Category Archives: statute of limitations

PROFESSIONAL MALPRACTICE STATUTE OF LIMITATIONS IN CONSTRUCTION CONTEXT

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In an interesting dichotomy, which statute of limitations applies to professional malpractice claims relating to construction claims, i.e., in the construction context?

Is it the two year statute of limitations in Florida Statute s. 95.11(4)( a) that governs professional malpractice claims or is it the four year statute of limitations in Florida Statute s. 95.11(3)(c) that governs actions “founded on the design, planning, or construction of an improvement toot real property”?  This dichotomy led the appeal in American Automobile Ins. v. FDH Infrastructure Services, LLC, 48 Fla.L.Weekly D1091a (Fla. 3d DCA 2023).

This case sadly involved a construction accident that led to deaths. A contractor was engaged to install an antenna on an existing television tower. The contractor hired an engineering firm “to perform a structural analysis as to the stability and weight-bearing capacity of the tower. [The engineer] was contractually obligated to assess the proposed rigging plan…to lift the loads necessary to construct the antenna.” FDH Infrastructure Services, supra.  Unfortunately, after the installation of the antenna commenced, the rigging components failed resulting in workers falling to their deaths. After insurers paid out benefits, they sued the engineering firm under equitable and contractual subrogation theories. The engineering firm moved for summary judgment arguing the subrogation claims were barred by the professional malpractice two year statute of limitations in section 95.11(4)(a). The trial court agreed and granted summary judgment in favor of the engineering firm.

On appeal, the insurers argued the trial court applied the wrong statute of limitations. The trial court should have applied the four year statute of limitations in section 95.11(3)(c) governing the construction context. The appellate court agreed:

Section 95.11(3) applies narrowly to only construction-based claims. This provision stands in contrast to section 95.11(4), which encompasses any “professional malpractice” action. Consistent with this distinction, in Kelley v. School Board of Seminole County, 435 So. 2d 804 (Fla. 1983), the Florida Supreme Court approved the application of section 95.11(3) in a case of professional negligence associated with the provision of architectural services. Id. at 805, n.2 (“Both the trial court and the [F]ifth [D]istrict found the 4-year statute applicable, and we agree with the district court that the language of (3)(c), rather than (4)(a), is more specifically applicable to this case.”). The same view has been adopted by several other courts. See Havatampa Corp. v. McElvy, Jennewein, Stefany & Howard, Architects/Planners, Inc., 417 So. 2d 703, 704 (Fla. 2d DCA 1982) (applying section 95.11(3)(c) to an action by building owner against architect, contractor, subcontractor, materialmen, and bonding company utilized in design and construction of new manufacturing facility); Hotels of Deerfield, LLC v. Studio 78, LLC, No. 21-60980-CIV, 2022 WL 1666976, at *4 (S.D. Fla. Mar. 7, 2022) (“[B]ecause [section] 95.11(3)(c) is more specific than 95.11(4)(a) regarding claims against design professionals arising out of designs or improvements to real property, the former should control because more specific statutes preempt more general statutes as a matter of law.”); see also Luis Prat & Cary Wright, Rights and Liabilities of Architects and Engineers, in Florida Construction Law and Practice ch. 3.5 (10th ed. 2022) (quoting § 95.11(3)(c), Fla. Stat.) (“Actions for professional malpractice by privity claimants against the design professional, other than those actions arising out of the ‘design, planning, or construction of an improvement to real property,’ must be commenced within two years . . . .”); cf. Lillibridge Health Care Servs., Inc. v. Hunton Brady Architects, P.A., No. 6:08-CV-1028, 2010 WL 3788859, at *18 (M.D. Fla. Sept. 24, 2010) (footnote omitted) (rejecting defendant’s contention that section 95.11(4)(a) was more specific statute in action by owner of medical office building against architect and engineering firm for problems arising during construction of building and observing “Florida courts — to which this [c]ourt must defer on issues of state law — have repeatedly applied paragraph (3)(c) rather than (4)(a) in suits against architects and engineers”).

***

[I]n the instant case, FDH was contractually obligated to assess the structural integrity of the tower and rigging plan prior to the commencement of construction. Performing the calculations necessary to enable the construction of the new antenna on the existing building was part and parcel of that task. Given the parameters of the contract, the summary judgment record established the subrogation “action[s] [were] founded on the . . . planning . . . of an improvement to real property.” § 95.11(3)(c), Fla. Stat. Consequently, we find this action falls within the ambit of the four-year limitation.

FDH Infrastructure Services, supra.

