One of the most commonly cited barriers to delivering Missing Middle Housing in Colorado traces back to the state’s Construction Defect Laws, enacted in 2001 under the Construction Defect Action Reform Act (CDARA). The intent was clear and reasonable: protect homeowners from faulty construction and provide a legal pathway to address legitimate defects. However, policy intent and market reaction don’t always align.
Shortly after the new law, the litigation environment, particularly in condominium and townhome communities governed by Homeowner Associations (HOAs), became increasingly complex and costly. Because HOAs have the authority to bring claims on behalf of all unit owners, entire projects could become subject to large-scale litigation.
As a result, insurance premiums for attached for-sale housing rose dramatically, risk exposure increased and builders recalibrated. The housing market responded.
The Decline of For-Sale Attached Housing
As litigation risk increased, townhomes and condominiums—especially entry-level, for-sale products—became less attractive to build than detached single-family homes or multi-family rental apartments.
Across many Colorado markets, condominium construction dropped sharply in the years following CDARA’s implementation and subsequent legal activity. Developers shifted toward rental models or detached homes, where litigation exposure was more limited.
The unintended consequence? A shrinking pipeline of attainable homeownership options.
For many first-time buyers, condos and townhomes represent the most accessible entry point into ownership. When that product type becomes scarce, affordability suffers.
The Rise of the “Pull-Apart” Townhome
Builders didn’t stop building. They adapted.
One common response was the emergence of what many call the “pull-apart” townhome.” Instead of constructing fully attached units sharing a common wall, builders separated what would otherwise be attached homes by the minimum required distance for fire safety—often six feet with fire-rated walls.
Technically, the homes are detached. Functionally, they look and feel like townhomes.
But that six-foot separation matters. While modest, those gaps reduce overall unit yield on a block. Multiply that spacing across a subdivision, and the total number of homes that can be delivered declines. In an environment where housing supply is already constrained, even small reductions in density have real impacts.
Party Wall Agreements as an Alternative to HOAs
Another strategy that has gained traction is the use of a Party Wall Agreement instead of forming a HOA.
A party wall agreement is a legal arrangement between property owners who share a structural wall. The agreement defines responsibility for maintenance, repair, and cost-sharing related to the shared wall—and in some cases, shared exterior walls or roof systems.
This approach allows homes to be owned fee simple, without creating an HOA structure. For many buyers and builders, that distinction matters. It can simplify governance, reduce administrative layers, and potentially lessen some litigation exposure associated with condominium regimes.
In the context of Missing Middle Housing, party wall agreements offer a way to preserve attached product types while avoiding full HOA governance.
A Case Study: Designing Out Future Disputes
One of our clients, StreamHome Construction, is taking this concept a step further with their upcoming project – in this instance with duplexes.
While a party wall agreement does not require separate roof planes or fully independent exterior wall systems, they are intentionally designing the units that way. Each side will have its own roof structure and distinct exterior wall plane. Why? Because future homeowner disputes often arise during major maintenance events—roof replacement, exterior painting, or siding repairs. When those systems are shared, coordination and cost allocation can become contentious.
By designing duplexes with separate roof structures and visually distinct exterior planes, StreamHome is proactively reducing the potential for conflict. The homes still benefit from the efficiency of a shared wall, but key maintenance elements remain independent.
It’s a small design decision with long-term implications.
Looking Forward
The evolution of Colorado housing policy, construction defect reform, and market adaptation continues. Recent legislative changes aim to rebalance risk and encourage more townhome and condominium development. Whether those efforts will significantly restore the for-sale attached market remains to be seen.
What is clear, however, is that design, legal structure, and policy are deeply intertwined.
Thoughtful strategies—like pull-apart townhomes and well-crafted party wall agreements—demonstrate how builders can respond creatively to regulatory realities while still delivering attainable housing.
In a state working to expand its housing supply, these details matter.