In May, the Colorado General Assembly enacted H.B. 25-1272—the American Dream Act—to address one of the state’s most persistent housing challenges: the shortage of attainable, for-sale condominiums. For more than a decade, Colorado’s for-sale multifamily market has struggled under the weight of unpredictable construction defect litigation.
Developers and lenders, wary of exposure, largely avoided condominium projects—especially those priced for working families. As a result, many of Colorado’s fastest-growing cities have seen a near absence of new affordable condominium supply, even as demand for attainable housing continues to rise. The act is effective on Jan. 1, 2026.
Learning From Texas
Ten years earlier, Texas faced a similar problem. In 2015, the Texas Legislature enacted H.B. 1455 (Chapter 82, Sections 82.119 and 82.120 of the Texas Property Code). H.B. 1455 established a mandatory, transparent process for resolving condominium defect claims through independent inspections, owner participation and a 90-day right to cure.
Interestingly, when I helped draft H.B. 1455, we reviewed and adapted concepts from an earlier Colorado Senate proposal—2014’s S.B. 14-220—which had attempted, but failed, to introduce a similar framework for construction defect reform. That bill included many of the same principles later adopted in Texas, such as owner participation, advance notice, and support for mediation and arbitration of defect claims.
It’s notable that while Colorado’s 2014 effort stalled amid political opposition, Texas implemented those ideas the following year, and it took another decade for Colorado to pass its own version in the form of the American Dream Act.
The result illustrates how enduring and complex the issue of condominium defect reform has been for states seeking to balance consumer protection with housing supply.
The Act’s Framework
The American Dream Act creates what it calls a multifamily construction incentive program, or MCIP, that developers can elect to follow when building for-sale condominium or townhome projects.
In exchange for adhering to a defined set of construction, inspection and warranty standards, participants receive a more predictable path for resolving defect claims.
Key components include:
- Notice of election—developers record an election to participate in the MCIP before offering units for sale.
- Independent third-party inspection—a licensed, unaffiliated inspector confirms compliance during construction.
- 1/2/6 limited warranty—this covers workmanship and materials for one year, mechanical and plumbing systems for two, and structural components for six.
- Opportunity to cure—developers have a defined period to address identified issues before litigation proceeds.
In return, the statute provides procedural balance and predictability: a six-year statute of repose (down from 10), a requirement that owners exhaust warranty remedies before filing claims, and a certificate-of-review requirement for claims against design professionals.
A Matter of Choice
Under the American Dream Act, a developer must make a deliberate decision whether to opt into the MCIP framework. Unlike the Texas statute, which imposes the procedural regime universally on new condominium projects, Colorado’s law gives developers the option to participate.
The choice is a calculated one: While many developers will likely opt in given the benefits of predictability and risk mitigation, it remains a reasoned business decision rather than a default mandate.
Opting in signals to lenders, insurers and potential buyers that the project is committed to structured standards and defect-resolution processes, but it also binds the developer to specific procedural obligations that may limit flexibility in managing claims or negotiations. That trade-off must be evaluated carefully at the outset of each project.
Critiques and Counterpoints
While commentators have lauded H.B. 25-1272 as a pragmatic step toward revitalizing for-sale multifamily housing, legal critiques from Colorado’s construction and litigation bar have underscored risks and practical problems with implementation. The MCIP adds complex procedural steps and disclosures associated with claim resolution that are preconditions to achieving the act’s benefits without a meaningful reduction of risk.[1]
The added complexity and additional costs needed to comply with these steps and disclosures could also limit adoption by the building industry. It’s also worth noting that the MCIP’s settlement process, which provides the developer with a right to inspect the property within 30 days and proffer a plan for the repairs or a settlement officer within another 30 days, will be difficult to accomplish.[2]
Nonetheless, critiques of the MCIP can be seen as deliberate trade-offs intended, in the final analysis, to reduce speculative or marginal litigation and restore predictability to the market.
It’s by no means perfect—legislation never is—but clarity of process, clearer definitions, and presuit inspections and disclosures will provide some reduction of risk formerly associated with condominium projects in the Centennial State.
Arbitration and Declaration Protections
One distinction between the Texas and Colorado approaches lies in the domain of arbitration and the stability of dispute resolution provisions in condominium declarations.
In Texas, under H.B. 1455, a declaration may provide for binding arbitration of construction defect claims—and critically, the statute prohibits subsequent amendment of that arbitration requirement for claims arising prior to the amendment. That legislative lock-in was designed to block a common tactic of retroactively removing arbitration when a claim arises.
In Colorado, the American Dream Act does not expressly impose a mandatory arbitration requirement or statutory amendment restraint.
However, Colorado jurisprudence—most notably the Colorado Supreme Court‘s 2017 decision in Vallagio at Inverness Residential Condominium Association v. Metro Homes Inc.—establishes that a declarant’s consent-to-amend clause in the original declaration may survive a later attempt to delete an arbitration requirement.
In Vallagio, the court held that the Colorado Common Interest Ownership Act does not forbid nonpercentage conditions, such as requiring a developer’s written consent, on amendments, and that the attempted deletion by a unit owner amendment of an arbitration clause without the developer’s required consent was ineffective.
As a result, the arbitration clause remained binding even after the developer had turned over control of the association. Thus, while the MCIP does not mandate an arbitration lock-in, the Vallagio doctrine offers a functional equivalent—provided the condominium declaration amendment provision is carefully drafted.
A Step Toward Balance
The American Dream Act does not eliminate litigation risk entirely, but it does introduce a process, some predictability and a means for parties to cooperate to resolve construction defect claims. It balances accountability with opportunity—protecting consumers while giving developers a framework to deliver housing.
As Colorado implements this law, the real measure of success will not be in court filings but in cranes on the skyline—and in the number of new homes available to Colorado families. If the state achieves that goal, the American Dream Act may well stand as the next chapter in a national trend toward smart, balanced condominium reform.
CONTACT:
Bob Burton I 512.370.2869 I rburton@winstead.com
Bob Burton is a Shareholder and Department Head at Winstead, where he leads the firm’s Real Estate Development, Real Estate Finance, and Public Finance practice areas. He has significant experience advising clients on mixed-use developments, master-planned communities, and complex community governance structures. Bob counsels national homebuilders and real estate developers on all aspects of residential, commercial, and mixed-use projects, including land acquisition, entitlement, project structuring, marketing, and regulatory compliance. His work spans large-scale master-planned communities, urban and suburban mixed-use developments, resort and second-home communities, and multifaceted condominium projects across the country.
Article published in Law360, October 14, 2025
[1] McLain, *New Law, Old Risks: Why Colorado’s H.B. 25-1272 May Backfire on Builders* (HHMR Law, May 27, 2025). https://www.hhmrlaw.com/new-law-old-risks-why-colorados-h-b-25-1272-may-backfire-on-builders.html.
[2] Yost, Christopher, *Colorado’s New Construction Bill: What Developers Need to Know* (Law Week Colorado, May 30, 2025). https://www.lawweekcolorado.com/article/colorados-new-construction-bill-what-developers-need-to-know/.
Disclosure: The author assisted in drafting and advancing the 2015 Texas bill, H.B. 1455.
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