On May 9, 2025, Governor Jared Polis signed House Bill 25-1272, known as the “Colorado American Dream Act,” into law. The legislation, which takes effect January 1, 2026, aims to address the state’s well-documented shortage of for-sale multifamily housing, particularly condominiums and townhomes, by creating a voluntary program for developers and builders who agree to enhanced quality assurance measures and pre-litigation procedures. In exchange, participants were promised certain procedural and substantive protections in construction defect litigation.
Despite its well-intentioned goals, H.B. 25-1272 falls short of delivering meaningful legal protections to builders. While touted as a reform, the Act ultimately introduces more procedural burden and disclosure obligations than it does risk reduction. The law appears to offer insulation from meritless claims, but closer inspection reveals that its protections are largely illusory and, in some cases, may increase the risk and cost of litigation for participants.
Overview: The Voluntary Incentive Program
The centerpiece of the Act is the creation of the Multifamily Construction Incentive Program (“MCIP”), a voluntary framework under which builders can opt to comply with certain requirements in exchange for limited benefits in future construction defect disputes. Participation requires:
- Recording a notice of election in the real property records prior to issuance of the final certificate of occupancy;
- Providing specific written warranties to buyers:
- One year for workmanship and materials;
- Two years for plumbing, electrical, and mechanical systems;
- Six years for structural components;
- Undergoing third-party inspections at defined project phases by an unaffiliated, licensed design or construction professional.
While the statute claims that these features will reduce litigation, the procedural and legal burdens on participants are extensive, and the protections offered in return are narrow, inconsistent, or already available under existing law.
Procedural Burdens: Disclosure Obligations and Litigation Timelines
Perhaps the most significant change introduced by the MCIP is a new and aggressive notice-of-claim framework for participating construction professionals. Within 60 days of receiving a notice of claim, the builder must disclose extensive documentation, including:
- “All plans, specifications, and soil reports related to the claim;”
- “Maintenance and preventive maintenance recommendations;”
- “The name, last-known address, and scope of work of each construction professional who contracted to perform work;”
- “All documents related to the third-party inspection of the property;”
- “Copies of each insurance policy purchased by the construction professional and related to the claim”
See C.R.S. § 13-20-803.5(3.5)(a).
These disclosures would not otherwise be required at this early stage and typically come, if at all, only as part of mandatory disclosures or after formal discovery requests in litigation or arbitration. Under this new framework, builders must effectively arm claimants with the documents needed to support and plead a defect claim, well before litigation is filed and without the procedural protections of formal discovery.
This asymmetry is exacerbated by new tight timelines. If a builder intends to make a settlement offer under the Act, it must do so within 90 days after the property inspection period concludes. Failure to do so strips the builder of many of the program’s protections and may result in exposure to the claimants’ attorney fees. These condensed deadlines create tension between legal strategy and insurance claim-handling obligations—especially where coverage investigations are still ongoing.
Fee-Shifting: An Incentive to Sue, Not Settle
The Act’s fee-shifting provision is among its most controversial features. “If a claimant unreasonably rejects a reasonable written offer of settlement … the court may award attorney fees and costs to the construction professional.” See C.R.S. § 13-20-803.3(9)(d). However, “[i]f a construction professional fails to make a reasonable written offer … the limitations on damages and defenses … do not apply, and the court may award attorney fees and costs to the claimant.” See C.R.S. § 13-20-803.3(9)(e).
This statutory language introduces tremendous hindsight risk, effectively inviting plaintiffs’ counsel to gamble on whether it can beat a notice of claim offer as a way to create entitlement to attorneys’ fees. As we previously discussed in our blog post, “Attorney Fee Clauses Are Engraved Invitations to Sue,” injecting attorneys’ fees into construction defect litigation often incentivizes lawsuits, not early resolution.