The appellate court did note a contrast with a case where the two-year professional malpractice statute of limitations applied. In that case, an engineering firm was hired to review construction drawings and inspect a newly constructed home.  Since the inspection involved already completed construction, “‘this [did] not transform the claim into one founded on the ‘construction’ of an improvement to real property, as that term is commonly understood.'” FDH Infrastructure Services, supra, quoting Manney v. MBV Engineering, Inc., 273 So.3d 214, 216, 217 (Fla. 5th DCA 2019).

When assessing professional malpractice claims against a design professional, etc., in the construction context, please do so with the advice and strategic input from construction counsel.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

FLORIDA’S STATUTE OF LIMITATIONS / REPOSE FOR ACTIONS FOUNDED ON CONSTRUCTION IMPROVEMENT MODIFIED

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On April 13, 2023, Florida’s all-important four-year statute of limitations–Florida Statute s. 95.11(3)(c)–relating to actions founded on construction of an improvement of real property was modified.  This is a key statute of limitations for ALL construction practitioners because it also includes the statute of repose for latent construction defects.

At the bottom of this posting is the current version fo s. 95.11(3)(c) with the underlined section being recent additions. (They hyperlink above will identify the deletions and additions.)  Important things to note:

Statute of Repose. The statute of repose has been reduced from 10 years to 7 years.  There is now an objective date for when the repose period commences: “within 7 years after the date the authority having jurisdiction issues a temporary certificate of occupancy, a certificate of occupancy, or a certificate of completion, or the date of abandonment of construction if not completed, whichever date is earliest.”

Statute of Limitations. Similarly, the commencement of the statute of limitations now commences based on an objective date: “with the time running from the date the authority having jurisdiction issues a temporary certificate of occupancy, a certificate of completion, or the date of abandonment of construction if not completed, whichever date is earliest.”

Multiple Buildings. If dealing with a project regarding multiple buildings with each building getting its own TCO, CO, or certificate of completion: “[I]f the improvement to real property consists of the design, planning, or construction of multiple buildings, each building must be considered its own improvement for purposes of determining the limitations period set forth in this paragraph.”

Application. The modifications to this statute of limitations apply “to any action commenced on or after the effective date of this act, regardless of when the cause of action accrued, except that any action that would not have been barred under s. 95.11(3)(c), Florida Statutes, before the amendments made by this act must be commenced on or before July 1, 2024. If the action is not commenced by July 1, 2024, and is barred by the amendments to s. 95.11(3)(c), Florida Statutes, made by this act, then the action is barred.”

Florida Statute 95.11(3)(c)

An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date the authority having jurisdiction issues a temporary certificate of occupancy, a certificate of occupancy, or a certificate of completion, or the date of abandonment of construction if not completed, whichever date is earliest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 7 years after the date the authority having jurisdiction issues a temporary certificate of occupancy, a certificate of occupancy, or a certificate of completion, or the date of abandonment of construction if not completed, whichever date is earliest. However, counterclaims, cross-claims, and third-party claims that arise out of the conduct, transaction, or occurrence set out or attempted to be set out in a pleading may be commenced up to 1 year after the pleading to which such claims relate is served, even if such claims would otherwise be time barred. With respect to actions founded on the design, planning, or construction of an improvement to real property, if such construction is performed pursuant to a duly issued building permit and if the authority having jurisdiction has issued a temporary certificate of occupancy, a certificate of occupancy, or a certificate of completion, then as to the construction which is within the scope of such building permit and certificate, the correction of defects to completed work or repair of completed work, whether performed under warranty or otherwise, does not extend the period of time within which an action must be commenced. If a newly constructed single-dwelling residential building is used as a model home, the time begins to run from the date that a deed is recorded first transferring title to another party. Notwithstanding any provision of this section to the contrary, if the improvement to real property consists of the design, planning, or construction of multiple buildings, each building must be considered its own improvement for purposes of determining the limitations period set forth in this paragraph.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

SERVING THE 558 NOTICE OF CONSTRUCTION DEFECT LETTER IN LIGHT OF THE STATUTE OF REPOSE

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shutterstock_683852965Florida Statutes Chapter 558 requires a Notice of Construction Defect letter (“558 Notice”) to be served before a construction defect lawsuit is commenced.  This is a statutory requirement unless contractually waived for a completed project when latent defects or post-completion construction or design defects are pursued.  

 

A recent Florida case held that this statutory requirement is NOT intended to bar a lawsuit based on Florida’s ten-year statute of repose for construction defects IF the 558 Notice is timely served within the statute of repose period.  After the expiration of the statute of repose period, a construction defect lawsuit can no longer be commenced.  

