REAL ESTATE

In 1998 the Colorado legislature passed a law clarifying the duties and responsibilities of a landlord concerning property owned by a tenant who has been evicted. The law provides that a landlord who complies with the lawful directions of a law enforcement officer who is executing a writ of restitution (recovery of possession of the premises) is immune from civil or criminal liability concerning personal property removed from the premises. The law provides that a landlord has no duty to store or maintain personal property that is removed from the premises during execution of the writ of restitution, and the landlord has no duty to inventory or determine ownership of or condition of the personal property. The landlord is immune from liability for loss or damage to the property. If a landlord elects to store the property the landlord may charge the tenant the reasonable costs thereof.

BUSINESS LAW

The Colorado Supreme Court has recently ruled on the question of court review of derivative actions. A derivative action is the mechanism by which shareholders can sue on behalf of a corporation when those in control of the corporation have decided not to pursue a claim belonging to it, including claims against the existing board members. The Court states that the decision regarding whether to dismiss a derivative lawsuit against board members is ordinarily delegated to a special litigation committee formed of individuals independent of those charged with the wrongdoing. The committee conducts an investigation and makes a decision whether to continue the litigation. That decision is subject to review by a court, and in this case the extent of that review was considered by the Supreme Court. The Court held that in Colorado, once a special litigation committee is duly appointed and then recommends dismissal of the derivative lawsuit, the trial court's role is limited to determining the authority, independence and good faith of the committee. If the committee is properly given authority to review the situation, is truly independent, and employs reasonable procedures in analyzing the situation, a court must defer to the committee's business judgment and may not second-guess a decision not to pursue the litigation.

CONSTRUCTION LAW

In a decision dated September 14, 1998 the Colorado Supreme Court has set forth the test as to when a landlord may be held responsible for improvements contracted for by a tenant. Previously, a property owner could be held responsible for the cost of improvements to its building notwithstanding the fact that a tenant contracted for the improvements, under the concept of unjust enrichment. The Supreme Court has now held that besides proving that a landlord received a benefit at the contractors expense, the contractor must show that it is unjust for the landlord to retain the benefit without paying for it because of some type of improper, deceitful or misleading conduct by the landlord. Simply because the landlord gives permission for the work to be done, takes a role in completion of the improvements, and contracts to retain the improvements upon lease termination, is not enough. Without some misleading conduct as to who will pay if the tenant is unable to pay for the improvements, the contractor will not be able to look to the building owner for payment.

The statute of limitations in Colorado concerning actions against a contractor or builder relating to planning, supervision, inspection or construction of any improvements to real property is two years after the claim for relief arises, and in no event shall an action brought more than six years after the substantial completion of the improvement to the real property. A claim arises at the time the claimant discovers or in the exercise of reasonable diligence should have discovered the physical manifestations of a defect in the improvement which ultimately causes the injury. In a recent case roofs were installed on forty-one buildings in an apartment complex at the end of 1993. Less than one year later eight roofs began to leak. Later, after more leaks, it was determined that the roofs had been improperly installed. A lawsuit was not filed until August of 1996. The Court of Appeals determined that the claims were not barred as a matter of law. This is because there was a genuine issue of fact as to whether the defects in the roof that caused the leaking in the eight roofs was the same defect as the installation defects. The issue of whether knowledge of leaks in eight buildings should have prompted the owner to investigate possible defects in the remaining buildings was a question of fact, which could not be resolved as a matter of law. The Court of Appeals ordered that the case be returned to the trial court for further proceedings as to whether the owner, in the exercise of reasonable diligence, should have discovered the installation defects based on the roof leaks.

A similar issue recently was decided in the Colorado Court of Appeals, respect to whether efforts to repair defective work toll the "contractors" statute of limitations from running while repair efforts are made. In this case a lawsuit was filed more than four years after the painting contractor completed the initial work under the contract but less than two years after repainting efforts were made. The Court held that if the owner can prove that after there was a manifestation of a defect under the statute, the contractor undertook to repair the defect; that in doing so the contractor either expressly or impliedly promised or represented that such repairs would remedy such defect; and that the owner reasonably relied upon such promise or representation and, as a result, did not institute legal action against the contractor, the limitations period of the contractors statute will be tolled until the date the contractor abandoned its repair efforts. The Court states that this approach is consistent with public policy, because so long as there are efforts to remedy a defect, requiring the owner to institute suit while repairs are being made would be inconsistent with the policy that favors voluntary settlement of disputes and may lead to more litigation.

The Colorado Supreme Court has overruled a long existing precedent concerning "pay if paid" clauses in construction contracts in the state of Colorado. The Court found language in a contract to the effect that the subcontractor would be paid "provided like payment shall have been made by owner to contractor" to be insufficient to constitute a shift of the risk of the owner's nonpayment from the general contractor to the subcontractor. The Court held that to create such a condition precedent, the contract must clearly express the intent that the subcontractor is to be paid only if the owner first pays the general contractor. In this case the agreement contained no language reflecting any intent to shift the risk, such as an express acknowledgment by the subcontractor that it rather than the general contractor agreed to assume the risk of nonpayment by the owner, or that there was any anticipation of a possibility that the owner might not pay, and there was no specific language creating a contingency that must occur before payment is made by the general contractor. In this case the payment terms constituted a "pay when paid" clause, which is an unconditional promise by the general contractor to pay a subcontractor, although payment may be delayed because of the owner's failure to pay the general contractor.

UNBUNDLED LEGAL SERVICES

"Unbundled" legal services is the process whereby an attorney is retained by or available to a client to give specific or limited scope legal advice at one or more stages of a legal matter. The idea is to increase the public's access to legal services by lowering the cost of legal representation by segregating tasks that a lawyer will perform for a client. Examples include a single consultation or periodic consultations during an ongoing legal matter, legal research on a single matter or a variety of issues, drafting documents or reviewing documents drafted by the client, and coaching a client in negotiations on the law and negotiation strategies.

Effective July 1, 1999 changes to the rules of ethics governing attorneys and rules of procedure in court actions allow attorneys in Colorado to assist pro se litigants without such assistance constituting an appearance in the litigation. Once again, the idea is to allow persons engaged in litigation matters access to legal advice at a lower cost, where they might otherwise go without legal advice. The new rules allow, in addition to advice, research and negotiation, additional services such as pretrial case management, coaching and assistance in drafting pleadings and papers that the client will sign and file pro se. Certain disclosures of attorney involvement are required, however.

The benefit of this approach is to save money by reducing the cost of litigation, which can be very high. The detriments are that pro se parties are required to know, understand and apply procedural rules and the rules of evidence if they choose to represent themselves in court. No matter how well the client is prepared by an attorney (and preparation increases the cost to the client), the client still has to present the case in court. Further, the complexity of the case and thus all of the facts a lawyer must know, understand and take into account in rendering complete legal advice, may eliminate the practicality of unbundled services.

Numerous issues must be addressed when an attorney and client enter into an agreement for unbundled legal services. In general, it will be most important that the client understand what they are getting into, and this can only occur after a complete and thorough conversation with the attorney. The increased availability of legal services to the public, however, makes this a promising area for future development.