September 19, 2017

Non-breaching party may choose between liquidated damages and actual damages if the contract so allows

By: Timothy Gordon

The Supreme Court of Colorado has held that a contractual provision that gives a non-breaching party the option of choosing between recovery of liquidated damages and pursuing actual damages is enforceable so long as the two remedies are exclusive.  Ravenstar v. One Ski Hill Place, 2017 CO 83.  The dispute in Ravenstar was over the failure of certain buyers to close on the purchase of condominium units.  After the buyers breached, the developer/seller, kept their deposits as liquidated damages as permitted by the purchase and sale agreements.

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August 10, 2017

Housing Crisis in Colorado May Get Worse: Anti-Growth Initiatives Slated for Lakewood and Colorado

By: Rebecca W. Dow, Esq.

Denver’s housing market was recently named as one of the top four overvalued markets in the nation by CoreLogic (a leading provider of consumer, financial and property information), due to rising home prices as a result of a lack of inventory of homes for sale. The median sales price of a single-family home in Denver reached a record $407,000 in May, and statewide it topped $365,000.  Experts have argued that in Denver alone, 16,000 to 18,000 new homes a year are needed to meet demand.  Last year, only 11,038 homes were built in Denver according to MetroStudy.  In Lakewood, the current median selling price for homes is $494,000 according to Lakewood realtors. Corelogic has predicted that the small supply of existing homes for sale and insufficient single-family construction will continue to put upward pressure on home prices.

Despite the reported need for more residential housing, on July 28, 2017, a group named Lakewood Strategic Growth submitted petitions with more than 7,500 signatures supporting a proposed ordinance to impose a 1% annual limit on residential growth in Lakewood, Colorado, and to require Lakewood City Council approval of any projects containing 40 or more residential units. Only 5,165 signatures are required from registered voters to submit the proposed ordinance for a vote. The Lakewood City Council has until August 28th to review the validity of the submitted petitions. If the signatures are valid and sufficient, the City Council may adopt the anti-growth ordinance or if the City Council does not adopt the ordinance, it will be placed on the November 7th ballot to be decided by the Lakewood voters. The proposed ordinance is 14 pages long, contains 4,800 words, and includes a complex formula for setting allocations for construction of new residential homes.  Under the proposed ordinance, only 650 housing units would be built in 2018 in Lakewood. A 300-unit apartment building would count as 300 housing units of the total 650 allowed.

The backers of the Lakewood anti-growth ordinance contend that it is not a “no growth” initiative and is intended to manage growth in an effective manner.  Lakewood Mayor, Adam Paul, recently published a letter in the Denver Post outlining his opposition to the anti-growth measure stating that it is “rife with unintended consequences” and that it will “make life more expensive for people already living in Lakewood”. Mayor Paul has said that restricting housing “will drive prices higher. . .and make Lakewood too expensive for teachers, police officers, firefighters”. The Denver Post recently reported that “the [Lakewood] proposal comes at a time when rents in the Denver area – especially in areas within and just beyond the city limits – are soaring and developers are working to keep up with the demand.  A massive shortage of construction workers is making things worse.”

A larger concern for Colorado developers and builders is that a statewide anti-growth measure, entitled “Limit on Local Housing Growth” (Initiative #4) may appear on the statewide ballot in Colorado as an initiated state statute or constitutional amendment in 2018. This statewide measure would establish a constitutional right to limit housing growth through countywide initiatives and referendums. Initiative #4 specifies that no permits to build new privately owned residential housing units would be issued beginning with the declaration of voter approval of Initiative #4 until January 1, 2019; and thereafter would limit annual private housing growth to 1% in the cities and counties of Broomfield and Denver and in the counties of Adams, Arapahoe, Boulder, Douglas, El Paso, Jefferson, Larimer and Weld for 2019 and 2020. Thereafter, limits in those cities and counties would continue unless local voters overturn them by ballot measures.