 

In Gindel v. Centex Homes, 43 Fla. L. Weekly D2112d (Fla. 4th DCA 2018), homeowners took possession of townhomes on March 31, 2004.  The homeowners discovered construction defects and on February 6, 2014 provided the 558 Notice to the homebuilder.  This notice was served before the expiration of the ten-year statute of repose period.  The homebuilder notified the homeowners it would not cure the defect and the homeowners initiated a construction defect lawsuit on May 2, 2014, more than ten years from when they took possession of their townhomes, and outside of the statute of repose period. 

 

The issue was the application of Florida’s ten-year statute of repose in Florida Statute 95.11(3)(c). 

 

The homeowners argued that its action commenced upon serving the statutorily required 558 Notice so that its lawsuit was timely filed.

 

The homebuilder argued that the homeowners commenced their action by filing the lawsuit after the ten-year statute of repose, irrespective of when the 558 Notice was served, meaning the construction defect lawsuit should be barred.  The trial court agreed with this argument.

 

On appeal, however, the appellate court agreed with the homeowners that the presuit notice requirements called for in Florida Statutes Chapter 558 constitute an action for purposes of the statute of repose.  In other words, by the homeowners serving the 558 Notice within the ten-year statute of repose period, the homeowners timely commenced their construction defect lawsuit.  To hold otherwise would be to view Florida Statute Chapter 558 as a device to potentially bar claims when the required 558 Notice was timely served.  This position makes sense considering a claimant cannot file a construction defect lawsuit without complying with Chapter 558.  See Fla.Stat. s. 558.003.

 

When it is coming close to the ten-year statute of repose (or statute of limitations) deadline, the safer approach is to file the lawsuit and move to stay or abate the lawsuit pending compliance with the Florida Statues Chapter 558.  This way this issue is fully avoided by the lawsuit already being initiated. This approach is also supported in Chapter 558 by stating the action shall be stayed pending compliance with the requirements of the statute.  See Fla.Stat. s. 558.003.  

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

OWNERS: DON’T IGNORE THE STATUTE OF LIMITATIONS IN FLORIDA STATUTE s. 95.11(3)(c) FOR CONSTRUCTION DEFECTS / DAMAGE

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Unknown-1If you are an owner experiencing construction defects or corresponding damage (e.g., water intrusion) please consult with counsel.  Not doing so can result in your lawsuit being forever time-barred by the statute of limitations!  Do NOT let this happen to you; this means that any valid claims you may have associated with the construction defects or corresponding damage are gone.

 

The statute of limitations for construction disputes including construction defect disputes is embodied in Florida Statute s. 95.11(3)(c), set forth at the bottom of this posting.  Please check out this article and this article for more information on the statute of limitations for construction defects. 

 

For example, in Brock v. Garner Window & Door Sales, Inc., 2016 WL 830452 (Fla. 5th DCA 2016), homeowners experienced water intrusion from their windows and sued the company that installed the windows.  The problem, however, was that the homeowners sued the window installer more than four years after the homeowners discovered the defect (the statute of limitations in s. 95.11(3)(c) as set forth below) but less than five years after the discovery of the defect.   The homeowners tried to creatively argue that the five-year statute of limitations governing written contracts should control because the window installer was not a licensed contractor and should not reap the benefit of the shorter four-year statute of limitations. The Fifth District rejected this argument. 

 

Regardless of whether your claims are against a licensed or unlicensed contractor, the four-year statute of limitations in s. 95.11(3)(c) is going to control your construction defect lawsuit.  In the case above, the homeowners waited more than four years after discovering the water intrusion to sue their window installer.  As a result, their counsel had to come up with an argument to try to circumvent the four-year statute of limitations.  Unfortunately, the argument was not successful and the homeowners potentially valid claims were time-barred.  Clearly, this is a situation you want to avoid so that you are not having to defend your valid claims with a statute of limitations defense.

 

 Florida Statute s. 95.11(3)(c)

(3) WITHIN FOUR YEARS.—

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(c) An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

STATUTE OF LIMITATIONS AND REPOSE FOR INDEMNIFICATION CLAIMS (STEMMING FROM CONSTRUCTION DEFECT)

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images-1I have written articles regarding the statute of limitations and statute of repose relating to construction disputes governed under Florida Statute s. 95.11(3)(c):

 

Within Four Years.  An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.

 

In the construction defect context, a claimant has four years to sue from the date they knew or reasonably should have known with the exercise of due diligence the defect (e.g, the latent defect).  This is the statute of limitations.  Nonetheless, a claimant must sue no matter what on a latent defect within ten years from the project’s completion (see statute above).  This is the statute of repose.  A construction defect lawsuit cannot be initiated after the expiration of the statute of repose.

