Real estate notebook: Legislature's changes to construction-defect laws could help condo developers

Several much-anticipated changes to Minnesota's construction-defect laws are closer to the governor's pen.

The amendments to House File 1538 received bipartisan support and went to a conference committee for House and Senate members to hash out differences.

The current, long-standing statute was aimed at protecting homeowners from construction defects that might not have been discovered until several years after completion. The rules, among the most stringent in the nation, essentially hold builders and subcontractors liable for repairs for at least a decade.

Developers say they give homeowner's associations the power to file costly and frivolous lawsuits, sometimes initiated by law firms that specialize in such litigation. That has deterred construction of condominiums, which are now in short supply in the Twin Cities.

David Siegel, executive director of the Builders Association of the Twin Cities, offered the following summary of the changes proceeding through the Legislature:

• Associations will be required to have a preventive plan that demonstrates that they are doing the kind of maintenance that can help prevent future problems.

• An association will not be allowed to proceed with a suit unless a majority of the homeowners (at least 51 percent) can verify that they have been notified of the litigation and are willing to move forward with such legal action. That change is intended to make sure that members of the association are well aware of the pending litigation.

• Mediation will be required before legal action as part of an effort to give all parties a chance to air their grievances, and builders time to fix problems.

Siegel said that BATC believes such changes will encourage developers to build more association-maintained housing, especially entry-level townhouses. At the peak of the pre-recession construction boom, more than half of all new houses in the Twin Cities were association-maintained townhouses and twin homes. Today, they are 15 percent.