mattress. Delightful views of a beautifully landscaped fountain courtyard welcome you to a luxurious retreat in these gracious Beaver Creek Colorado accommodations offering every amenity including wired and Wi-Fi high-speed Internet access, dual phone lines, voicemail, iHome stereo with iPod dock, complimentary daily newspaper, 24-hour room service and easy video checkout. To truly invigorate and rejuvenate, visit the Allegria Spa. Featuring a tranquil Feng Shui design, signature treatments and outdoor whirlpools, it is a mecca for the spa enthusiast. Rooms for conference participants at the Park Hyatt are $155 per night. Call 1.970.949.1234 or visit https://resweb.passkey.com/Resweb. do?mode=welcome_ei_new&eventID=1888910
Beaver Creek Lodge
silver Sponsor:
bronze Sponsor:
At the base of Beaver Creek Mountain, Beaver Creek Lodge offers a sublime retreat of mountain chic luxury. Enter a setting of AAA Four-Diamond excellence, nestled within a charming alpine village steps from shopping, dining and entertainment. Newly renovated suites and condominiums feature mountain chic décor and include a gas fireplace, dining area and kitchenette with microwave and refrigerator. The separate bedroom features a granite vanity with sink, cozy pillow-top mattress and state-of-the-art flat screen TV and Bose® Wave® CD radio. Rooms for conference participants at the Lodge are $129 per night. Call 1.800.525.7280.
deadlines These special hotel rates are available until September 10, 2010. However either hotel may run out of available rooms at the Conference rate before that date. You must be registered for the Conference and mention Colorado Association of Home Builders & the Rocky Mountain Builder Conference to make your reservations.
exhibitors:
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1st Mortgages
Pinnacol Assurance
hotel cancellation policy
Barvista Building Systems
ProHome Colorado
MetLife Home Loans
Real Green Building Systems
NCFI Polyurethanes
U.S. Metals
Reservations will require a deposit at the time you call. Cancellation at any time will result in loss of your deposit. This is hotel policy, and there are no exceptions.
Pavestone Company
Willis of Colorado
Summer 2010
www.hbacolorado.com
www.builderconference.com
re-tool
Re-tooling is the process of reviewing an existing plan and modifying it with a goal of reducing construction costs while updating buyer appeal. Apply those concepts to plans that have a proven sales success. Review Structure
Kit of Parts
Count Corners
Update
Maximize floor framing spans, simplify bearing lines and maximize stackability.
Pre-determine standard details such as fascias and components like windows and cabinetry. Update the features of the home to match buyer expectations.
Minimize the exterior corners of a plan which reduces foundation and roof framing costs.
Systems
Maximize Square Footage
Organize plumbing walls. Centralize mechanical units and duct runs. Update energy managment systems.
Look for opportunities to maximize square footage at minimum costs. Optimize square footage by being sure the home frames on a 2’ module. Use cantilevers, in the direction of floor framing, optimized areas over the garage. Minimize circulation spaces. Original Model
Update your curb appeal with a focus on lower maintenance and increased authenticity.
Re-tooled Model
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1. Delete original Living Room and provide higher valued 2nd Study or Guest Suite. 2. Increase Pantry size. 3. Position flat screen for prime viewing angles. 4. Decrease corner count (by half). 5. 3rd Car option. At 44’ wide, standard 2 Car Garage can be built on a smaller lot to decrease sales price. 6. An optional Outdoor Room. 7. A Wine Room can be optioned from a standard storage closet. 8. Front Garage wall is recessed behind the home’s front face. 9. 2’ cantilever in direction of framing provides “cheap” added square footage. 10. Laundry has been moved to upper level. 11. A big Master Walk-in Closet is a must. 12. View enhanced to rear yard. 13. Efficient circulation space. 14. Privatized Powder 15. Interior position of fireplace reduces cost 16. Cook top located on outside wall simplifies venting.
Re-tooled Model
©
3.
To revise for the purpose of updating, improving or to optimize a product.
“Today’s economy requires constant vigilance by the builder to manage costs to stay competitive. An important tool in managing costs is an efficient and ‘considered plan’.”
6.
ud kn
6. High corner count. 7. View from Foyer is of Nook. 8. Clumsy floor material changes. 9. Large expanse of circulation space. 10. High window count. 11. Bedroom door adjacent to large volume space. Noise could be an issue.
Exteriors
©
1. Side Patio location is not very functional: consider distance from Kitchen to BBQ location. 2. Non-privatized Powder Room. 3. Wasted space or a “non-valued” Living Room. 4. Combo Owner’s Entry/Laundry: opens to front Foyer and formal rooms. 5. Inneficient floor framing above.
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’10 Legislative session
A Brutal One for
usiness Battle-weary builders emerge victorious in some issues, may admit defeat in others B y K im J ackso n Colorado Builder Forum
Summer 2010
25
T
he ’10 legislative session ended May 12, leaving both general business and home builders tending to their wounds. Some of the injuries are superficial, while others will take time to heal. Still others, if left as they stand, will force even more builders to quietly close their doors, taking the hundreds of jobs each builder provides for employees and subcontractors with them. “For all aspects of the business community, it was a very bad session,” said Steve Durham, Colorado Association of Home Builders lobbyist. “Business costs were driven up by a number of measures, including elimination of tax credits and exemptions, workers’ compensation and unemployment compensation costs, and litigation costs through strengthening of the trial lawyers.” Chair of the CAHB Government Affairs Committee Chris Elliott added, “I think the legislature was trying to solve their budget issues. They were plugging every loophole, gap and incentive that existed to accomplish that. There are a handful of decent Democrats that are sensitive to business issues and are sensitive to our issues. But their leadership clamps them down and when it comes time, they’re forced to go a certain way. As a whole, the party in power doesn’t care about business issues.”
Builders gain ground by partnering with home owners to pass bill Even so, CAHB’s efforts at the capitol won some victories on the battlefield. One of builders’ most important bills, HB-1394, was signed by the Governor May 21, 2010. The bill was written to clarify and correct what the CAHB believed were a series of erroneous judicial decisions, which started with the General Security Indemnity Company, regarding professional liability insurance policies issued to construction professionals. (See article, page 40) “You’ve got a judge, who, along the way, made a decision that said insurance companies do not necessarily have a duty to provide a defense or coverage in the event of a construction defects claim,” observed Elliott. “That stood the whole construction defect issue on its ear. So we had the incentive to make sure that our members had coverage.” And in what was a first, CAHB partnered with home owners to introduce and ensure the passage of the bill. “It
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Summer 2010
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was beneficial for both sides to correct what we believed to be an error in that original court case and several court cases that followed, to use that as a precedent,” Elliott said.
Builders hold their ground at capitol CAHB also successfully killed or amended several bills that could have harmed builders. For example, if passed, HB-1012 would have limited an employer’s use of surveillance cameras with employees who submit workers’ compensation claims. “The whole purpose of surveillance is to identify people who scam systems,” Elliott said. “The whole notion that you have to give the suspected injured worker notice that they might be subject to surveillance is crazy.” Durham added, “It’s one of the few clear victories that we had, which preserved the ability of a business to prevent workers’ compensation fraud.” CAHB successfully defeated HB-1162, which would have provided a guarantee of payment for amounts due under a construction contract. “When you’ve got a legitimate issue,
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whether someone did something correctly or not, it doesn’t matter when you have to pay somebody in a certain period of time. This bill eliminates the opportunity to settle those things.” CAHB has defeated this bill for the past three or four years, and expects to see it again next year.
