On May 12, 2025, Colorado Governor Jared Polis signed into law House Bill 25-1272, creating the Multifamily Construction Incentive Program (MCIP), a voluntary, opt-in framework aimed at encouraging the construction of entry-level, attached multifamily housing, such as condominiums and townhomes. The law becomes effective August 6, 2025, with the MCIP’s core provisions taking effect on January 1, 2026.
The MCIP represents a significant shift in Colorado’s approach to construction defect litigation, offering builders and developers a new path forward – one that attempts to balance consumer protection with reduced legal exposure. The impact and implications of the MCIP remain to be seen, but it presents new avenues for builders and developers to be aware of and to monitor as implementation proceeds.
What Is the MCIP?
The MCIP, which is not a default – but instead requires those seeking its protections to opt in by completing various prerequisites outlined below – is designed to address long-standing concerns about the chilling effect of construction defect litigation on the development of for-sale multifamily housing. By opting into the program, builders and developers can access statutory protections that limit the types of claims and damages that can be brought against them, provided they meet certain quality assurance and disclosure requirements.
Key features of the MCIP include:
- Limitations on Claims: Only certain types of damages are actionable, including:
- Actual damage to property
- Loss of use
- Bodily injury or wrongful death
- Substantial system failure or safety risks
- Statute of Limitations: Claims must be brought within six years of project completion, aligning with the warranty periods required under the program.
- Exhaustion of Warranty Remedies: Before filing a lawsuit, claimants must first exhaust the builder’s warranty process.
- Affidavit Requirement: Claims against architects or engineers must be supported by a third-party affidavit, similar to existing procedures for asserting claims against other licensed professionals.
- HOA Claim Restrictions: Homeowners’ associations must now obtain 65% unit owner approval (up from a simple majority) before initiating a defect action.
- Mitigation Requirement: Claimants must take reasonable steps to mitigate damages before filing suit. Failure to do so may bar recovery.
How to Opt In
To participate in the MCIP, builders must take several proactive steps:
- Record a Notice of Election:Before the final certificate of occupancy is issued, the builder must record a notice of election to participate in the MCIP in the real property records.
- Provide Specific Warranties:Builders must offer the following minimum warranties to buyers:
- 1 year for workmanship and materials
- 2 years for plumbing, electrical and mechanical systems
- 6 years for structural components
- Third-Party Inspections: Projects must undergo inspections at defined phases by an independent, licensed design or construction professional unaffiliated with the builder.
These requirements are intended to promote higher construction standards and transparency, while also giving builders a reputational and legal advantage.
What Happens If There’s a Claim?
Even under the MCIP claims can still be brought, but the process is more structured and builder-friendly:
- Mandatory Disclosures: Within 60 days of receiving a claim, the builder must provide extensive documentation related to the project.
- Fee Shifting: If a claimant rejects a reasonable settlement offer, the court may award attorney fees and costs to the builder. Conversely, if the builder fails to make a reasonable offer, it may lose access to the MCIP’s liability protections and be subject to fee shifting in favor of the claimant.
- Insurance Protections: The law prohibits insurers from canceling or reducing coverage based on a builder’s participation in the MCIP or offer to repair.
What This May Mean for You
If you are a builder, developer or design professional involved in or interested in becoming involved in Colorado’s multifamily housing market, the MCIP offers a compelling opportunity to reduce litigation risk while enhancing your reputation for quality construction. However, the benefits of the program are only available to those who proactively opt in and comply with its requirements.
Action Steps
- Review your warranty policies and ensure they meet or exceed the MCIP’s minimum standards.
- Engage qualified third-party inspectors early in the project timeline.
- Coordinate with legal counsel to prepare and record the required notice of election and ensure compliance with opt-in requirements to obtain MCIP protections and new statutory requirements if a claim is received once MCIP protections are implemented.
- Educate your sales and project teams on the MCIP’s benefits and obligations.
If you have questions about how the MCIP program applies to your Colorado development pipeline or how to prepare for its January 2026 rollout, please contact Joey Mark, or your regular Lathrop GPM attorney.