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Court throws out condo document amendment in construction suit

A court ruling from outside of Illinois shows how complex dealing with complaints from a condominium’s homeowner’s association of alleged construction defects can be. Homeowner’s associations usually have governing documents, which are open to interpretation and can be amended over time.

The Colorado Court of Appeals has sided with the builder of a condominium in a dispute over whether a construction defect claim could be taken to arbitration over the association’s objections. The appellate court found that an amendment to the association’s bylaws was improper.

The original documents contained a provision that allowed construction defect matters to be decided in arbitration, rather than in court. The clause said that this provision could not be amended without the consent of the developer, even if the developer no longer owned any units in the condo.

The developer sold the last of its units in 2012. The following year, the unit owners voted overwhelmingly to remove the section of the documents that included the arbitration clause. The association then sued the developer for unspecified construction defects.

The developer argued that removing the arbitration clause without its permission was invalid, and the Court of Appeals agreed. The three-judge panel noted that “arbitration is favored in Colorado” for resolving business disputes.

Many construction businesses prefer to take their disputes to arbitration, where the neutral decider is often informed about the industry. Arbiters are often retired judges who presided over construction disputes during their previous careers.

Whether your company goes to arbitration or to court, you will likely benefit from the advice of an attorney.

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