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State Rep. Gregg Rippy has succeeded in putting new emphasis on the age-old warning "buyer beware."
Legislation sponsored by Rippy that is designed to protect contractors and others in the construction industry from liability claims cleared the state Senate yesterday.
If the state House agrees to the amendments made during the Senate debate, the bill could be on Gov. Bill Owens' desk by the end of next week. The original bill cleared the House earlier this month.
If signed into law, critics say people who unknowingly purchase shoddily built homes will have a much more difficult time recovering their losses.
Rippy is a Glenwood Springs Republican who represents all of the Roaring Fork Valley in the state Legislature. He and four other state representatives sponsored the legislation.
The bill has been vehemently opposed by homeowner associations and attorneys who represent homeowners victimized by deceptive contractors.
One state representative, Rep. Mark Larson, a Cortez Republican, even went so far as to label the bill the "Homebuilder Indemnification Act of 2003." Larson had originally been one of the bill's sponsors, but withdrew his support as basic protections for home buyers were gutted as the bill was amended, according to a report in the Denver Rocky Mountain News.
Rippy did not return a call seeking comment. But he was quoted recently in The Glenwood Springs Post Independent as saying the legislation was needed to protect contractors from the state's consumer protection laws. The laws allow for triple damages in cases of fraud or willful negligence.
Rippy said contractors and other construction professionals have seen their liability insurance premiums skyrocket as a result of homeowner claims, which ultimately forces up the cost of homes.
He has yet to go on the record to name any contractors who have been harmed by insurance prices, but he did tell the Post Independent that he knows excavators who "can't get insurance at any price," even though they've never been subjected to a claim.
Rippy said his bill ultimately protects the home buyer through a provision that requires disgruntled homeowners to negotiate with the contractor responsible for the unsatisfactory work before taking the issue to court.
But critics of the bill say it shifts an enormous amount of responsibility away from contractors and onto home buyers.
"This bill is just outrageous," said Mick Ireland, a Pitkin County commissioner and an attorney. "What it seeks to do is shift all the risk for construction defects to the homeowner."
In the bill, the negotiation required before legal action forces the homeowner to list all the construction shortcomings and take them to the contractor. The contractor then can make an offer to repair the problems or pay a settlement to the homeowner.
Rippy said the point of the negotiations is to get the problem dealt with, if possible, before lawyers and insurance companies are involved.
"I think it very much makes a contractor come to the table and say, 'OK, I'm going to take care of it,'" Rippy told the Post Independent.
That may be the intention, said Ireland, who as a county commissioner pays close attention to legislation coming out of Denver, but the problems for the homeowner come if an agreement can't be reached. Ireland said he does not represent home builders or homeowners as an attorney.
Section 5 of Rippy's bill sets tight limits on what a home buyer can do if he rejects an offer from the home builder:
The home builder can argue that the buyer "unreasonably rejected" his offer of repair. If the court agrees, then the buyer is limited to recovering the cost of repairs only, in effect taking away the buyer's right to have his grievances heard by a jury.
In the event that a buyer is found to have unreasonably rejected a settlement or repair offer from a contractor, the settlement amount is limited to the cost of repairs initially offered by the contractor. In other words, the rejected offer becomes the maximum amount the homeowner can recover.
Before a buyer is allowed to sue for damages beyond the settlement amount offered by the contractor (or other construction professional), the court must find that the contractor's offer of repair was "fraudulent beyond a reasonable doubt."
By introducing the requirement that fraud be proven beyond a reasonable doubt, Rippy and other supporters of the legislation are introducing standards of proof used by criminal courts into what is a civil dispute. In civil cases, the standard of proof for a claim is based on a preponderance of the evidence, far short of the "beyond a reasonable doubt" requirement.
Even if an injured buyer actually clears the hurdles in section 5, and then proves beyond a reasonable doubt that the builder acted "fraudulently and in bad faith" in the construction of the home, Rippy's bill limits what the buyer can recover in "actual economic damages."
Under the current state law, home buyers and other consumers are allowed to seek triple damages if they have been defrauded by a service provider or sales agent. By tripling the monetary damages, Colorado's Consumer Protection Act is designed to discourage shady business practices by companies and individuals. Rippy's bill, critics say, specifically exempts shoddy construction work from the Consumer Protection Act.
Actual economic damages are defined by Rippy's bill as the cost of repairs or the "diminution in value" of the property.
"It's extremely difficult to prove that your property is worth less than it would be if a house was built as promised," Ireland said.
Given the general growth in property values over time, "the contractor can say, 'Your house is worth more than you paid for it, so I'm not going to make any repairs,'" Ireland continued.
Rippy's bill also makes it more difficult for someone injured as a result of a construction defect to sue for damages. It requires that a judge or arbitrator - a jury is not allowed - conduct a hearing to determine if the damages sought are "scientifically valid a cause by the alleged [construction] defect."
The bill also gives contractors the right to claim their work complies with the building code or industry standard, and is therefore not fraudulent, even if the buyer was expecting something other than what was delivered. And it allows builders to use a certificate of occupancy or any other government certificate of inspection as proof that their work is on the up and up - again, even if it's not what the buyer was expecting.
Rick Davis, the Glenwood Springs city councilman who ran against Rippy last fall, is worried the new legislation will shift responsibility on building departments.
Davis, who has been building homes in the area for more than three decades, said the bill goes too far in dealing with the very real issue of insurance costs for contractors.
