What Colorado’s New Construction Defect Law Means for Condo and Townhome Buyers

By Prerna Kapoor, CLHMS | REAL Brokerage | July 29, 2026

If you’re buying a new construction condo or townhome in Colorado this year, one thing changed on January 1 that almost nobody outside the legal and building industry noticed. Your HOA now needs a lot more agreement among owners before it can sue a builder over a construction defect, and builders who sign up for a new state incentive program get real legal protection in return for offering a written warranty. Here’s what that actually means for you.

The Vote Just Got Much Harder to Get

Under a new law, House Bill 25-1272, known as the Colorado Dream Act, an HOA now needs approval from 65% of all owners before it can file a construction defect lawsuit against a builder. Before this year, a simple majority was enough. That’s a real shift in how much consensus a community has to build before pursuing a claim, especially in larger condo and townhome communities where getting even half the owners to vote on anything is a challenge.

The law also requires that if an HOA does win or settle a claim, it has to use that money to actually fix the defects first, before spending it on anything else. Lawmakers passed this as part of a broader package aimed at Colorado’s shortage of for-sale multifamily housing, which the legislature’s own findings put at more than 100,000 units statewide. Builders have long pointed to construction defect litigation as one reason they’d rather build apartments to rent than condos to sell, and this bill is a direct response to that.

The Clock That Was Already Running

Separate from this year’s change, Colorado has always had a statute of repose on construction defect claims. It’s six years from the date a project reaches substantial completion, full stop, regardless of when a defect is actually discovered. If a defect first shows up in year five or six, that deadline stretches to eight years total. There’s also a separate two-year statute of limitations that starts ticking the moment you discover, or reasonably should have discovered, the problem. Both clocks apply, and a claim has to satisfy both to move forward.

This matters most for anyone buying a resale condo or townhome in a building that’s four, five, or six years old. The window to catch and act on a defect is closing whether or not anyone’s paying attention to it.

Why Some Builders Are Opting Into a Shorter Deadline on Purpose

The new law also created the Multifamily Construction Incentive Program, a voluntary track builders can opt into before a project gets its final certificate of occupancy. In exchange for real protections, mostly around litigation, opted-in builders have to provide a written warranty: one year on workmanship and materials, two years on plumbing, electrical, and mechanical systems, and six years on structural components. They also have to use independent third-party inspectors with no financial ties to the project.

Here’s the part that surprises people. If a builder meets those requirements, the statute of repose on that project gets locked at a flat six years, no five-to-six-year extension available, and getting a certificate of occupancy creates a legal presumption that the property doesn’t have construction defects. Buyers have to work through the warranty process before they can sue at all. It’s a real trade, shorter builder exposure for a documented warranty and a faster repair process, and it’s the kind of thing worth asking about directly when you’re touring a new development.

What to Actually Ask Before You Buy

I’ve had buyers touring new townhome developments in Lone Tree and Aurora ask about this exact scenario this summer, usually right after their inspector flags something minor and they want to know what recourse looks like five years down the road. If you’re looking at a new condo or townhome anywhere in the Denver metro, ask the builder or listing agent whether the project opted into the incentive program, and ask to see the written warranty if it did. If you’re buying resale in a building that’s a few years old, ask the HOA directly whether there’s any known or pending defect issue, and how many years the building has left on its statute of repose. None of this should scare you off a purchase. It just changes what questions are worth ten minutes of your time before you sign.

Quick answers

Did Colorado make it harder for HOAs to sue builders? Yes. As of January 1, 2026, an HOA needs 65% of all owners to approve filing a construction defect claim, up from a simple majority.

How long do I have to file a construction defect claim in Colorado? Generally six years from substantial completion, the statute of repose, extended to eight years if the defect first appears in year five or six. A separate two-year statute of limitations also applies from the date you discover the problem.

What is the Multifamily Construction Incentive Program? A voluntary program that gives builders a flat six-year statute of repose and other litigation protections in exchange for providing a written warranty and using independent third-party inspectors.

If you’re comparing new construction to resale anywhere in my service area, my new construction buying guide walks through the process end to end, and what a builder warranty actually covers is worth reading before you tour a model home. If you’re looking at an existing condo or townhome instead, what an HOA reserve study can tell you and my full HOA guide cover what else to check before you commit. I’m always happy to talk through a specific building or builder before you make an offer, no pressure, no pitch.

You can read the bill itself at the Colorado General Assembly’s page for HB25-1272, and a construction law firm’s detailed breakdown of what changed at Woods Aitken’s summary of the Colorado Dream Act.

Prerna Kapoor | REALTOR® | Luxury Home Specialist
REAL Brokerage | 720-949-5450 | info@prernakapoor.com
CLHMS • RENE • PSA • ABR | International Sterling Society Award Winner

Prerna specializes in residential real estate across Parker, Aurora, Lone Tree, Castle Pines, Highlands Ranch, Cherry Creek, Greenwood Village, and Centennial. She speaks English, Japanese, and Hindi.