 

Let’s assume the following dates:

 

            Project completion (start of limitations)                                          2005

            First discovery of water intrusion                                                   2008

            General contractor completes repairs                                            2011

            General contractor sues subcontractor for indemnification            2013

 

In this scenario, the subcontractor may argue that the general contractor’s statute of limitations to sue the subcontractor for the defect and damage is barred by the statute of limitations since the first discovery of water intrusion was in 2008 and the general contractor waited to sue until 2013 (five years later).

 

But, wait…the general contractor is going to sue the subcontractor for indemnification (preferably, contractual indemnification based on the terms of the subcontract). In this scenario, the general contractor is suing after it completed repairs and established its liability to the owner for repairing the defects and damage. 

 

“The statute of limitations for an action seeking indemnity does not being running until the litigation against the third-party plaintiff [general contractor] has ended or the liability [against the third-party plaintiff], if any, has been settled or discharged by payment.” Castle Constr. Co. v. Huttig Sash & Door Co., 425 So.2d 573, 575 (Fla. 2d DCA 1982) (finding general contractor’s indemnity claim against subcontractor did not accrue until the owner’s litigation against the general contractor ended or the general contractor’s liability determined).  Stated differently, the statute of limitations for the general contractor’s indemnification claim did not begin to start running until 2011 when its liability to the owner for the defects was discharged / settled.

 

Now, let’s assume the following dates:

 

     Project completion (start of limitations)                                          2005

            First discovery of water intrusion                                                   2008

            General contractor completes repairs                                            2013

            General contractor sues subcontractor for indemnification            2016

 

In this instance, the subcontractor may argue that the statute of repose expired because the general contractor waited until 2016 or eleven years after the statute of limitations started to accrue in 2005.  Guess what?  The subcontractor would be right.  See Dep’t of Transp. V. Echeverri, 736 So.2d 791 (Fla. 3d DCA 1999) (explaining that the statute of repose for construction defect claims still applies to claims for indemnity).  Stated differently, even though the general contractor sued the subcontractor for indemnification within three years of establishing its liability, it was still bound by the ten year statute of repose that started accruing in 2005, meaning such lawsuits were barred after 2015.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

IS THE 10 YEAR STATUTE OF REPOSE FOR CONSTRUCTION DEFECTS REALLY A 10 YEAR STATUTE OF REPOSE?

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UnknownIt is time for a very favorable case for an owner that experiences latent defects.  In construction defect cases, there is a ten-year statute of repose to sue for latent defects.  Specifically, under Florida Statute s. 95.11(3)(c), the “action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.  Stated differently, the latent defect lawsuit must be commenced no later than 10 years from the latest of one of the specified conditions or else the lawsuit is forever barred.

 

The question is when does the ten-year repose period really begin to run; what condition specifically triggers the running of the period.   The Fifth District Court of Appeal in Cypress Fairway Condominium v. Bergeron Construction Co. Inc., 40 Fla. L. Weekly D1097b (Fla. 5th DCA 2015) concluded that the statute of repose in a construction defect case began to run on the completion of the contract which was the date the owner made final payment under the contract. Naturally, the completion of the contract would be the latest condition and completion does not occur until the owner fulfills its obligation by making final payment.

 

What does this mean?  This means that the repose period does NOT commence when construction is actually completed or when the certificate of occupancy is issued.  Rather, it commences when the owner tenders final payment to its contractor (after it accepts the construction and punchlist work).

 

The ramifications of this type of opinion are unknown and potentially scary.  What if the owner withholds payment and does not make final payment for months if not years after the contractor completed construction and the owner has received a certificate of occupancy.  Maybe there is a dispute as to punchlist or warranty items that results in the owner not making final payment.  Does the owner get the benefit of withholding money or delaying making final payment?  Perhaps.

 

There have been recent cases that have been fairly generous to owners with respect to the statute of repose in construction defect cases.  Thus, if you are an owner and discover latent defects, consult with counsel because all may not be lost regarding a potential defect lawsuit.  And, if you are a contractor, do not automatically dismiss a construction defect lawsuit as being outside of the statute of repose and be sure to consult with counsel to best protect your interests.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