Sponsors’ PR efforts boomerang; bill killed Senate Bill 045 was designed to increase the rights of home owners and enact the Homeowner Protection Act of 2010. Senator Morse and Representative Kerr intended to resurrect the bill they ran last year — and were defeated — on dealing with interest on a construction defects claim. “The bill was intended to be a direct assault on the home building industry’s insurance costs and fortunately lacked the support to pass this year,” Durham said. Admittedly, some of the bill’s defeat was due to their own efforts. Around mid-session, a campaign film was posted on YouTube and sent to the Democratic caucuses, urging action on home owner protection issues regarding construction defects. “It blew up in their faces and I think they decided to retreat on this one this year, because of the notoriety that they got from that,” Elliott said. “It will probably come back
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next year. If we can defeat the primary sponsor in the election, we may not have to worry about it as much .” Primarily designed around Buckley Air Force base in Aurora, HB-1205, as introduced, “was a property rights disaster,” Durham said. It would have given local governments the power to enforce certain land uses, regardless of what existing land uses were. As written, the bill would have given in this case, the Air Force, the authority to approve any land use plans outside the base — from housing, to retail, commercial, industrial and agricultural. Through its Government Affairs Committee and lobbyists, CAHB was successful in ushering the passage of the bill that now serves as an innocuous notice to military bases when a land use change occurs around them.
Rent control? Really? Two rent-control bills caught builders’ attention during the session. Senate Bill 185 would have extended defects issues to rental units and awarding claims to renters they wouldn’t otherwise have had. The bill was defeated, yet had it passed, Elliott said, “then next year, it’ll happen to us. We saw that with a number of bills this year.”
Builders lose ground with bills Builders were excited about its green building incentive pilot program, HB-1331, introduced by Rep. Cheri Gerou. A completely innovative program that was designed to use funding the Governor’s Energy Office had authorized, yet, according to Elliott, “had done nothing to implement,” the bill was intended to create the authorizing measures to launch the program. It sailed through the House Transportation Committee with a bipartisan 9-2 vote, and was killed in Appropriations (see article, page 44). The bill offered incentives for builders to build above code by 25 percent. Those builder could then offer home owners who want to buy new construction a grant to improve the energy efficiency of their existing homes. This grant gives existing home owners a selling edge when compared with other homes without upgrades in a neighborhood. CAHB Lobbyist Jeani Frickey said, “The Governor’s Energy Office was not supportive of this bill at all, and did its best to kill it every step of the way. They finally got it in Appropriations.” The second rent control bill introduced was signed by the Governor. House Bill 1017 authorized certain public entities to enter into voluntary agreements affecting rent on private property. An attempt to repeal the Telluride case that protected builders from rent control, in exchange for getting building permits. While it was amended and isn’t expected to do that much damage, Elliott said, “It has the impact of the camel’s nose under the tent,” Elliott said. “Being forced into doing an affordable type of product leaves the door open for next year, when they can come back and say to us, ‘Well, you ought to build and sell at a discount to provide affordable housing.’”
Cost-cutting-happy legislature creates questionable new state position While the state is searching for corners to cut everywhere, the Governor signed into law HB-1278, which creates an ombudsman for matters arising under the Colorado Common Interest Ownership Act. “That bill is a disaster in the making,” Durham said. “It sets up a process where the state will now represent disgruntled residents of planned communities. Anyone who lives in a planned community and enjoys the fact that there are reasonable standards of conduct will see those standards significantly eroded to pacify a disaffected minority over the coming years by that bill. The bill will have the effect of reducing everyone’s property values.”
Mandatory offer bill bites builders A bill that requires new home builders to offer home buyers water efficiency options overlaid state requirements on top of federal ones. Yet according to Frickey, HB-1358 has left a bad taste in builders’ mouth about proactively working with anybody on mandatory offers. Last year,
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CAHB worked with the Governor’s office on a solar prewiring bill, which, Frickey said, “we weren’t crazy about, because it was a mandate. It’s micromanaging our contracts again.” Yet builders worked on it and included language that protected them. “But we said that this couldn’t be the beginning of 15 mandatory offers,” Frickey said. “Well, this year, then, we had a mandatory offer for low-flow water fixtures. So that bothered us.” What’s more, the water conservation piece of the bill doesn’t save water. “That’s the unfortunate part,” Frickey said. “There are probably more meaningful things that could be done on conservation, including public utilities and their water leaks, but we were the low-hanging fruit. It was easier to kick us when we were down, and that’s what we saw with that bill. We tried to kill it at multiple places and we weren’t able to get any traction.”
Lost bank battle may signal defeat for some builders CAHB suffered a major defeat when CAHB introduced SB-127 — the limitation of a lender’s ability to collect against a debtor personally — was killed. Banking regulators have made it very clear to Colorado’s lending institutions that real estate loans need to be off their books. When the loans mature, banks are now refusing to do what has been standard for decades: renew the loan. Instead, they’re calling the loan due and selling the land to someone else at a discount (see related article, page 46).
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Embedded in many banks’ loan documents is a clause that states the principal guarantees the loan. Because on paper, many of CAHB’s loan guarantors appear to have more assets than the property is deemed worth by the bank, and even though builders are current on their principal and interest payments, banks increasingly bypass the foreclosure process and sue the guarantor. “We’ve had a number of members who have had to deal with that and the net result is in many cases, it ruins them personally,” Elliott said. “So we ran a bill that said if banks have real property that’s collateral and builders have provided a personal guarantee, banks at least have to look at the property first.” He added, “The banking and home building communities are together on a great many issues, but in this particular case, it pitted friends against each other; the legislature concluded they were going to support the banks.” CAHB plans to revisit the issue next year.
Start now — Change what’s happening at the capitol Sure, it’s the summer. Sure, you have other things to do. Your business may be picking up and you’re swamped with building new homes. Yet Elliott warned that the biggest issues builders face right now is the election. “If we can figure out a way to change the leadership in either of the houses or the governor’s office, we stand a good chance of keeping bad stuff from happening in the future,” he said. “If not, then we may be in for it. Our efforts to fight back will be eroded that much further and we’re going to lose significant stuff. So the election is probably THE most crucial thing we face in the next year. Get out and support the right candidates. Participate in the political process. Make some things happen.”
Bills of Interest Sent to/Signed by the Governor
LEGISLATIVE WRAP-UP
Kerr J. / Tapia
04/15/2010 Governor Action Signed
Oppose
Concerning limitations on the inclusion of agricultural lands within urban renewal areas.
Fischer / Carroll M.
04/14/2010 Governor Action Signed
Monitor
Concerning a requirement for mortgage companies to be registered by the division of real estate.
Carroll T. / Tochtrop
05/26/2010 Governor Action Signed
Support
Concerning the authority of the regional trnasportation district to enter into agreements permitting specified uses at its transfer facilities.
McNulty / Johnston
04/15/2010 Governor Action Signed
Oppose
Concerning the suspension of the exemption from the state sales and use taxes for fuels used for industrial purposes.
Pommer / Heath
02/24/2010 Governor Action Signed
Oppose
Concerning the disqualification of category 7 motor vehicles from the state income tax credit for the purchase of vehicles using alternative fuels.