The Illusion of Substantive Protections
The Act claims to limit program claims to material defects. Specifically, Section (6) provides:
A person shall not assert a program claim unless the defect has resulted in one or more of the following:
(a) Actual damage to real or personal property;
(b) Actual loss of the use of real or personal property;
(c) Actual bodily injury or wrongful death;
(d) An unreasonable reduction in the capability of, or an actual failure of, a building component to perform an intended function or purpose; or
(e) An unreasonable risk of bodily injury or death to… the occupants of the residential property.
See C.R.S. § 13-20-803.3(6).
This language lacks teeth. The inclusion of the term “unreasonable” gives claimants and their experts broad leeway to assert that any deviation from perfection constitutes a defect. Expect plaintiffs’ experts to testify, as they already do, that minor cracking, uneven finishes, or out-of-tolerance measurements create an “unreasonable reduction” in functionality. In practice, this language will swallow the protection, rendering it a nullity.
No True Right to Repair
Another supposed benefit of the MCIP is its requirement that claimants exhaust warranty remedies before filing suit: “If a claim involves a defect… that is covered by the warranty… the claimant shall pursue all reasonable remedies available under the warranty process before bringing an action for damages.” See C.R.S. § 13-20-803.3(7)(b).
By inserting the word “reasonable” with respect to a warranty’s remedies, which often include an actual repair of the alleged defect, the statute introduces ambiguity. Plaintiffs’ attorneys are likely to argue that requiring the builder to inspect or repair is not “reasonable” under the circumstances, particularly where relationships are adversarial or defects are widespread. The result is that the MCIP creates no actual, enforceable right to repair. Builders will likely remain sidelined from the repair process, precisely the situation the Act claimed to resolve.
Affirmative Defenses That Aren’t
The Act purports to create new affirmative defenses, such as those based on homeowner neglect, weather, alterations, or abuse. These defenses are not new, however, or unique to projects opted into the MCIP. They simply restate principles that already apply to claims for negligence, breach of contract, and warranty. As a matter of law, if a builder can prove that the plaintiff’s own conduct or external factors caused the damage, the plaintiff cannot establish causation, regardless of whether the project was in the MCIP.
Calling these “affirmative defenses” is a misnomer. Builders have always had the right to assert these arguments, with or without the statute. The Act provides no new burden-shifting framework, presumptions, or immunities. Instead, it reinforces existing defenses under a new heading, offering no added legal advantage.
Certificate of Review Requirements: A Procedural Trap
The Act also alters the rules for certificates of review in cases involving design professionals. Under current law, a claimant may file suit against an architect or engineer and has 60 days to submit a certificate of review from another licensed professional. Under the MCIP, “A claimant shall file the certificate of review with the complaint.” See C.R.S. § 13-20-803.3(2)(a).
This change may catch claimants off guard, resulting in dismissals for failure to comply. Worse, the same requirement applies to nonparty designations. A builder wishing to designate a design professional as a nonparty at fault must file a certificate at the time of designation. This may hinder strategic defenses and complicate efforts to properly allocate fault, again, increasing procedural risk for program participants.
Mitigation: Already the Law
The Act restates a builder’s right to assert failure to mitigate as a defense: “A claimant must certify in the complaint that the claimant has satisfied the duty to mitigate.” See C.R.S. § 13-20-803.5(1)(b).
This is unnecessary under current Colorado law. To be sure, Colorado law already imposes a duty to mitigate damages, and builders who opt not to enroll in the program retain that defense. Framing mitigation as a “benefit” of MCIP participation is misleading, builders already have that right, and this provision adds nothing of practical value. To the contrary, it provides another procedural hurdle which, if not met, results in builders losing a currently available defense. This is especially problematic since the requirement to allege a duty to mitigate comes before discovery, when a claimant has to provide information, or answer discovery, related to what steps is has taken to mitigate its damages.
Conclusion: More Risk, Not Less
Builders considering participation in the MCIP should consult with legal and insurance counsel before recording any election to opt in. Once committed, the program may increase exposure while limiting strategic flexibility and offering no new, substantive protections.
If you have questions about how this legislation may affect your business, contact our team at Higgins, Hopkins, McLain & Roswell, LLC. We are here to help you navigate Colorado’s evolving legal and regulatory landscape.