THE DRAWBACK OF BEING A THIRD-PARTY DEFENDANT IN A CONSTRUCTION DISPUTE

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Airconditioning-systemThe Florida Supreme Court just entered an opinion that potentially has huge implications in construction defect disputes. In Caduceus Properties, LLC v. William G. Graney, P.E., 39 Fla. L. Weekly S93a (2014), an owner sued its architect for design defects with its HVAC system. The architect third-partied into the dispute its mechanical engineer (sub-consultant). The architect’s third-party claims were dismissed for failure to comply with a court order and the architect ultimately declared bankruptcy. The owner, AFTER the statute of limitations expired to assert defect claims, amended its complaint to assert direct claims against the mechanical engineer (also, after the mechanical engineer had already been dismissed from the dispute). The issue the Florida Supreme Court analyzed was whether the owner could assert these claims after the expiration of the statute of limitations since the mechanical engineer was previously a third-party defendant in the dispute. Stated differently, did the owner’s claims against the mechanical engineer relate back to the original third party complaint the architect timely asserted against the mechanical engineer such that the claims were timely filed within the statute of limitations? The Florida Supreme Court held the owner could do this: “[A]n amended complaint filed after the statute of limitations has expired, naming a party who had previously been made a third-party defendant as a party defendant, relates back…to the filing of the third party complaint.”

 

Why are the implications huge? In a construction defect case, oftentimes there are third-party defendants.  In this case, it was a sub-consultant of the architect. In many cases, it is the general contractor that asserts third-party claims against subcontractors. Sometimes, a subcontractor moves to dismiss the claims and prevails and/or settles directly with the general contractor. Well, now, based on this ruling, even if the subcontractor is dismissed, as long as a third-party complaint was asserted against it, it could potentially be back-doored into the dispute by the owner / plaintiff. The owner would just assert a claim against the subcontractor, even after the expiration of the statute of limitations, and argue that under the Florida Supreme Court’s ruling its claims against the subcontractor relate back to the initial third-party complaint that the general contractor timely filed against the subcontractor. Ouch! Therefore, now, a third-party defendant may not get the solace they think they deserve from getting dismissed from a lawsuit or settling directly with the party that sued it. So, a subcontractor or third-party defendant that wants to settle is best getting the owner to sign off on the settlement to ensure it does not get back-doored into the very lawsuit it was dismissed from. On the other hand, this gives the owner options to sue third-party defendants brought into the dispute after the expiration of the statute of limitations if there are concerns with the solvency of the defendant it sued (e.g., general contractor or architect that are usually in direct privity of contract with the owner).

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

CONDOMINIUM ASSOCIATION RIGHTS REGARDING CONSTRUCTION DEFECTS & THE STATUTE OF LIMITATIONS FOR STATUTORY IMPLIED WARRANTIES

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imagesContractors, subcontractors, suppliers, developers, and design professionals that are involved in the design and construction of condominiums need to appreciate three items relating to the construction of condominiums and the rights of condominium associations:

 

(1) The condominium association, upon turnover from the developer to the unit owners, may sue for matters affecting the common elements or matters of common interest concerning most or all of the unit owners (Fla. Stat. s. 718.111)

 

(2) The condominium association’s statute of limitations to assert construction defect claims does not begin to accrue until the developer has turned over control of the association to the unit owners (Fla. Stat. s. 718.124); and

 

(3) The developer, the contractor, subcontractors, and suppliers owe certain statutory implied warranties to the unit owners that can be asserted by the association as a class representative (Fla. Stat. s. 718.203). For instance, under Fla. Stat. 718.203(2): “The contractor, and all subcontractors and suppliers, grant to the developer and to the purchaser of each unit implied warranties of fitness as to the work performed or materials supplied by them as follows: (a) For a period of 3 years from the date of completion of construction of a building or improvement, a warranty as to the roof and structural components of the building or improvement and mechanical and plumbing elements serving a building or an improvement, except mechanical elements serving only one unit.”

 

A.  THE STATUTE OF LIMITATIONS FOR STATUTORY IMPLIED WARRANTY CLAIMS

 

A topic that comes up is the statute of limitations for an association to assert a statutory implied warranty claim since the statutory implied warranties kick in from the completion of the building (i.e., the Certificate of Occupancy) and are of a shorter time period than the four year statute of limitations period from the time the defect was discovered (or should have been discovered with the exercise of due diligence).

 

This issue was addressed by the Florida Supreme Court in Charley Tropino & Sons, Inc. v. Seawatch at Marathon Condominium, Ass’n, Inc., 658 So.2d 922 (Fla.1994). In this case, three condominium buildings were constructed and the last building received its Certificate of Occupancy in April 1983. The association was turned over from the developer to the unit owners more than two years later in August 1985. The association then asserted a construction defect lawsuit that included claims for breach of statutory warranties against the general contractor, developer, etc., (over defective concrete and metal decking) in May 1988: more than five years from the Certificate of Occupancy of the last building and almost two years from when the association was turned over to the unit owners.