"There is justification for a change in the rules," he said. "But this singles out one industry and puts the consumers at risk."
Legislation sponsored by Rippy that is designed to protect contractors and others in the construction industry from liability claims cleared the state Senate yesterday.
If the state House agrees to the amendments made during the Senate debate, the bill could be on Gov. Bill Owens' desk by the end of next week. The original bill cleared the House earlier this month.
If signed into law, critics say people who unknowingly purchase shoddily built homes will have a much more difficult time recovering their losses.
Rippy is a Glenwood Springs Republican who represents all of the Roaring Fork Valley in the state Legislature. He and four other state representatives sponsored the legislation.
The bill has been vehemently opposed by homeowner associations and attorneys who represent homeowners victimized by deceptive contractors.
One state representative, Rep. Mark Larson, a Cortez Republican, even went so far as to label the bill the "Homebuilder Indemnification Act of 2003." Larson had originally been one of the bill's sponsors, but withdrew his support as basic protections for home buyers were gutted as the bill was amended, according to a report in the Denver Rocky Mountain News.
Rippy did not return a call seeking comment. But he was quoted recently in The Glenwood Springs Post Independent as saying the legislation was needed to protect contractors from the state's consumer protection laws. The laws allow for triple damages in cases of fraud or willful negligence.
Rippy said contractors and other construction professionals have seen their liability insurance premiums skyrocket as a result of homeowner claims, which ultimately forces up the cost of homes.
He has yet to go on the record to name any contractors who have been harmed by insurance prices, but he did tell the Post Independent that he knows excavators who "can't get insurance at any price," even though they've never been subjected to a claim.
Rippy said his bill ultimately protects the home buyer through a provision that requires disgruntled homeowners to negotiate with the contractor responsible for the unsatisfactory work before taking the issue to court.
But critics of the bill say it shifts an enormous amount of responsibility away from contractors and onto home buyers.
"This bill is just outrageous," said Mick Ireland, a Pitkin County commissioner and an attorney. "What it seeks to do is shift all the risk for construction defects to the homeowner."
In the bill, the negotiation required before legal action forces the homeowner to list all the construction shortcomings and take them to the contractor. The contractor then can make an offer to repair the problems or pay a settlement to the homeowner.
Rippy said the point of the negotiations is to get the problem dealt with, if possible, before lawyers and insurance companies are involved.
"I think it very much makes a contractor come to the table and say, 'OK, I'm going to take care of it,'" Rippy told the Post Independent.
That may be the intention, said Ireland, who as a county commissioner pays close attention to legislation coming out of Denver, but the problems for the homeowner come if an agreement can't be reached. Ireland said he does not represent home builders or homeowners as an attorney.
Section 5 of Rippy's bill sets tight limits on what a home buyer can do if he rejects an offer from the home builder:
The home builder can argue that the buyer "unreasonably rejected" his offer of repair. If the court agrees, then the buyer is limited to recovering the cost of repairs only, in effect taking away the buyer's right to have his grievances heard by a jury.
In the event that a buyer is found to have unreasonably rejected a settlement or repair offer from a contractor, the settlement amount is limited to the cost of repairs initially offered by the contractor. In other words, the rejected offer becomes the maximum amount the homeowner can recover.
Before a buyer is allowed to sue for damages beyond the settlement amount offered by the contractor (or other construction professional), the court must find that the contractor's offer of repair was "fraudulent beyond a reasonable doubt."
By introducing the requirement that fraud be proven beyond a reasonable doubt, Rippy and other supporters of the legislation are introducing standards of proof used by criminal courts into what is a civil dispute. In civil cases, the standard of proof for a claim is based on a preponderance of the evidence, far short of the "beyond a reasonable doubt" requirement.
Even if an injured buyer actually clears the hurdles in section 5, and then proves beyond a reasonable doubt that the builder acted "fraudulently and in bad faith" in the construction of the home, Rippy's bill limits what the buyer can recover in "actual economic damages."
Under the current state law, home buyers and other consumers are allowed to seek triple damages if they have been defrauded by a service provider or sales agent. By tripling the monetary damages, Colorado's Consumer Protection Act is designed to discourage shady business practices by companies and individuals. Rippy's bill, critics say, specifically exempts shoddy construction work from the Consumer Protection Act.
Actual economic damages are defined by Rippy's bill as the cost of repairs or the "diminution in value" of the property.
"It's extremely difficult to prove that your property is worth less than it would be if a house was built as promised," Ireland said.
Given the general growth in property values over time, "the contractor can say, 'Your house is worth more than you paid for it, so I'm not going to make any repairs,'" Ireland continued.
Rippy's bill also makes it more difficult for someone injured as a result of a construction defect to sue for damages. It requires that a judge or arbitrator - a jury is not allowed - conduct a hearing to determine if the damages sought are "scientifically valid a cause by the alleged [construction] defect."
The bill also gives contractors the right to claim their work complies with the building code or industry standard, and is therefore not fraudulent, even if the buyer was expecting something other than what was delivered. And it allows builders to use a certificate of occupancy or any other government certificate of inspection as proof that their work is on the up and up - again, even if it's not what the buyer was expecting.
Rick Davis, the Glenwood Springs city councilman who ran against Rippy last fall, is worried the new legislation will shift responsibility on building departments.
Davis, who has been building homes in the area for more than three decades, said the bill goes too far in dealing with the very real issue of insurance costs for contractors.
"There is justification for a change in the rules," he said. "But this singles out one industry and puts the consumers at risk."