Ferrandino / Heath
02/24/2010 Governor Action Signed
Oppose
Concerning a decrease in the maximum amount of a state income tax credit that may be claimed for the donation of a conservation easement in gross.
Ferrandino / Heath
04/29/2010 Governor Action Signed
Oppose
Concerning a temporary limit on the state income tax deduction for a net operating loss.
Ferrandino / Heath
02/24/2010 Governor Action Signed
Oppose
Concerning a temporary requirement that Hullinghorst / a taxpayer defer claiming any amount of an Heath enterprise zone investment income tax credit that exceeds two hundred fifty thousand dollars.
05/27/2010 Governor Action Signed
Oppose
Concerning the inclusion of conservation standards in the plumbing code.
Soper / Tochtrop
04/05/2010 Governor Action Signed
Oppose
Concerning land use planning by local governments to address the impacts of land use development upon military installations in close proximity to such governments.
Ryden / Spence
05/21/2010 Governor Action Signed
Oppose
Concerning continuation of the regulation of electrical work by the state electrical board.
Soper / Tochtrop
05/05/2010 Governor Action Signed
Monitor
Concerning the foreclosure deferment process for residential properties.
Ferrandino / Carroll M.
05/05/2010 Governor Action Signed
Oppose
Concerning required registration for persons who work on fire suppression systems.
Casso / Tochtrop
06/07/2010 Governor Action Signed
Most Recent Status
Bill Title
Sponsors
Monitor
Concerning the powers of a special district that provides transportation-related services, and, in connection therewish, authorizing a special district that provides such services to levy a voter-approved sales tax and to join a regional transportation authority.
McFadyen / Gibbs
05/24/2010 Sent to the Governor
Monitor
Concerning the continuation of the workers’ compensation classificatino appeals board.
Gagliardi / Carroll M.
04/05/2010 Governor Action Signed
Monitor
Concerning expedited residential foreclosure sales.
Labuda & ... / Johnston
04/29/2010 Governor Action Signed
Deliberating Concerning amendments to the “Municipal Annexation Act of 1965” in order to conform the act to provisions of the state constitution.
Nikkel / Lundberg
05/06/2010 Governor Action Signed
HB10-1243 HB10-1247 HB10-1249
Concerning land surveying, and in connection therewith, altering licensure criteria for land surveyor applicants and specifying procedures for issuance of a surveyor’s affidavit of correction.
HB10-1259
Oppose
HB10-1278
05/12/2010 Sent to the Governor
HB10-1288
Pommer / Whitehead
CAHB Position
Oppose
Concerning the creation of an ombudsman for matters arising under the “Colorado Common Interest Ownership Act”.
Ryden / Carroll M.
05/25/2010 Sent to the Governor
Monitor
Concerning the ability of a commercial real estate broker to secure payment of commissions earned, and, in connection therewith, enacting the “Commercial Real Estate Brokers Commission Security Act”.
Nikkel / Williams
04/29/2010 Governor Action Signed
Monitor
Concerning the “New Energy Jobs Creation Act of 2010”, and, in connection therewith, creating the Colorado New Energy Improvement District and authorizing the district to fund new energy improvements by issuing special assessment bonds payable from special assessments levied on eligible real property owned by persons who voluntarily join the district help them fund new energy improvements to the eligible real property.
Miklosi / Schwartz
05/17/2010 Sent to the Governor
Oppose
Concerning a requirement for new home builders to offer home buyers water efficiency options.
Fischer / Johnston
06/09/2010 Governor Action Signed
Support
Concerning professional liability insurance policies issued to construction professionals.
Rice / Scheffel
05/21/2010 Governor Action Signed
Oppose
Concerning measures to reduce conflicts of interest in workers’ compensation cases.
Carroll M. / Miklosi
05/27/2010 Governor Action Signed
Oppose
Concerning increased penalties for violations of the workers’ compensation laws.
Tochtrop / Pace
05/26/2010 Governor Action Signed
Oppose
Concerning accountability for workers’ compensation insurers.
Hodge / Ryden
05/27/2010 Governor Action Signed
Oppose
Concerning the allocation of moneys to promote conservation of the state’s natural resources.
Monitor
Concerning rate setting for workers’ compensation insurance.
Monitor
Concerning the reimbursement of costs incurred on change orders in Public Works contracts.
HB10-1328
Concerning additional information regarding covered entities’ water efficiency plans.
05/26/2010 Governor Action Signed
HB10-1358
Monitor
Miklosi / Carroll M.
HB10-1394
Concerning a brochure to describe the process for workers’ compensation claims.
05/06/2010 Governor Action Signed
SB10-011
Oppose
Kagan / Boyd
Bill #
SB10-012
Concerning authorization for certain public entities to enter into voluntary agreements affecting rent on private residential property.
Most Recent Status
SB10-013
Oppose
Sponsors
SB10-098
Bill Title
SB10-112
CAHB Position
SB10-116
HB10-1241
HB10-1240
HB10-1225
HB10-1205
HB10-1204
HB10-1200
HB10-1199
HB10-1197
HB10-1196
HB10-1190
HB10-1143
HB10-1141
HB10-1107
HB10-1085
HB10-1051
HB10-1038
HB10-1017
Bill #
Tochtrop / 04/29/2010 Sonnenberg Governor Action Signed Kopp / Swalm
03/31/2010 Governor Action Signed
Kopp / Rice & ...
03/31/2010 Governor Action Signed
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Bills of Interest KILLED/VETOED by the Governor
LEGISLATIVE WRAP-UP cont’d
Monitor
Concerning a limitation on what may be considered when determining the actual value of real property for the purpose of levying property tax.
Bradford / Harvey
02/02/2010 House Committee on Local Government Postpone Indefinitely
Monitor
Concerning the disclosure in connection with the sale of residential real property of its proximity to an airport.
Swalm / Williams
02/10/2010 House Committee on Business Affairs and Labor Postpone Indefinitely
Oppose
Concerning payment of amounts due under a construction contract.
Soper / Bacon
04/20/2010 House Second Reading Lost with Amendments
Monitor
Concerning a perpetual conservation easement in gross for which a state income tax credit is claimed.
McKinley
04/28/2010 House Committee on Finance Postpone Indefinitely
Support
Concerning allocation of environmental remediation costs incurred by certain public utilities.
Balmer / Bacon
05/12/2010 House Committee on Transportation & Energy Postpone Indefinitely
Concerning the suspension of the credit agains the state income tax of a portion of the credit allowed under the Federal Internal Revenue Code for payment of the alternative minimum tax.
Ferrandino / Heath
Support
Concerning procedures for small planned communities to elect to exempt themselves from certain provisions of the “Colorado Common Interest Ownership Act”.
Stephens / Brophy
Support
Concerning a clarification of the conditions on land-use approvals that may be imposed by local governments under statutory provisions governing the regulatory impairment of property rights.
Murray / Harvey
01/29/2010 House Committee on Finance Postpone Indefinitely
03/03/2010 House Third Reading Lost
03/29/2010 Senate Second Reading Laid Over to 05/13/2010
SB10-185
SB10-133
HB10-1292
HB10-1290
HB10-1198
Oppose
36
Summer 2010
www.hbacolorado.com
Support
Concerning the establishment of a green building incentive pilot program administered by the Governor’s Energy Office to incentivize the making of energy efficiency improvements to existing residences with current home energy ratings below minimum standards for people who purchase highly efficient new residential construction.