 

The Florida Supreme Court was asked to determine whether the turnover of the association from the developer to the unit owners extended the time for unit owners to assert a breach of statutory implied warranty claim.  (Based on the facts of the case, the question was whether the association in 1988 could assert breach of statutory warranty claims against the developer, general contractor, etc., when the Certificate of Occupancy was issued more than five years earlier for the last building and unit owners obtained control of the association approximately two years earlier.) The Court answered this question “Yes,” maintaining:

 

“[A] condominium association has a statutory right to file suit on behalf of its unit owners for breach of implied warranty of fitness and merchantability for construction defects affecting the common interest. Such a suit must be filed within the general time limits set out in chapter 95, but the commencing of this limitations period shall be tolled until control of the association passes from the developer to the unit owners.”
Charley Tropino, 658 So.2d 925.

 

This means that the statutory implied warranty period is not a statute of limitations. Rather, it is simply the time period in which the life of the warranty applies to cover defects that occur within that time period. However, these claims are then tolled until the association is turned over to the unit owners at which time the association has four years to assert its breach of statutory warranty claims. See Saltponds Condominium Ass’n v. Walbridge Aldinger Co., 979 So.2d 1240 (Fla.3d DCA 2008) (a condominium association was turned over in August 2002 and had until August 2006 to preserve its rights to sue for breach of statutory implied warranty claims).

 

Let’s apply this law to hypotheticals because it is confusing:

 

Hypothetical 1: A Certificate of Occupancy was issued for a condominium tower in March 2005. The condominium association was turned over to the unit owners on April 2008. Due to construction defects, the association filed a lawsuit against the general contractor for structural defects in February 2012 that included breach of statutory warranty claims.

 

Under s. 718.203, as referenced above, the contractor owes to the association an implied warranty for structural components from three years from the completion of the building (defined as the Certificate of Occupancy date). This means that a breach of this implied warranty should have taken place between March 2005 (Certificate of Occupancy date) and March 2008 (three years from that date). But, and this is an important but, the condominium association does not need to file suit on this breach of the implied warranty until April 2012 (four years from the April 2008 date the condominium association was turned over to the unit owners since the statute of limitations is tolled until an association is turned over to the unit owners).

 

Hypothetical 2: An interesting twist to the above hypothetical is if the association did not file its lawsuit until March 2014-nine years from the Certificate of Occupancy date and six years from the turnover date. Under these dates, the association will have to assert that it did not discover the defects until on or after March 2010 in order to fall within the four year statute of limitations. However, by doing this, the condominium association really should NOT have a breach of statutory warranty claim against the general contractor because the life of the warranty would have expired before the breach of that duty was actually discovered.

 

Hypothetical 3: Now, let’s assume the association did not file suit until March 2016 or eleven years from the Certificate of Occupancy date and argues that it did not discover the defects until March 2014. Under this context, the association should not have any claims since the turnover of the association to unit owners has no bearing and does not toll the ten year statute of repose period to file suit (i.e., the last date a lawsuit must be filed-not matter what). See Sabal Chase Homeowners Ass’n, Inc. v. Walt Disney World Co., 726 So.2d 796 (Fla. 3d DCA 1999) (finding that turnover of condominium association to unit owners did not extend the statute of repose).

 

B.  TIDBITS FOR CONTRACTORS CONSTRUCTING CONDOMINIUMS

 

General contractors constructing condominiums need to operate under the presumption that there is a strong likelihood that the association will assert construction defect related claims including breach of statutory warranty claims. Many condominium associations retain engineers at turnover or shortly thereafter to perform a comprehensive analysis of the plans, as-built plans, submittals, and condition of the condominium to determine if there are any design / construction defects. Associations will want to do this to ensure they preserve warranty-related items / claims and provide parties notice of those items sooner than later. Contractors, knowing claims are forthcoming, need to be proactive:

 

  • They will want to hire subcontractors that do not have residential or condominium exclusions in their policies, or an exclusion in a liability policy that excludes coverage for condominium projects.
  • They will want to ensure that they maintain the appropriate liability coverage with completed operations coverage and are identified as an additional insured under subcontractor policies.
  • They may want to account for the presumed claim in their price knowing that certain overhead may be devoted to addressing claims long after completion.
  • I have also seen escrow provisions included in the developer-contractor contract where an escrow account is to be funded and maintained during the statute of repose period to offset claims. I have never been a big fan of this since (i) parties prefer to have the money instead of having that money fund an account for ten years, (ii) it could, perhaps, serve as motivation that there is money to fund claims that are not otherwise insurable claims, and (iii) it could lead to disputes down the road as to the allocation of that money in the event a dispute is initiated and fingers are pointed as to the cause of the defect.
  • If the contractor and the developer are in a dispute over certain defects and a settlement is reached, the settlement should reflect that the developer is entering into this agreement on behalf of the association (assuming it is still in control of the association) and accepts money, etc., for the specific items in consideration for a full and final release for the defects. This way, at a minimum, the contractor could create an argument in the event the association later files suit against the contractor for the same exact defects that the defects were already resolved and accepted by the developer on behalf of the association.

