The Colorado Legislature enacted the Homeowner Protection Act (HPA), C.R.S. § 13-20-806(7), in response to unequal bargaining power between builders/developers and home buyers. The Legislature was concerned that builders/developers included onerous clauses in form home purchase agreements that limited their liability for any homeowner dispute. Homebuyers, left with the choice of agreeing to the limitation or not purchasing the home, would agree to limit their liability, often without reading or understanding the agreement. Then, years later, the builder/developer would rely on the limitation of liability to defeat homeowner claims.
The HPA addresses this concern by voiding any express waiver of or limitation on the legal rights and remedies provided by Colorado’s Construction Defect Reform Action as against public policy. The HPA was enacted on April 20, 2007, and applies to any action filed after its enactment.
Since its passage, builders, developers, architects and engineers struggled with whether the HPA voids limitations of liability in professional contracts executed prior to enactment. Architects, engineers and other professionals argued that the HPA could not void their contractual limitation of liability because: (1) voiding these clauses in contracts executed prior to the HPA would be unconstitutionally retrospective and (2) the HPA applied only to contracts with homeowners, not sophisticated commercial parties such as builders, developers, architects and engineers.
Colorado district courts struggled with these issues without guidance from Colorado’s superior courts for seven years. Finally, on Jan. 30, 2014, the Colorado Court of Appeals issued its first reported opinion regarding the HPA in Taylor Morrison of Colo., Inc. v. Bemas Constr., Inc., 2014 COA 10.
In Taylor, the Colorado Court of Appeals concluded that applying the HPA to void limitation of liability clauses in professional contracts executed prior to enactment of the HPA was unconstitutionally retrospective. Thus, limitations of liability in professional contracts between sophisticated parties executed prior to 2007 are enforceable.
However, the Court of Appeals did not address the alternative argument that the HPA could not apply to any professional contracts and was limited to only homeowner contracts. Given this, uncertainty remains whether the HPA voids limitation of liability clauses in a professional contract executed after enactment of the HPA. This uncertainty will not be resolved until the Colorado Court of Appeals or Supreme Court clarifies the scope of the HPA.