Gerou
04/16/2010 House Committee on Appropriations Postpone Indefinitely
Deliberating
Concerning enactment of the “Workers’ Compensation Policyholder Protection Act of 2010”, and, in connection therewith, requiring the distribution of excess surplus funds held by Pinnacol Assurance to Pinnacol Assurance policy holders and limiting the insurance commissioner’s discretion with respect to the prior approval of workers’ compensation pure premium rates filed by a rating organization.
Ryden / Tochtrop
04/06/2010 House Committee on Business Affairs and Labor Postpone Indefinitely
Oppose
Concerning the establishment of the Colorado “Work Share Program” to allow payment of unemployment compensation benefits to eligible employees who have received a reduction in work hours.
Heath / Pace
05/20/2010 Sent to the Governor
Oppose
Concerning increasing the rights of homeowners, and, in connection therewith, enacting the “Homeowner Protection Act of 2010”.
Morse / Kerr A.
05/10/2010 Senate Committee on State, Veterans & Military Affairs Postpone Indefinitely
Monitor
Concerning the regulation of the purchase of commodity scrap metals.
Heath / Levy
04/05/2010 House Third Reading Lost
Oppose
Concerning the “Colorado Taxpayer Transparency Act of 2010”.
Carroll M. / Weissmann
05/12/2010 House Consideration of First Conference Committee Report result was to Adopt Committee Report Not Repass
Support
Concerning a limitation on a lender’s ability to collect against a debtor’s personal liability when the loan is secured by collateral.
Monitor
Concerning the creation of an income tax credit to incentivize Colorado businesses to rehire laid-off workers sooner.
Heath & .../ Rice
05/05/2010 House Committee on Finance Postpone Indefinitely
Oppose
Concerning modifications to the residential warranty of habitability for the purpose of protecting renters.
Shaffer B. / Merrifield
05/05/2010 House Committee on Business Affairs and Labor Postpone Indefinitely
HB10-1331
02/04/2010 House Committee on Judiciary Postpone Indefinitely
Sponsors
HB10-1356
Acree / Williams
Most Recent Status
Bill Title
SB10-028
Concerning measures to encourage the voluntary cleanup of unoccupied real property.
CAHB Position
SB10-045
Monitor
SB10-048
05/05/2010 Senate Committee on Judiciary Postpone Indefinitely
Bill #
SB10-114
Pace / Carroll M.
HB10-1093
HB10-1084
Most Recent Status
Concerning limitations on the use of surveillance of employees who have submitted a workers’ compensation claim.
HB10-1151 HB10-1162
Sponsors
Oppose
HB10-1187
HB10-1169
Bill Title
SB10-127
CAHB Position
HB10-1012
Bill #
Cadman / Frangas
02/15/2010 Senate Committee on Business, Labor and Technology Postpone Indefinitely
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construction defects
by Kim Jackson
A first of its kind
Builders partner with home owners to pass insurance coverage for construction defects bill Builders’ biggest win at the capitol resulted from an unique partnership between home builders and home owners — a CAHB first— to pass HB-1394. Governor Ritter signed the bill on May 21, 2010, successfully restoring builders’ general liability coverage for construction defects. Last year, the Colorado Court of Appeals decided on behalf of the General Security Indemnity Company of Arizona that a general liability insurance policy obtained would not cover construction defects. The result was that a number of insurance carriers refused to defend and indemnify builders against construction defects claims.
40
Summer 2010
www.hbacolorado.com
CAHB drafted legislation to restore builders’ insurance According to Dennis Polk, partner with Holley, Albertson & Polk, PC, legislative action was necessary, due to the length of time it takes to get a Colorado Supreme Court resolution. “If this line of thinking prevailed without legislative intervention, builders could be without insurance for a period of eight years. Very few builders can withstand a construction defect case, simply because of the enormous costs to defend those types of cases. Before you talk about indemnifying or paying for damages, the costs of defense are astronomical in construction defects cases.”
construction defects
(continued from page 40)
To ensure passage, CAHB enlisted home owners’ help It was such an important piece of legislation that builders, for the first time in CAHB history, sought collaboration with home owners. “The builder community is sensitive to the ultimate effect that this has on consumers,” Polk said. “Because they are concerned about their buyers, it seemed appropriate to engage the assistance of other people who can be adversely affected by this series of decisions.” CAHB Lobbyist Steve Durham observed that this collaboration was a first in his experience. “It’s one of those cases where home owners who have received a product that has a construction defect are entitled to have that repaired. Builders don’t have the money to pay for repair absent insurance. This is a pro consumer bill that restores insurance coverage for which home builders had paid, and gives consumers the benefit of that coverage. This bill insures the solvency of the industry.” Ron Sandgrund, principal with Sullan2, Sandgrund, Smith & Perczak, P.C., added that Colorado residential property owners and CAHB have the same interest in ensuring that the insurance industry’s promises of insurance coverage for damages arising from construction defects are enforced. “While disagreements between home builders and home owners will inevitably arise from time to time,” he said, “their combined effort on HB-1394 shows that that can also work together constructively to solve some problems.” During the legislative hearings on HB-1394, Sandgrund explained that the insurance industry was forced to admit that the recent Colorado Court of Appeals and U.S. District Court case decisions that found there was no coverage for construction defects “were misreading the policy language and contradicting the insurance industry’s longstanding intent to provide such coverage since 1986.”
Note to builders: Do diligence when buying insurance The new law restores the insurance coverage builders have paid for, while giving consumers the benefit of that coverage. “There’s more than one lesson in this,” Durham said. “Yes, we did successfully restore builders’ coverage, but you need to be diligent in going forward. It’s important to exercise caution and due diligence when purchasing insurance. Be sure to deal with reputable, reliable companies.”
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As the bill made its way to the Governor’s office to be signed, Polk said that recalcitrant carriers were already stepping up to do what they were contractually obligated to do — and had always done — before the General Security, Greystone and their progeny of cases incorrectly interpreted Colorado’s existing public policy. Yet for a number of responsible insurance carriers who have always done the right thing, the bill’s passage has no effect on them. “I applaud the responsible carriers and responsible brokers,” Polk said. “Uniformly, those mainline, well-established insurance carriers have said this is the way they’ve always done business and the bill is not going to have an effect on them.” Other carriers, he cautioned, will have to change their business practices. “They say they’re going to have to engage in more careful underwriting before they issue policies, which is something I think they should have been doing all along,” Polk said. “There’s a third category of insurance carriers who really wanted out of this market anyway. They say HB-1394 is going to cause a premium increase or they’ll go out of the market. And to some of those carriers, I simply say, ‘Good riddance. You weren’t providing coverage anyway.’” This unique alliance between home builders and owners benefited everyone involved: home builders, home owners, subcontractors. “This shows what can be accomplished when people who look like they’re on the other side of the fence can achieve when they’re really looking out for the overall interest of both sides of the transaction,” Polk said. “We will disagree with the plaintiffs’ bar and they will disagree with us. But I think this shows a very unique circumstance, where a cooperative effort is a benefit to both our industry and the consumer.”
