Construction Law Update – Second Quarter 2025

Construction project starts are now moving into both new types of projects and new technologies for building across the country. Office to residential conversions are happening in many urban centers which have lower commercial office space demands and great challenges meeting new home construction demands. Solar energy projects and data centers are leading the commercial construction booms across the country in many states. Construction technology is also seeing many new changes with the use of 3D printers for construction as well as the introduction of robotics in the field allowing for construction to continue despite labor shortages in many areas.

Weather related challenges also are impacting design for construction projects and manufacturers have introduced remote sensing technology for water loss and flooding issues as well as wildfire sensors in buildings. Other new weather technologies include use of cyclone-proof roofs and storm-resistant doors. New sustainability goals also have created materials options including low-carbon cement, cross-laminated timber and solar power energy systems as part of many new construction projects. The ability of our construction industry to adapt and modify itself to meet these changing needs allows it to evolve with the demands, maintaining its role as a vibrant part of our economy.

The past several years of challenges in material and labor shortages as well as new requirements for sustainable construction methods have acted as catalysts for the industry. Construction companies and manufacturers have been working hard to create solutions to these issues which include the introduction of new renewable construction materials and creative solutions to high labor demands such as the use of pre-fabricated building components which are easily transported and installed. On the legal side of these developments, we see the continued efforts to focus on safety. California has now implemented its balcony inspection and repair compliance statutes for residential apartment projects and homeowners association projects including detailed investigation specifications on elevated walkways and balconies which must be inspected in both new and older projects across the state. Arizona is proposing changes to its statute of limitations for construction defect claims to shorten the statute from 8 to 4 years for construction defect claims in a condominium projects. Shorter statutes will result in more frequent inspections and construction review obligations by owners and property managers.

Legal trends in California include increased liability for design professionals based on a recent decision finding liability for designers absent contractual privity in Lynch v. Peter & Associates, Inc., 104 Cal. App. 5th 1181 (2024). Construction companies and developers also favor arbitration over jury trials which continue to be the preferred venue for litigation in many states with statutory support at the federal and state level, as seen in many recent court decisions interpreting arbitration provisions and statutes. The California Supreme court issued a recent decision addressing waiver of the right to arbitration in Quach v. California Commerce Club, Inc., 16 Cal. 5th 562 (2024) which is a good reminder to make sure to seek arbitration early in the dispute rather than wait until after the state court action has been commenced. Arbitrations provide a speedier, streamlined resolution path which has a benefit to avoid expensive protracted litigation. These updates and trends show that the construction industry continues to grow and thrive in many ways and the future trends reflect the dynamic growth ahead.

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As the court noted in Appleby, “parties in construction defect cases who have the right to sue the builder for breach of contract may not also assert the same claims in tort.” 2023CA0008 at ¶ 19. Relying on the Supreme Court’s prior holding (from BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004)) that the economic loss rule applies in cases involving “interrelated contracts,” as well as those involving a “direct two-party contract,” the court held that the economic loss rule barred claims by homeowners against a structural engineer even though the homeowners had not contracted directly with the structural engineer. In doing so, the court distinguished prior case law holding that homeowners may pursue direct actions in tort against subcontractors (see A.C. Excavating v. Yacht Club II Homeowners Ass’n, 114 P.3d 862, 868 (Colo. 2005)), noting that the “independent duty” owed by contractors and subcontractors under Cosmopolitan Homes, Inc. v. Weller, 663 P.2d 1041 (Colo. 1983) extends only to “subsequent purchasers” of the home. This is because original purchasers of a home, unlike subsequent purchasers, can enforce the remedies specified in their contracts with the builder or developer who sold them the home.

The homeowners in Appleby made arguments on appeal premised on the public policy reflected in the legislative history of the Construction Defect Action Reform Act (CDARA). The court did not consider those arguments because they were raised for the first time on appeal. These arguments, regarding the “independent duty exception” to the economic loss rule, will likely be the grounds for future legal battles. Following the announcement of the Appleby decision, the Colorado legislature in 2025 introduced a bill to amend Section 13-20-806 of the Colorado Revised Statutes to clarify that “construction professionals owe an independent tort duty of care to construct residential homes in a non-defective and reasonable manner, and that this duty is owed equally to original and subsequent residential home purchasers.” (SD25-185). The bill passed the Judiciary Committee and was referred to the Committee of the Whole, but the legislative session ended without its passage. Currently, the economic loss rule as analyzed in Appleby remains the law, but we can expect this issue to be revisited in the next legislative session.

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Former Reno Managing Partner Robert Schumacher and Associate Tomiko Ortiz obtained full dismissal of a complaint against GRSM client, the MEP Consultant and Design Engineer of record, on a large luxury condo/apartment complex on motion to dismiss. The basis for the motion was plaintiff’s failure to comply with Nevada’s stringent statute concerning lawsuits filed against design professionals. Specifically, the motion argued that plaintiff should have filed concurrently with the complaint an affidavit of a design professional and Certificate of Merit consistent with Nevada law. Plaintiff, who was suing for serious personal injuries sustained in a hit and run pedestrian versus auto accident, alleged that the design of the (temporary) exterior lighting of the project (which was in the middle of being built) was deficient such that the area where plaintiff was run down was too dimly lit causing, at least in part, plaintiff’s injuries.

Gordon Rees Scully Mansukhani Charleston Partners Arden Lowndes and J. Patrick Norris recently secured a significant win on behalf of an engineering firm involved in the repair design of a high-rise residential building in coastal South Carolina. The case arose from construction defect claims brought by a homeowners’ association against the general contractor, which in turn filed a third-party equitable indemnity claim against GRSM’s client. Read the full result here.

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Construction Executive developed The Top 50 Construction Law Firms™ ranking by surveying more than 600 U.S. construction law firms. The survey collected data on 2024 revenues from construction practices, the number of construction attorneys, the percentage of total revenues from construction practices, the number of states licensed, the establishment year of the construction practice, and the number of construction industry clients served in 2024. An algorithm weighted these factors in descending order of importance to determine the ranking. Read more here.

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GRSM’s construction attorneys focus their practice on the comprehensive range of legal service required by all participants in the construction industry – architects, engineers, design professionals, design joint ventures, owners, developers, property managers, general contractors, subcontractors, material suppliers, product manufacturers, lenders, investors, state agencies, municipalities, and other affiliated consultants and service providers.

We serve clients who design, develop, or build all types of structures, including commercial buildings, single and multifamily residential projects, industrial facilities, universities, hospitals, museums, observatories, amusement parks, hotels, shopping centers, high-rise urban complexes, jails, airports, bridges, dams, and power plants. We also have been involved in projects for tunnels, freeways, light rail, railway stations, marinas, telecom systems, and earth-retention systems. Our experience includes private, public, and P3 construction projects.

If you have questions about this issue of the Construction Law Update or our nationwide construction practice, click here to visit our practice group page or contact partner Dan Evans.

Daniel E. Evans
Gordon Rees Scully Mansukhani
555 Seventeenth St.
Suite 3400
Denver, CO 80202
(303) 200-6863
deevans@grsm.com

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