 

For more on condominium statutory warranties, please see https://floridaconstru.wpengine.com/florida-condominium-acts-statutory-warranties-difference-between-manufacturer-and-supplier/

 

https://floridaconstru.wpengine.com/statutory-implied-warranties-for-condominium-associations/

 

For more on the statute of limitations and statute of repose, please see: https://floridaconstru.wpengine.com/watering-down-the-10-year-statute-of-repose-period-for-construction-disputes/

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

WATERING DOWN THE 10 YEAR STATUTE OF REPOSE PERIOD FOR CONSTRUCTION DEFECT DISPUTES

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platYes, it appears that the Second District Court of Appeals in Clearwater Housing Authority v. Future Capital Holding Corp., 38 Fla. L. Weekly D2323a (2nd DCA 2013), just entered an opinion that has watered down the ten year statute of repose for construction disputes. That is right – watered down the statute of repose. This is excellent for owners with construction latent defect disputes, but bad for contractors and design professionals.

 

The statute of limitations for construction disputes is governed by Florida Statute s. 95.11(3)(c):

 

(c) Within Four Years. An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.

 

The bolded language above is the ten year statute of repose language, which means that a lawsuit brought after this date is forever barred even if it is otherwise filed within four years from the date an owner discovered a latent defect (the statute of limitations period). In other words, after this repose period, latent defects become moot.

 

However, the Second District in Clearwater Housing Authority gave owner an excellent argument to extend the repose period. In this case, an owner hired a contractor and design professionals for purposes of building an apartment project in Clearwater. The property was then purchased by Clearwater Housing Authority. The Certificate of Occupancy was issued in 2000 and this was when Clearwater Housing Authority took possession of the property. However, a final plat was not submitted by the engineers on the project until 2003.

 

In 2009, Clearwater Housing Authority initiated a dispute for construction defects against various parties. But, in 2011, it amended its complaint to assert a claim against Future Capital Holding Corporation (“Future Capital”). Future Capital did the right thing and moved for summary judgment due to the expiration of the statute of repose. The math was simple. The Certificate of Occupancy occurred in 2000 and it was brought into the lawsuit in 2011, more than 10 years after-the-fact. The trial court agreed and summary judgment was entered in favor of Future Capital.

 

Clearwater Housing Authority creatively argued that the engineer did not submit the final plat until 2003 and this marked the date that triggered the beginning of the repose period; thus, it had until 2013 to assert claims for construction defects. This argument was based on the repose language: “[T]he action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.” Stated differently, “the [ten year] repose period commences on the latest date that any of the listed entities—the professional engineer, registered architect, or licensed contractor—completed or terminated their contract.” Clearwater Housing Authority, supra.

 

The Second District reversed the summary judgment based on Clearwater Housing Authority’s argument and because an issue of fact remained as to when the contract was completed.

 

What effect does this have? A huge effect! An owner can sue a contractor or design professional outside of ten years from the issuance of the Certificate of Occupancy and argue that the repose period did not run based on the following arguments: (a) the contractor’s contract was not completed until well after the Certificate of Occupancy date because the contractor was doing endless punchlist work or (b) the design professional had not completed its contract because it was required to submit as-built plans (or some relatively minor task) which it did not do until well after the Certificate of Occupancy. Therefore, based on this holding, owners can be very creative as to when contracts were arguably completed to create questions of fact to postpone the repose period, especially if they are concerned with this defense. On the other hand, contractors and design professionals sued for construction defects that otherwise have a statute of repose argument, like Future Capital seemed to have in the Clearwater Housing Authority case, need to appreciate that a creative owner will be able to create a question of fact to preclude the entry of summary judgment.

 

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

OWNERS: UNDERSTAND AND APPRECIATE THE STATUTE OF LIMITATIONS FOR CONSTRUCTION DEFECTS

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imagesCASAN61XHaving an understanding of the statute of limitations when an owner notices a construction defect with their property is essential to ensure that legal actions are timely filed. Not having this appreciation could have a devastating impact. It could result in an owner being legally barred from pursuing an action for debiltating construction defects or damages. This should never be the case.

 

The statute of limitations for construction disputes is primarily governed by Florida Statute §95.11(3)(c). This section provides that there is a four year statute of limitations for:

 

“An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.”

