Colorado’s housing shortage—particularly in the for-sale condominium market—has been driven in part by the high cost and unpredictability of construction defect litigation. In 2025, the General Assembly enacted House Bill 25-1272, the Colorado American Dream Act, to address these barriers and encourage new condominium development. The Act creates a voluntary Multifamily Construction Incentive Program (MCIP) that offers developers a clearer, more predictable framework for addressing construction defect claims in exchange for meeting defined quality, inspection, and warranty standards.
The MCIP is effective on January 1, 2026. On and after January 1, 2026, developers of attached condominium developments consisting of 2 or more units can voluntarily opt in to this program by:
- Recording an Opt-In Notice. Recording a notice of election into the MCIP in the real property records before offering units for sale;
- Provide 1/2/6 Limited Warranty. Providing a written limited warranty to unit owners at closing, which covers workmanship and materials for 1 year, electrical, plumbing, and mechanical systems for 2 years, and structural components for 6 years; and
- Hire an Independent Inspector During Construction. Hiring an independent third-party inspector—licensed or certified and unaffiliated with the developer—to inspect project components and confirm compliance during construction.
Key Benefits of Opting In
Developers who opt into MCIP gain several procedural safeguards and substantive protections, making defect litigation more structured and predictable:
- Statute of Repose Reduction. The statute of repose, i.e., the period of time during which a claim may be brought, is reduced from 10 to 6 years.
- Mandatory Warranty First, Litigation Later. Unit owners and the association must pursue all warranty-based remedies before filing a defect claim.
- Clear Limits on Claim Types. Narrows the scope of claims to actual property damage or loss of use, bodily injury or death, failure of a component to perform its intended function, and safety risks to occupants.
- Certificate of Review Rule (for Architects & Engineers). Claims against design professionals require a certificate of review (signed expert opinion) to be filed with the initial complaint—not after—ensuring early and stricter scrutiny of claims.
- Structured Claim Response Process. Developers must respond to claims within defined timelines—either by offering a settlement (money or repairs) or providing a formal explanation with applicable standards, which creates transparency and promotes early resolution.
- Attorney Fee Shifting. If a settlement offer is unreasonably rejected, the court may award attorneys’ fees to the developer. Conversely, if the builder fails to make a reasonable offer, the unit owner of the association may recover fees.
- Affirmative Defenses Expressly Available. Developers may assert defenses and avoid or limit liability for defects not caused by them, such as extreme weather or natural catastrophes, acts of war, terrorism, or vandalism, a unit owner or association’s neglect, misuse, or failure to mitigate damage, and circumstances where repairs previously made under the program successfully addressed the defect.
- Insurance Protection. Developers are protected from the risk of insurers denying or canceling liability coverage merely because they made a repair or settlement offer, so long as it’s within the claims process.
Other Changes
Whether a developer elects to opt into MCIP or not, the Act includes the following new benefits.
- Higher Approval Requirement Before Initiating a Claim. An association must now obtain 65% owner approval (up from a simple majority) to initiate a construction defect claim.
- Settlement Used to Repair Defects. Any settlement or judgment proceeds must be used first to repair defects before other uses.
- Duty to Mitigate. A claimant must take reasonable steps to mitigate damage before filing a claim. If they don’t, any damages attributable to that failure may be barred.