Construction Law

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Construction Defects on Mortgaged Homes

Construction defects are always a problem for construction companies. However, changes in legislation have changed how companies are held liable for those defects. Mortgaged homes can still have defects, and it raises the question of who is responsible for those defects: the construction company or the mortgage lender. In this editorial, a Colorado Springs contractor lawyer discusses construction defects on mortgaged homes. 

Related: Who is Responsible For Construction Defects?

Lender vs. Construction Company

In the majority of cases, the construction company is still held liable for construction defects. This is not a significant departure from how the system was established before. Any time there is a construction defect, the company that built the property is likely to be held liable for the cost of repairs.

This concept is made more difficult to put into practice with the introduction of construction lending. Because of this, lenders may fill the role of a property owner or property development company. In these cases, it may be possible for a homebuyer to turn to the lending company to resolve construction defects. Essentially, whichever company is responsible for building the property is the one that the law turns to for liability.

Construction Lending

Construction lending changes how the resolution for construction defects is handled slightly. Construction companies can take out loans to support the construction process and finance the remainder of the project. If the construction company defaults on the loan, the lender can seize the property as collateral.

When the lender takes ownership of the property, it will likely try to finish the construction so that it can sell the property to recover its costs. However, this means that the lender is functioning as a developer and will hire another construction team to finish the work. Since the lender assumes the leadership role in completing construction, it stands to reason that the lender is responsible for construction defects in the same way that the construction company should be held responsible.

Related: 5 Things For Contractors to Know About Construction Defects

Every Case is Different

Every case is a bit different, and that means it can be hard to predict which company will be held liable for construction defects. It could be your construction company, the lender, or a contractor that worked on the project that faces legal action as a result of a construction defect. The best way to know where the law in your state stands on this matter is to discuss the case with a Colorado Springs contractor lawyer. Every state is different and could offer your company a varying level of protection against construction defect claims.

To determine what your legal options are dealing with construction defects, discuss what happened with a construction law attorney. He or she can tell you where your state stands on lenders being responsible for construction defects and mortgaged homes, so that you will know if your construction company will need to pay for the construction defect. If you have any questions about construction defects and legal processes, contact one of the Colorado Springs contractor attorneys from Cotney Attorneys & Consultants.

If you would like to speak with a Colorado Springs contractor lawyer, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.