CAHB to Polk and members: Thank you! Durham noted that while the rare alliance played a big part in the bill’s passage, Dennis Polk’s contribution was significant. “The industry really owes a debt of gratitude to Dennis Polk, who practically lived at the capitol during the month this was pending. He tackled technical changes and dispelled myths that the insurance industry was putting forward.” He added that members also stepped up to further the bill’s success through e-mails and commentaries “that were very important to us,” he said. “Lobbyists are only as good as the support they get from their members and we got great support on this issue.”
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green building
Builders break new ground with only bill of its kind in the nation
by Kim Jackson
Green building incentive pilot program killed after overwhelming bipartisan committee support
Earlier this year, builders were excited to introduce an innovative green building incentive pilot program this session to the Colorado State Legislature. In fact, after thoroughly researching it, the Colorado Association of Home Builders learned that there was no other green building incentive program like it in the country. The pilot program gives existing home owners who want to buy new construction a grant to improve their homes’ energy efficiency — such as installing energy efficient windows or a high-efficiency furnace — and gain a marketing edge over neighbors’ homes for sale without improvements. Working with the Governor’s Energy Office (GEO), home builders who build 25 percent above current efficiency code make these grants possible to home owners. The program offers energy efficient-minded builders a way to more aggressively market their homes to green-conscious consumers and sets them apart from those builders who simply build to code.
Ground-breaking program preceded Fed’s stimulus package Long before any federal stimulus package was created, CAHB began working on the pilot program and proposed it to the GEO in October 2008, in hopes of receiving some severance tax funds that were dedicated to the GEO. CAHB was told those funds weren’t available. When the federal stimulus package was issued and the governor’s office earmarked nearly $6 million for new construction projects, CAHB was encouraged. The program is accountable. It creates jobs. It stimulates the economy. Yet the GEO and the governor’s office weren’t interested. Rep. Cheri Gerou, sponsored and introduced House Bill 1331 to the state legislature this year to create a small green building incentive pilot program, which is administered by the GEO. Jeani Frickey, CAHB lobbyist, observed that everyone involved wins when the bill is passed. “You have a smaller carbon footprint for the new construction and you reduce the size of the carbon footprint of the house a home owner is selling. This bill was a Main Street benefit.”
Bill killed after passed with 9-2 committee vote Yes, you read that right. The bill passed out of the House Transportation Committee with a bipartisan support vote of 9-2. It was then killed in House Appropriations with “one of the most bizarre reasons I’ve ever had to deal with as a lobbyist,”
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Frickey said. “We had been battling against a perception that we were trying to co-op and hijack American Reinvestment and Recovery Act (ARRA) dollars, which wasn’t our intent. The GEO wasn’t supportive of this program at all; they didn’t do anything to clarify this misperception.” While in the House Transportation Committee, CAHB amended the bill to remove all reference to the ARRA. The GEO didn’t support the program or do anything to clarify the misperceptions. The bill was killed in House Appropriations. “The GEO really did its best to kill this bill every step of the way,” Frickey said, “so they finally got it in Appropriations.” Frickey is somewhat mystified by the series of events with this bill and observed that the GEO was one of the toughest state agencies she has worked with in her career. “We’re dealing with GEO staff who are antigrowth, who do not support new construction of any kind,” she said. “They didn’t want to do anything that benefited new construction. Among those who have dealt with the GEO, there’s also a perception that if it’s not their idea, it’s not an idea worth pursuing. They had an absurd number of what they’re calling new construction projects that do absolutely nothing to help energy efficiency in new construction.”
Rep. Gerou’s efforts pushed the groundbreaking bill forward The progress made with the bill this session was mainly due to the efforts of Rep. Cheri Gerou. Frickey said, “She was a phenomenal sponsor and we’re grateful for her efforts. Through her willingness to take this on and deal with the Governor’s Energy Office, she was, in large part, why we made it as far as we did. The bill’s demise, I believe, had nothing to do with the policy and everything to do with the politics. And that’s unfortunate.” There is good news in this. The pilot program’s foundation has been laid and the groundswell has started. When people were walked through and understood the program, Frickey said, “they were excited about the concept and wanted to see how we could get it off the ground.” She added that builders are still behind this innovative program — and it may gain more traction by working with the Department of Energy or through private funding. “Home builder members who have been involved with it are still really excited about it, so we’re just going to continue to turn over every stone and see how we can get this off the ground.”
Bill that protected builders, consumers, killed in committee
Creative financing options help builders sell more homes while avoiding suit-happy, land-grabbing banks by Kim Jackson
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Imagine this: You’re a doctor, a successful one. You bought a $500,000 semi-custom home four years ago. Last year, you had a few setbacks that caused you to fall behind on your mortgage payments. The house now is only worth $325,000 and you owe $450,000. You’re expecting a letter from the bank and when it comes, you’re stunned at the message. Because you’re a doctor — you can only assume — instead of letting you know it will begin a foreclosure process, the bank is suing you for the difference between what’s owed and what the house is worth. Thinking that there’s been a mistake, you quickly dial your lender, only to find out that is exactly what the bank intends to do. Panic replaces disbelief as you flail about, trying to figure out what to do next. If the CAHB-introduced Senate Bill 127 had passed, that scenario would have no chance of playing out in the future. The bill sought to curb the current lending industry’s practice of going after a personal debtor on real property and look to the property first. Because the bill was killed in committee, that’s exactly what can happen to any home owner in Colorado. According to CAHB Treasurer and Owner of Colorado Custom Homes David Tschetter, none of the consumer advocacy groups was willing to stand up with CAHB on behalf of this bill because the sentiment was that it is a commercial real estate problem. “No one is looking at it from the consumer’s standpoint, because it’s never happened that way,” Tschetter said. “Well, it’s never happened on our side of the equation either, but now it is. And they’re suing us before going after collateral.”
while simultaneously selling the property to another buyer. That could lead to banks making more money — at least on paper — than what’s owed on the property. It’s why, Tschetter said, the CAHB sought relief and sponsored SB-127. “If the bank goes after collateral first, it gives our membership the ability to survive and fight another day.” Chris Elliott, chair of the CAHB Government Affairs Committee, added, “I think this goes to the dislike of who more, in this particular case. They [the legislature] don’t care much for the banks, but they dislike us just that much more.” CAHB expects to revisit the issue next year.
Feds force banks to call loans
Tschetter paints a rather bleak picture. Yet there are splashes of color that some builders have been using to sell more homes and improve their own works of art. One often overlooked area of financing has been capturing builders’ imagination and boosting their bottom lines: Credit unions. While we all know them as consumer lending institutions for short-term loans, many of Colorado’s credit unions are financing home loans for both consumers and builders alike. Bryant Ottaviano, CEO of First Mortgages, specializes in pairing builders with credit unions to long-lasting, profitable relationships with potential home buyers. “It’s a fairly untapped market,” he said. “Here’s a $300 million financial institution that wants to lend money — and is actually lending money — to their community.” Shane Silvernale, CFO of Denver Community Federal Credit Union, explained that like banks, credit unions are under regulatory pressures. To avoid following in the footsteps of the savings-and-loan debacle — where long-term assets were financed with short-term deposits — credit unions are increasingly selling long-term assets into the secondary market, including Fannie Mae, Freddie Mac and the Federal Home Loan Bank.