A proponent of the statewide antigrowth Initiative #4 has been reported as stating that the growth in Colorado is “completely out of control. Excessive growth will bankrupt the state. There is already no money for highways.” (Denver Business Journal, December 1, 2016). The title of Initiative #4 was challenged, and the title was affirmed by the Colorado Supreme Court in May 2017. The form of the petition was approved on August 7th.  The Colorado Secretary of State’s Office has a deadline of November 30, 2017, for the petition.  Due to the passage of Amendment 71 in November 2016, signatures equal to at least 2% of the registered electors who reside in the state’s 35 Senate districts must be part of the total. In 2018, the number of signatures required for an initiated constitutional amendment/state statute is estimated to be 98,492.  If sufficient signatures are gathered, Initiative #4 will appear on the ballot for the November 2018 general election.

According to the nonpartisan Director of Research of the Colorado Legislative Council, the initial fiscal impact of Initiative #4 will be that the “value of existing housing units may increase in communities where there are binding growth limits, impacting homeowners and landlords. For Colorado residents that would like to move into communities with binding housing limits, this measure may make it more expensive to find homes to buy or rent.  Limits on housing permits will also impact the distribution of construction employment, retail trade, and population within Colorado.”  The fiscal impact estimate clearly predicts that if Initiative #4 is passed, the housing crisis in Colorado would worsen and home prices would increase in an already “overvalued” market.

 

July 11, 2017

Force Majeure Clauses in Development Agreements

By: Clay Karwisch

A recent Idaho Supreme Court case has important lessons for drafting force majeure clauses in development agreements. In Burns Concrete v. Teton County, the Idaho Supreme Court held that a force majeure clause in a development agreement was broad enough to apply to Teton County’s failure to grant appropriate approvals for the construction of a concrete plant contemplated by the development agreement. In the case, Burns Concrete (the Developer) acquired property zoned for commercial use, and successfully applied to have the zoning changed to industrial. Under the applicable zoning ordinance, buildings in the industrial zone could not exceed 45 feet in height unless approved by a conditional use permit. The Developer made a timely application for a conditional use permit to exceed the height limitation, which the planning and zoning office recommended for approval.

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June 14, 2017

What You Need To Know About Colorado Bidding Rules

By Kevin Bridston, Tim Gordon and Sean Hanlon

There are a few basic rules that any contractor needs to be aware of before bidding a project in Colorado, including rules related to licensing, bonding, bid preferences for local contractors, local employment rules, bid shopping rules, bid mistakes, and bid protest issues.  No article can cover these topics with the specificity needed to determine whether to bid a project in Colorado, and what steps need to be accomplished to do so (those are issues that should be discussed with a lawyer) but at a very high level, we lay out some of the basic requirements under Colorado Law in this post.

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May 31, 2017

From Cow Town to Innovative Agribusiness Epicenter: Here Comes the National Western Stock Show Project

By: Sean Hanlon

Denver’s first Stock Show took place in 1906.  As an emerging city, Denver was often referred to as a “Cow Town.”  A lot has changed since 1906.  The National Western Stock Show continues to thrive, buts its National Western Complex is showing its age.

Enter the National Western Stock Show Project.  The Stock Show Project is focused on creating a global agribusiness epicenter that will attract private companies and public organizations to collaborate on solving long developing problems associated with food, animal health, and water.  A global think tank of sorts.  The expanding complex will also have a new livestock center, a new equestrian center (with 1,000 permanent stalls), a new expo hall, and a new arena. The Stock Show Project—expected to cost more than $1 billion—will result in a 250-acre campus containing a unique cross-pollination of industries.  Expected to span a decade,  the Stock Show Project will be completed in phases, and will not interrupt the annual Stock Show event which will continue during the renovations.

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May 23, 2017

Construction Defect Reform in CO; HB 1279: Pluses, Pitfalls & Practical Pointers

By: Rebecca Dow

Construction defect litigation reform will take a small step forward this week when Gov. John Hickenlooper signs HB 1279 on May 23, 2017.  HB 1279 will go into effect immediately after signature by the Governor, and developers and residential builders will need to be aware of certain aspects of the law.  HB 1279 has been much touted as a bipartisan effort toward addressing the housing squeeze in Colorado, as reflected by just 3.4 percent of new housing starts in 2016 being for sale condominiums in the Denver metro area.  HB 1279 passed unanimously by both the House and the Senate on May 4, 2107. This is the first piece of legislation passed in the last several years to address any aspect of construction defect litigation reform, although during that time more robust construction defect reform ordinances have been passed by approximately 12 cities and counties in Colorado. HB 1279 offers some pluses to developers/builders, but also contains some pitfalls, as discussed below.  Finally, this article will provide some practical pointers for residential construction under HB 1279.