 

Now, what exactly does all of this mean? To begin with, this means that the statute of limitations for construction disputes commences on the latest of: i) the owner’s possession of the property, ii) the issuance of the certificate of occupancy by the governing building department, iii) the date construction was abandoned if the project was not completed, or iv) the date the contract was terminated (which would also typically be the case if the project was not completed).

 

For a completed construction project, the dates I like to focus on are the temporary and/or permanent certificates of occupancy dates because these signify the dates the owner is entitled to occupy their property in whole or in part. These are also hard dates that can be confirmed through the building department and the closing of the building permit. The owner has four years to initiate a lawsuit from this date.

 

However, when an owner discovers a construction defect or damage to their property (i.e., water intrusion or leak, mold, cracked or spalling stucco, etc.), it is frequently a discovery that occurs many years AFTER completion and occupancy. When this occurs, the statute of limitations becomes less clear.

 

The discovery of a defect or damage after completion is referred to as latent defect because the defect or damage was not patently visible during construction (or reasonably discovered with the exercise of due diligence prior to the owner’s acceptance and occupancy of the property). In this circumstance, the statute of limitations commences on the date the latent defect was discovered. But, under the law, in no event can the cause of action be pursued more than ten years after the factors referenced above (project completion). This cap on when an action can be filed with respect to a given construction dispute is referred to as the statute of repose.

 

For example, let’s assume a project was completed on December 31, 2010. Many years later, on December 31, 2017, the owner discovers serious latent defects. This discovery starts the running of the statute of limitations. But, the owner would not have four years to sue on these latent defects because if he waited the four years until December 31, 2021, his suit would be barred by the statute of repose, which would cap suits relating to the project ten years from completion on December 31, 2020.

 

Understanding when the statute of limitations would commence and when actions would be barred under the law is important and, many times, factually complicated. Recently, the Third District Court of Appeal in Hochberg v. Thomas Carter Painting, Inc., 36 Fla. L. Weekly D1200f (3d DCA 2011), analyzed the running of the statute of limitations in a construction dispute. In this case, owners hired a contractor to build their beautiful new home. After the home was completed in 2003 and the owners moved in, they discovered mold and water intrusion damage. The owners immediately hired an engineer to analyze their discovery and the root of the defects. The expert produced a preliminary report in 2004 addressing the cause of the defects.

 

In 2008, the owners sued the subcontractors responsible for the defects for negligence and violation of Florida’s building code. Subcontractors argued that the owners filed their lawsuit outside of the statute of limitations because they discovered the defects in 2003 but waited until 2008 to file their lawsuit. The owners argued that the statute of limitations should be tolled until they discovered the exact nature of the defects or magnitude of the underlying problem and which trade subcontractors the defects could be attributed to.

 

The appellate court held that, “Florida law is clear that ‘where there is an obvious manifestation of a defect, notice will be inferred at the time of manifestation [discovery] regardless of whether the plaintiff has knowledge of the exact nature of the defect.’” Hochberg quoting Performing Arts Center Auth. v. Clark Constr. Grp., Inc., 789 So.2d 392, 394 (Fla. 4th DCA 2001). In other words, even though the owners did not understand the magnitude of the defects or what specifically was causing the water intrusion into their home, the court maintained that their initial discovery of water intrusion and related damage (i.e, mold, wet carpeting) triggered the commencement of the statute of limitations.

 

This holding is important because when an owner discovers construction defects and damage, they do not discover or appreciate the magnitude of the discovery. For instance, an owner may discover wet interior finishes, smell or discover mold, discover cracks in their exterior finishes, or a roof leak, but will not typically know the specific defects causing these problems. They also typically will not have an appreciation as to the overall significance of the problem. Owners hire expert consultants to analyze these issues to not only determine the root and significance of the problem, but the method to fix the problems. The owners in this case tried to cleverly argue that the statute of limitations for latent defects should be tolled until an owner discovers the precise nature and cause of the defects, which would often correspond with the date the owners receive an opinion from their expert consultants. However, the court focused on the actual discovery of the defects or damage by the owners, rather than when the owner learned the magnitude of the problem.

 

Owners that discover a defect or damage with their home or property should absolutely not ignore the problem. Ignoring the problem could only exacerbate the underlying problems while potentially putting the owner in a situation where he is outside of the statute of limitations or repose and can no longer pursue an action against the parties responsible for the problems. Again, this should never be the case.

 

For more information on the statute of limitations and the statute of repose, please see: https://floridaconstru.wpengine.com/watering-down-the-10-year-statute-of-repose-period-for-construction-disputes/

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.