In case you think it’s an arbitrary effort by the lending industry to sue home builders and developers for the deficiency on a current, up-to-date loan — unlike the above scenario — banks themselves are being forced to take the actions they’ve taken by federal regulators. During the fall 2007, federal regulators began shutting down acquisition development and funding by warning financial institutions that commercial lending cannot exceed 300 percent of the institution’s total capital. Most of Colorado’s banks exceeded that number and were forced to do one of two things: Call the notes or raise more capital. When you consider that some banks were nearly double that 300 percent cap, it’s easy to see why they opted to dump loans rather than raise more capital. So when their loans began coming due last year, builders were astonished to discover that not only weren’t the loans being renewed by their own banks, no one else would lend them any money, either. What’s more, banks began to bypass foreclosure on builders. Instead, due to a clause in the loan documents, banks started suing loan guarantors for the deficiency,
Without action, banks could do same to consumers Original estimates of loans coming due in commercial real estate over the next few years were $1.8 trillion. Tschetter estimates the number is higher and fears that if the issue is not addressed, it will trickle down to consumers with loans on their homes, cars, “any kind of consumer credit.” Thing is, Tschetter said, U.S. Secretary of the Treasury Tim Geithner has a great funding mechanism on his desk that would create 1.3 million jobs. “It would need $40 billion to make it happen and would pump $500 billion of capital into the real estate markets nationwide,” Tschetter said. “He’s had it on his desk for eight months and hasn’t signed it. I’d like to think we’re going to find a solution, but I don’t know.”
Credit unions have money to lend
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Credit unions keep lending and borrowing within geographic bounds Denver Community only lends to builders and home buyers in the city of Denver. Like other credit unions, Silvernale said that borrowing and lending are within community boundaries, “so we don’t have to seek financing from outside or send revenues outside the immediate community. “ And unlike banks, credit unions aren’t bound to the Community Reinvestment Act. “Part of that is because what we do is fund ourselves from deposits from the community and we lend it back out to individuals with that common bond. It’s that reinvestment back into the community.” That means many credit unions have money to lend to builders and their buyers. “Because we’re a community lender,” Silvernale said, “we tend to seek those people coming into those communities where we’re at least an option for financing opportunities.” As such, he seeks relationships with builders to bring new buyers to him for the end financing. But sometimes, the builders don’t know where the buyers are. It’s why Ottaviano has specialized in creating partnerships between builders and credit unions. Not only are credit unions untapped in financial resources, but in the ability to draw in potential buyers. For example, builders can take advantage of a credit union’s statement stuffers to get the word out about a new project just around the corner. Or, he’ll set up lobby days, where a builder will send a sales person into the credit union to market the property. “We do seminars with our partner credit unions to offer up a credit seminar or a development across the street from the credit union,” he said. “It’s a fairly cohesive relationship, where the credit union is giving back to the builders and the builder is giving back to the credit union with new members.”
Credit unions participate in funding building projects Credit unions also like to fund building projects. While they’re not often in a position to fund a $10 million project, they can participate with organizations to fund a portion of it, or participate it out. “Maybe we can do $2 million and we find four others to participate in it,” Silvernale said. “We go in on the project together and share in the revenues. We also share in the risk.” It’s not something they do on their own. Silvernale often turns to Ottaviano for projects that are participated out, where Ottaviano rounds up other willing lenders, finds out things such as what interest rate each institution needs and
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how much risk each can bear and puts the deal together. “We’ve survived a lot of this downturn through a great deal of cooperation,” Silvernale said. Unlike the banking industry, “credit unions typically tend to back each other up pretty well, so we get into projects like this.” Along with forming partnerships with credit unions, Ottaviano creates for builders innovative, long-lasting relationships with home buyers. In the traditional lending scenario, he explained, banks have a box. “And if you fit into that box, you’re good. What I do is look to create the box around the builder, create the box around the buyer,” he said. “Tapping into resources that weren’t available or that they didn’t know about goes a long way toward helping builders bring in an extra buyer.”
Creative thinking closes more homes Sometimes, after suggesting to a builder the buyer get the construction loan, he’s met with resistance, because for the past 20 years, builders haven’t worked in that environment. “Well, the environment has changed,” Ottaviano said. “If financing a buyer construction loan helps justify one extra sale of a home per year, it goes a long way toward helping with the bottom line. As long as builders are willing to look outside the box, there are a number of options that can help them justify building homes for people.”
Traditional mortgage lending niche opens doors to thousands of potential buyers Surviving in any industry today means taking a closer look at what you do, how you do it and who you do it with to map out a new course that ensures your business will be around for years to come. Within the traditional mortgage banking industry, Pete Garvin has done just that. The vice president of strategic lending for Borrower’s First choice, a division of Cherry Creek Mortgage Company, Inc. examined how business has been done, and realized there was an opportunity buried deep within tradition that could restore profitability. Garvin has long held that builders mistakenly do not set aside enough marketing dollars for financing options. For example, larger builders could use some of the marketing dollars for a 3-2-1 buy down, where the first year of a five percent loan is at two percent, the second rises to three percent, the third increases to four percent and the balance of the loan remains at five percent. “It’s still one of the most advantageous methods for a builder to out and advertise, to create some ‘Wow!’ in the marketplace,” Garvin said. “And
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there’s nothing like going into the market and advertising an interest rate somewhere between two and three percent to get people to your model home complexes.” For builders who build 10-15 homes a year, he suggests “some kind of lower interest rate than market. Smaller builders can do that, as long as they put that into their pricing and include it in their marketing budgets.” Rather than charging a point or half a point on the loan, Garvin fixes the fee — whether it’s on a $200,000 first-time condo or a $417,000 house — saving each borrower somewhere between $1,000 and $2,000. “The benefit to the builder is that if the builder is either buying a rate down or paying closing costs, their cost to close with us is significantly less than the competition and maybe less than a mortgage company if the builder owns it themselves.” Builders can also leverage this cost savings in their advertising.
Marketing strategy teams builders with lender, title company to close more deals He’s also developed a program that partners his company with builders and title companies to bring more business — and profits — to all three entities. Here’s how it works: Let’s say a builder is going to build 25 homes this year, all in the same subdivision. The builder identifies large employers
and trade associations within a tenmile radius of the subdivision. The builder then teams with a mortgage lender and title company to make presentations to those employers and trade associations. Each partner of the team can then give prospective buyers within those targeted organizations a discount that saves when they buy from the team. “What you’re doing is leveling the playing field by reducing the price in bulk and hopefully you’ll get four or five sales out of that,” Garvin said. “It might be a hospital. It might be an electronics firm. It might be a high-tech firm. But whatever it is, team up with a lender and a title company to package a whole deal so you can compete on the street. That’s what I do.” Through signed agreements with large employers and trade associations, Garvin has built a database of nearly a million people in Colorado. “This helps the builder mostly in the marketing piece, where when a builder teams up with us, we can actually
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Lender, title company help builders sell on front end So where does the title company come in? He suggests that mortgage lenders and title companies both move their parts of the equation to the front of the formula, rather than at the end of it, with their hands out, waiting to be paid. “That’s the part of the equation where I think most people miss the boat,” he said. “If you don’t have a team approach to this, with the lender and the title company out front to sell the product, you’re missing the boat. After all, they’re getting paid when it closes; they should be helping to sell it.” Again, it’s getting out of the box of traditional thinking. And, he added, “If you’re going to be successful for this next decade, you’d better have a long-term plan, an intermediate plan and a short-term plan, because we’re going to be fraught with changes on every front for the next ten years. But it all goes back to the same equation, which is: Generate business. Qualified traffic will lead to sales, which will lead to closings, which will lead to revenues, which will lead to profits. And while there are other mitigating factors, if the first piece of that equation — getting qualified traffic — is not in place, NONE of the rest of that equation works.”