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May 16, 2017

Those contractual protections that you bargained for might be void

By: Tim Gordon

Building a mixed-use project?  If so, Colorado law might render void some of the contractual protections that you bargained for.

In Broomfield Senior Living Owner, LLC v. R.G. Brinkmann Co., 2017 COA 31, reh’g denied (Apr. 20, 2017), a division of the Colorado Court of Appeals had to decide whether certain construction defects claims brought by a project owner were untimely.  The project was a senior assisted and independent living facility (senior facility).  The construction contract (an AIA form) contained three separate accrual provisions with respect to claims:  Claims arising from acts or failures to act (1) occurring before substantial completion accrue no later than the date of substantial completion; (2) occurring between substantial completion and final payment certificate accrue no later than the final payment certificate issuance date; and (3) occurring after final payment accrue no later than the time provided in the warranty provisions.  Applying the contract language, the trial court entered summary judgment in the contractor’s favor and ruled that the construction defects claims at issue accrued on the date of substantial completion and were therefor barred.

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May 2, 2017

ASBCA dismisses two claims against Lockheed Martin based on “Plainly Invalid Legal Theory”

by: Tamara J. Lindsay

In late December 2016, the Armed Services Board of Contract Appeals (“ASBCA”) dismissed two claims that had been lodged against Lockheed Martin Integrated Systems, Inc. (“Lockheed Martian”) by the United States Army based on the government’s reliance on a “plainly invalid legal theory.” See ASBCA No. 59508, 2016 WL 7655944 (Dec. 20, 2016).  The decision, which consolidated Lockheed Martin’s appeal of two contracting officer’s final decisions, concerned claims by the government for alleged breach of contract by Lockheed Martin in the amounts of $102,294,891.00 and $14,494,740.00, respectively.  Each of these claims arose out of an audit in 2014 by the Defense Contract Audit Agency that found work performed by Lockheed Martin subcontractors was not appropriately backed up or substantiated.

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April 18, 2017

Mitigation of Construction Defect Litigation- Top 10 Construction Contract Issues

By: Rebecca W. Dow, Esq.

When negotiating a construction contract with a general contractor (GC), the owner/developer should be aware of, and address, a number of issues to attempt to mitigate or limit the risk of construction defect litigation for a residential project, including multi-family and for-rent residential apartment and senior housing projects. The standard forms of construction contract—such as the American Institute of Architects (AIA) or ConsensusDocs—are more beneficial to the contractor than the owner in many respects.  A construction contract will need to be reviewed thoroughly and revised to better protect the owner, and in the case of residential construction, should in particular, address the following top 10 key issues:

1) Scope of Work—The scope of work should be well-defined, accurate, comprehensive and identify the basic components of the project. The scope should not be based solely on the drawings and specifications, which are never 100% complete, and the contractor should agree to reasonably infer the scope of work from the contract documents to produce the intended work.  If there is an inconsistency in the contract documents or between the drawings and specifications and contract documents, the contractor should provide the better quality or quantity of the work or materials. The contractor should be required to report any errors, omissions or inconsistencies in the contract documents to the owner.   Contractor’s work should be subject to inspection by the owner, applicable city, county or governmental entities, and any third-party inspectors retained by owner or construction lender for quality assurance and quality control.  Contractor should give advance notice to owner as to specified key system installations—such as soil, foundation, acoustical, exterior, building wrap, HVAC and structural components to allow review and inspection by such third-party inspectors.

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April 11, 2017

The Dos and Don’ts of Drug Testing in Utah

By Garrett Walker

Contractors frequently encounter contract provisions requiring that they test their employees on a particular project for the presence of drugs and alcohol.  At times these provisions also purport to require disclosure to the other party of test results or other confidential information. By attempting to comply with these contract provisions, some contractors unintentionally expose themselves to claims by their prospective and current employees.  Read more >>