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

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.

 

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

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 reposeA 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?

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.

 

 

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

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.