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Photo courtesy: Habitat for humanity colorado
giving back
by Kim Jackson
Teller County Habitat for Humanity partnered with the State Historical Society and the town of Cripple Creek to move and restore this three bedroom home and three others to create affordable housing for hard-working families.
What down market?
After hitting two milestones, Habitat for Humanity Colorado is on track to build more homes this year than in any of the previous three years. How’s it managing THAT? November 2008 was a milestone for Habitat for Humanity Colorado. With more than 30 affiliates of Habitat for Humanity International in the state, that November marked the completion of the thousandth home. And last year, Habitat for Humanity Colorado (habitatcolorado.org) reached another milestone: 30 years in the state, through its affiliate, Habitat for Humanity of Metro Denver. You’d think that over the past two years, Habitat for Humanity Colorado would have slowed down some. But that’s not what’s happened. In fact, Habitat built more homes last year (106) than in 2007 (95) or 2008 (103). And it’s on tap to build 110 homes in Colorado this year.
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What’s more, the non-profit organization plans to build another 1,000 homes in just three years. Not all of those homes will be in the state. Executive Director Stefka Fanchi explained that its tithing program helps Habitat build at least one home internationally for every home built here, “through the efforts of folks in Colorado. For every home we build here, we raise funds to build a home in another country.” That’s pretty easy to do, too, since construction costs average $4,500 to build a home in another country, compared with the state’s average of $100,000. “What we’re trying to do is serve what is a great need here in Colorado,” she said, “and simultaneously serve what is an even greater international need.”
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giving back
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Mortgage payments, donations, financing tools help fund new homes Its model of building and selling homes to people who earn 25 to 50 percent below the poverty line continues to fund the next generation of affordable home owners. Habitat for Humanity sells the homes it builds to families in needs. The interest-free mortgage payments have helped to sustain the organization and continue building homes. The payments a family makes each month on a home it helped to build five years ago also help build another family’s new home. “Every payment they make gives back to another family,” Fanchi said. All by itself, the mortgage payment model has fed Habitat’s growth. Yet the organization heavily counts on the strong relationships it has formed with governmental and quasigovernmental agencies, foundations, corporations and individuals across the state to accelerate the number of homes it can provide for families in need. “We still rely to a great extent on donations and other financing tools that trickle in over time,” Fanchi said. And while that constant cash flow is a great tool for sustainability, “it’s not all up front at once, which allows us to build. So we have partnerships that help us accelerate that.” For example, the Colorado Housing and Finance Authority buys loans from Habitat, “so we can redouble our capacity and build more homes,” she said.
Silver lining: Building green helps fund new homes The organization also has discovered there’s additional funding by building green. For the past five years, Habitat for Humanity Colorado has been building high-performance homes to Energy Star standards or higher. “There’s funding available for that now and we’ve been able to successfully pursue that,” Fanchi said. Yet the main reason for Habitat’s building green is helps the long-term affordability for the families who own the homes. “We all know that if energy costs keep going up the way they have over the past ten years, it’s feasible that a family could pay more on their electricity bills than with their mortgages,” she said. “So we really need to build homes that are efficient, so families are not paying so much for energy they can’t afford it.” Habitat also now teaches new home owners about conservation and how to keep their energy bills down as part of their home owner preparation training.
Green building also makes homes more affordable In Longmont, Habitat for Humanity of the St. Vrain Valley has helped families build 44 homes over the past 22 years. Most were built in the last five years and meet or exceed Energy Star standards. Dan Northcraft, construction manager for the affiliate, said, “Even though they’re simple and affordable,
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we build quality housing. Our HERS ratings are in the 50s and we’ve received some green building certifications.” Standard on the homes he builds are blown-in wall insulation and an R5 around the exterior. Appliances are all high-efficiency, including the furnace and hot water heater. Habitat uses an energy recovery ventilator to manage the air quality of the tightly sealed homes. Framing is optimal value engineered, “so we’re using fewer trees to build a house,” he said. Exterior walls and floors are on two-foot centers, so it’s faster to frame and there’s more insulation available in the walls. There’s more, of course, but you get the idea. These homes are tight and will save their owners on energy costs for many years to come. “If we built to code, the family could afford the mortgage, but not the big utilities,” Northcraft observed. “It’s why we decided to make the sustainability upgrades standard on our homes. After all, it’s not a free house. There’s sweat equity built in and they have to repay the mortgage.”
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Photo courtesy: Habitat for humanity colorado
giving back
Using SIP technology, volunteers for Habitat for Humanity of Eagle and Lake Counties built these LEED-certified duplexes in Edwards.
Standards
Ethics
Most-valued partners are builders This year, Habitat for Humanity of the St. Vrain Valley will build four houses, down from last year’s six homes. He relies on many inkind donations from the industry, to build those homes. Last year, he said, it was harder for trades to donate their time because when they couldn’t make payroll, they often couldn’t “afford to donate free labor to wire, plumb or put a roof on,” Northcraft said. Even so, he noted, “a lot of the guys who were with us in good times have stuck around and are committed to the program. Sure, we’re building fewer houses, but we’ve generally been able to meet most of our inkind needs with people who really believe in our mission of serving low income families.”
Consistency design errors non-compliant roof installation leaky building envelope structural defects
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Experienced forensic engineers
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(303) 425-7272
Fanchi added, “Some of our best and most valuable partnerships have been with home builders. We have not been able to work with home builders to the extent we had in the past.” Whether participating in a builders’ blitz — where each of several builders simultaneously takes over construction of a home and several homes are built at once — materials donation, offering their expertise or sponsoring a home’s construction costs, Fanchi said, “builders have been incredibly valuable partners.”
Economy’s “new” normal is a moving target Last fall, the organization examined its financing options and acknowledged that without knowing where the economy was going or what the new “normal” was going to be, “we can’t assume it’s going to go back to the way it was — and we should probably assume that it never will,” Fanchi said.
Builders can still help — a lot Colorado’s 30 affiliates got together in September to explore what could be done to change the model, find new partners and reach out to developers and home builders.
“What amazed me was how quickly and eagerly people stepped up to do that,” Fanchi said. “A lot of people have said that we can’t really keep doing what we’re doing and we should slow down. But we’re needed more than ever and we need to keep on building. That is shocking to some people. But what’s more shocking to me is how many people were very willing to really share their expertise.” She paused, then added, “I think that’s the same with home builders. They may not be able to write a check, but there’s a lot they can do.” She noted that there’s still a huge need for affordable housing in Colorado. “If we build a thousand homes every minute for the next 20 years, we’ll never catch up with the need. The home building industry can help by volunteering labor, pulling a team together to work on a home for a day, sponsoring a home or taking part in a blitz build — which usually comes with a heavy dose of media coverage. “We most value ongoing partnerships with a long-term commitment,” Fanchi said. “And we’re always looking for creative ways to work with folks. The home building industry is our most natural fit and we have the most to learn from professionals in that industry.
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top trends
by Kim Jackson
Photo courtesy: Showplace Kitchens
What’s cookin’?
