Questions about the effect of foreclosures on construction defect suits. Input requested.

During a recent continuing legal education class at which I was speaking, I was approached by an attorney who posed a question about the effect of a foreclosure on a residential construction defect action.  The question, essentially, was what happens to homeowners’ construction defect claims after they lose their home in a foreclosure action?  What happens when the construction defects are a primary cause for why the homeowners are unable to keep up with the mortgage, leading to the foreclosure?

I had to confess that I didn’t know the answer, and my quest began.  I starting by posing the following questions to construction defect attorneys in Colorado, to various construction law and construction defect groups on LinkedIn, and to friends within the Construction Defect Claim Manager Association:

Does anyone know of any Colorado authority, authority from other jurisdictions, or law review articles dealing with the proper measure of damages in a situation in which construction defects in a home ultimately result in the loss of use of, and ultimate foreclosure on, a home? I am trying to wrap my head around the question of whether the (previous) owner’s claim would be for the actual damages under Colorado’s Construction Defect Action Reform Act (i.e., the cost of repair), or for breach of contract type damages, including the ultimate cost of the foreclosure (i.e., the lender’s deficiency claim), attorneys’ fees, damage to credit, etc.

Also, is there a real party in interest problem with respect to the previous owner seeking cost of repair damages under CDARA, in light of the fact that he no longer owns the property?

To date, I have received many helpful responses and copies of various briefs on the issue, but it seems to be somewhat of an unsettled question of law, at least in Colorado.  I am in the process of compiling all of this research for the purpose of drafting an article on the subject.  To that end, I thought it worthwhile to pose the questions to the larger audience of people who might come across this blog (to the extent that anyone still reads this blog after the end of  Colorado’s legislative session).

If you have any authority or thoughts on the subject. I would like to hear from you. Please contact me e-mail at mclain@hhmrlaw.com, by at (303) 987-9870, leave a comment on this blog, drop by the firm’s Facebook page.

I look forward to hearing from you and getting to the bottom of this issue.