United States District Court, D. Colorado
REPORT AND RECOMMENDATION ON DEFENDANTS' MOTION
TO DISMISS (Dkt #78)
Reid Neureiter Magistrate Judge
case is before the Court pursuant to an Order (Dkt. #80)
issued by Judge Christine M. Arguello referring Defendants
Men/in J. Flood and Susan S. Flood's Motion to Dismiss
Plaintiffs' Second Amended Complaint. (Dkt. #78.) The
Court has carefully considered the motion, Plaintiffs Steven
Hardy and Jody Whitson-Hardy's Response (Dkt. #87), and
the Floods' Reply. (Dkt. #89.) The Court heard argument
on the subject motion on October 3, 2018. (Dkt. #103.) The
Court has taken judicial notice of the Court's file and
has considered the applicable Federal Rules of Civil
Procedure and case law. The Court, now being fully informed,
makes the following recommendation.
following allegations are taken from the Second Amended
Complaint (Dkt. #66) and are described in the light most
favorable to the Hardys.
Floods were the original owners of real property in
Franktown, Colorado, that includes a house, a horse barn, and
a road arch (the "Property"). (Id. ¶
8.) In June 2013, the Hardys purchased the Property from the
Floods pursuant to a written Contract to Buy and Sell Real
Estate (the "Purchase Contract"). (Id.
¶ 5.) Prior to the sale, the Floods provided the Hardys
with a "Seller's Property Disclosure
(Residential)," (the "SPD"). (Id.
¶ 8; #66-3.) In the SPD, the Floods represented that
there were no "additions or alterations" made to
the Property, and no "moisture and/or water
problems." (Dkt. #66 ¶ 10; #66-3 at 1.) During a
property inspection on May 8, 2013, no latent or hidden
defects were discovered. (Dkt. #66 ¶11.)
to the Hardys, the basement of the home was an addition that
had been completed no more than four years before the sale.
(Id. ¶13.) Moreover, the Floods had not
obtained building permits for the basement construction, the
additional upstairs improvements, the barn, or the road arch.
(Id.) The Floods knew that the work was done without
a permit, but the Hardys did not learn this until 2015.
(Id.) According to the Hardys' expert witness,
attorney and licensed real estate broker Alan L. Stein,
"improvements to real property which are built without
required building permits and governmental inspections are
'latent or hidden defects,' which have been defined
in Colorado as 'those manifesting themselves after
purchase and which are not discoverable through reasonable
inspection.'" (Id. ¶ 16; #66-4 at 4.)
the sale, the Hardys experienced significant water leaks in
the home and, while making repairs, discovered black mold,
suggesting a history of leaks and moisture problems. (Dkt.
#66 ¶ 20.) At least one of the leaks was caused by
shower tiles that had been adhered directly onto plywood,
which is not an acceptable construction practice.
(Id.) Finally, the road arch collapsed after the
Hardys purchased the Property. (Id. at 21.)
the Hardys identify the following conditions that they
contend were latent defects that the Floods were obligated to
1. The Floods' construction of additions and alterations
to the basement without a building permit, without the
building department's review of the design, without
inspections by the building department, and in violation of
the building code;
2. The Floods' addition of the barn without a building
permit, without the building department's review of the
design, without inspections by the building department, and
in violation of the building code;
3. The Floods' construction of the road arch without a
building permit, without the building department's review
of the design, without inspections by the building
department, and in violation of the building code; and
4. Water leaks upstairs and in the ...