Photo courtesy: Home and the Range
As more owners stay in their homes, kitchens undergo surprising renovations
Viking’s response to upgrading appliances in the home is a sleeker, more compact kitchen set for under $9,000.
These Lyptus kitchen cabinets are a sustainably managed Brazilian eucalyptus hybrid that regrows itself in 15-17 years.
Where bigger used to be better in the
Owners want sustainable wood cabinets and lots of storage options
kitchen, designers are seeing home owners adapt their versions of an ideal kitchen to match their budgets. And like it or not, many people are staying in their homes, upgrading as their budget allows.
Compact, professional-grade appliances are hot ticket People still like higher-end appliances with that professional look, and manufacturers continue to fill that need. Viking modified its professional series and offers a “sleeker, more European look come into some of the traditional line,” observed Pete Dine, owner of Home and the Range. “They’ve always had the designer line and they’ve revamped that completely with a clean, minimalist of look.” Yet whether it’s new construction or remodel, Dines has noticed a trend in downsized appliances. For example, “People still want the six-burner ranges,” he said, but instead of 60 inches, they can get it now in 36 inches.” And because people are more budget conscious these days, Viking has responded by offering a complete kitchen that’s sleeker and more compact — including a four-burner range and oven beneath, hood, microwave, dishwasher and refrigerator — for under $9,000. “It’s a perfect remodel package,” Dines said. “People don’t need to get new cabinets or anything. We still do new construction, but appliance replacement and remodel is definitely a focus for all brands right now.” More info: 303-587-1730. homeandtherange.com
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Some people want cabinets. The cabinets could be old, tired or it might just plain be time for a change. And according to Lisa Phillips, showroom manager with cabinet maker Showplace Kitchens, home owners still prefer the clean, contemporary look, “but not so blatantly contemporary it’s sterile.” And because people are staying in their homes, rather than moving or building, storage is now a big priority. Storage item options, such as roll-out trays, soft-close drawers, novel ways to store spices, knives or other kitchen essentials, are “a trend that people are really hot on right now,” Phillips said. Those internal parts and pieces to a cupboard can add up, and fast, which sometimes takes home owners by surprise. “We find that many people start with a budget-conscious mind set,” she observed. “And the more you add internally, the price incrementally goes up every step of the way.” Another trend she’s seeing is that home owners want cabinetry made with sustainable wood. As part of its cabinetry line, Showplace Kitchens offers Lyptus, a eucalyptus hybrid that’s grown on regulated plantations in South America. A true highgrade hard wood, Lyptus grows in 15 to 17 years, and doesn’t deplete old-growth forests. “Our customers who request Lyptus have done their homework and researched their green options,” Phillips said. “We offer the usual oak, cherry, hickory and maple; we’re just seeing more people request Lyptus.” More info: 303-373-9555. showplacekitchens.com
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building by the law
by Ryan Warren, Esq. & Jenna Syrdahl, Esq.
Colorado Supreme Court decision could have significant impact on construction defect actions Colorado’s Construction Defect Action Reform Act (“CDARA”), C.R.S. § 13-20-801, et seq., regulates property damage and personal injury lawsuits involving defects in residential and commercial construction. Over the past nine years, many court decisions have interpreted and applied the provisions of CDARA. Last month, the Colorado Supreme Court decided Smith v. Executive Custom Homes, Inc. This decision has a significant impact on construction defect actions as it relates to both triggering and tolling time limitations, issues which every construction professional should be aware.
Notice of Claim Process The CDARA “notice of claim process” must be completed before filing a lawsuit against a “construction professional” (i.e., architect, contractor, subcontractor, developer). The homeowner must provide written notice to the construction professional, describing the general nature of the defect. After the notice is sent, the construction professional has 30 days to inspect the property, then 30 days to present an offer (if they choose) to settle the claim by monetary settlement or repair (45 days in commercial construction). If an offer is presented, the homeowner has 15 days to accept or reject it. If no agreement is reached, the homeowner is permitted to file suit. If the homeowner sends the notice of claim letter as described above, any applicable statute of limitation or repose are tolled (e.g., stopped) until 60 days after the entire notice of claim process is completed.
Statute of Limitation and Repose The statute of limitation is the time limit in which to bring suit against someone once a basis for that suit is known. The statute of repose is the time limit to bring suit after the project is complete, regardless of whether one is aware of a problem. The statute of limitation provides that a construction defect action must be brought within two years from when the homeowner “discovers or in the exercise of reasonable diligence should have discovered the physical manifestations of a defect” that ultimately causes damage. The statute of repose provides that a case cannot generally be brought later than six years after substantial completion of the improvement to real property. In most cases, the building is substantially complete when the Certificate of Occupancy is issued.
Smith v. Executive Custom Homes, Inc. The Smiths noticed accumulation of ice on their front walkway in February 2004, and sent an email to the property manager describing the condition. This email was forwarded to the builder, Executive, which arranged for its subcontractor to inspect and apparently repair the leaking gutters. One year later, Mrs. Smith slipped and fell on some ice, sustaining injuries.
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On January 17, 2007 (less than two years after Mrs. Smith’s fall but more than two years from when they first noticed ice), the Smiths filed suit against Executive. In response, Executive moved to have the case dismissed because the Smiths’ claims were filed more than two years after they first noticed the ice. The trial court agreed with Executive, holding the Smiths’ claims arose in 2004 when they first discovered the ice, and therefore the Smiths’ claims were barred by the statute of limitation and dismissed the case. The appellate court disagreed, holding that the repair doctrine may have tolled the statute of limitation. The repair doctrine, adopted by the appellate court in Colorado, but never the Supreme Court, provides that time limits stop running when a builder performs repairs because the homeowner may rely upon the promise of the builder that the issue is repaired rather than filing suit. The Colorado Supreme Court reversed the appellate court on May 10, 2010, finding that the statute of limitation for Mrs. Smith’s injuries began when the ice was noticed, not the date of the accident. This decision creates the potentially curious result of a homeowner’s personal injury statute of limitation passing before there is ever a personal injury. On the other hand, Smith protects construction professionals by requiring homeowners to bring defects (or their results) to a builder’s attention as soon as they are noticed instead of waiting years for more severe damage or injury to occur. CDARA was created in an effort to lessen construction defect litigation. One wonders if this decision might increase litigation and lead to homeowners quickly filing suit so as to make sure they preserve their statute of limitation, rather than providing builders an opportunity to repair the problem prior to suit. Importantly, Smith also held that there is no repair doctrine in Colorado. Instead, the CDARA notice time period is the only time-limit tolling mechanism. As discussed above, time limits are only tolled from the notice of claim issuance through the end of the CDARA process, plus 60 days (135 days in a residential setting, assuming no extensions). This holding is particularly helpful to construction professionals in that it reduces the arguments a homeowner can make to stretch time limits for filing suit. Remember, a homeowner can certainly argue that the repairs themselves were negligently performed. In that situation, the time limit will not begin to run until a physical manifestation of the defective repair is noticed. The impact of Smith as it relates to the repair doctrine will be interesting as it unfolds in the years to come. Construction professionals now have a more clear understanding of when a claim arises and what actions will toll a homeowner’s time limits within in which to file suit. Ryan Warren is the Director of Construction Law at Hensley Kim & Holzer. He and Ms. Syrdahl are experienced in construction defect issues, contracts, liens and delay claims. They represent general contractors, subcontractors, suppliers, warranty companies and owners.
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