Broomfield Senior Living Owner, LLC v. R.G. Brinkmann Co., 2017 Colo. App. Lexis 261 (March 9, 2017)

R.G. Brinkmann Company, as general contractor, was retained by Sunrise Development, Inc., a major national developer, for the construction of a senior assisted and independent living facility in Broomfield, Colorado. The project was owned by Broomfield Senior Living Owner, LLC.

Section 13.7 of the contract between Brinkmann and Sunrise provided that all claims arising from defects in Brinkmann’s work would be deemed to accrue no later than final completion of the project. On May 15, 2009, the project achieved final completion when a certificate of occupancy was issued.  No defects in the project were noted at that time.  In the Fall of 2012, however, Broomfield discovered broken sewer pipes at the project.  Further investigation revealed a number of defects that Broomfield attributed to Brinkmann’s poor construction.

On July 21, 2014, Broomfield filed a lawsuit asserting various defective workmanship claims against Brinkmann. Brinkmann responded by moving for summary judgment, arguing that under Section 13.7 of its contract with Sunrise, all defective work claims accrued no later than final completion on May 15, 2009 and that Colorado’s two year statute of limitations for civil claims therefore expired on May 15, 2011.  The trial court granted Brinkmann’s motion and dismissed Broomfield’s claims.

Broomfield appealed, arguing that Section 13.7 of the contract was void as against policy under the “Homeowner Protection Act” provisions of Colorado’s Construction Defect Reform Act. Specifically, Broomfield cited to two sections of the Act: (1) Section13-80-104(1)(b)(I), which generally provides that construction defect claims accrue at the time the defects were, or reasonably should have been, discovered; and (2) Section 13-20-806(7)(a), which provides for the protection and preservation of “residential property owners’ legal rights and remedies” by voiding any contract clause waiving or limiting a residential property owner’s right to bring construction defect claims within the applicable statute of limitations period.  Broomfield thus argued that, taken together, these sections voided Section 13.7 of Brinkmann’s contract because senior living facilities like the project are “residential” and that Broomfield is therefore a “residential property owner” within the meaning of the Act.

The Court of Appeals agreed with Broomfield, holding that it was a residential property owner entitled to the protections of the Act. In reaching that conclusion, the Court noted that the term “residential property owner” is not defined in the Act.  The Court therefore utilized a number of interpretative aids including dictionary definitions, the project’s zoning classification, similar language used in other statutes, and Colorado common law to conclude that “the term ‘residential’ is unambiguous and means an improvement on a parcel that is used as a dwelling or for living purposes.”  Utilizing that definition, the Court held that the project constitutes “residential property” because “the building is used to house senior residents [and] [n]either Brinkmann nor [Broomfield] contest that the senior residents live in the building or use it for any purpose other than ordinary living.”

Brinkmann raised two arguments in opposition. First, it argued that the project could not be considered “residential property” because Broomfield received rental income from the property’s senior residents.  Citing to Colorado case law, the Court rejected Brinkmann’s argument and concluded that the “receipt of income does not transform residential use of property into commercial use.”

Second, Brinkmann argued that a commercial entity such as Broomfield was not the type of “residential property owner” that the Act was meant to protect. The Court rejected this argument reasoning that “the term ‘residential’ in § 13-20-806(7) is used to describe the property owned, not to limit its applicability to any specific type of owner, whether an entity or a natural person.”  The majority of the Court thus held that the term “residential property owner” was unambiguous and refers to any property, including the project at issue, that is used as a dwelling or for living purposes.

In a concurring opinion, however, Judge Davidson found ambiguity in the Act’s use of the term “homeowner” in its title, but “residential property owner” in its text. He therefore disagreed with the majority’s conclusion that the Act’s language is unambiguous.  In resolving this ambiguity, Judge Davidson considered the Act’s legislative history, including senate testimony that the Act was concerned with “vulnerable homeowners ‘buying and purchasing the single largest investment in their lives[.]’”  Nonetheless, he viewed the legislative history as a whole as demonstrating  that “it was assumed as a given… that a purchaser of ‘residential property’ included not just an individual homeowner, but also the (more sophisticated and far less vulnerable) purchaser of mixed-use and multi-family properties.”  Therefore, Judge Davidson concurred in the Court’s judgment because the legislative history made clear that the legislature was on notice that the Act’s protections, as written, would apply beyond individual homeowners.

Accordingly, the Court held that the project constitutes “residential property,” that Broomfield was entitled to the Act’s protections as a “residential property owner,” and that Section 13.7 of the contract was therefore void because it served to limit Broomfield’s right to bring its construction defect claims against Brinkmann.

To view the full text of the court’s decision, courtesy of Lexis®, click here.