How Long Are You On The Hook For Defective Workmanship?
An Overview of the Construction Defect Statute of Limitations
William C. Last, Jr.
Attorney at Law
This article will review the basic limitations periods for filing a lawsuit for construction defects. In essence, if the lawsuit is not filed in that time it will be forever barred. The limitations periods affect not only the course of litigation, but a contractor's evaluation of its record retention and risk management decisions.
What is a Statute of Limitation and a Statute of Repose?
A Statute of Limitation is a law that has been enacted by the state legislature and signed by the governor that sets a limit on the right to file a claim on a particular legal cause of action (legal theory) against a defendant. Such a law declares that the specified cause of action cannot be maintained unless it is filed within a specified time after the right to bring that cause of action has accrued (usually the occurrence of injury).
A Statute of Repose is the same as a statute of limitations, but the final date for filing suit runs from a defined event (e.g. completion of the construction) rather than the discovery of the right to commence the action. The purpose behind a Statute of Repose is to set a final deadline for filing the action and, if it is not filed by that deadline, the prospective defendant will know that it is no longer exposed to a possible lawsuit. California's statute of repose for filing a lawsuit for latent defects will be discussed in subsequent section of this article.
What are the Statute of Limitations for filing a construction defect claim?
The applicable Statute of Limitations for filing a construction defect claim depends on the cause of action on which the lawsuit is based. A cause of action embodies the legal theory and the remedy which a plaintiff sets forth in the form of allegations in its complaint. For example, causes of action that can be pled in a construction defect cause of action include breach of contract, negligence, strict liability, fraud, breach of implied warranty and nuisance.
Each of those cause of actions is comprised of specific elements that must be pled and proved in order to prevail on that cause of action. Generally, a cause of action does not exist until last element of a cause of action has occurred. Usually, a cause of action will accrue with the wrongful act. Many causes of action, however, do not accrue until the plaintiff has suffered some injury or monetary loss, which sometimes doesn't occur until some time after the act. For example, a negligence cause of action the plaintiff must plead and prove that: (1) the existence of a legal duty to use reasonable care to avoid injury to the plaintiff; (2) the failure of the defendant to use reasonable care; (3) the failure to use reasonable caused some harm to the plaintiff; and (4) that harm was a reasonably foreseeable.
The California statute of limitations for breach of contract and breach of implied warranty is two years for oral agreements and four years for written ones. The general rule is that the period runs from the breach itself. However, there are many exceptions and a decided trend in the courts to date the period from the discovery of the breach where the plaintiff was not in a position to detect it earlier. Also, many building contracts promises about the future performance of the construction (e.g. roof warranties) or promises to repair defects for some period of time after completion.
The periods for actions for negligence or strict liability depend on the type of injury. They are (1) two years for injury to or death of an individual and (2) three years for property damage. The period generally begins when the plaintiff actually or, with the exercise of reasonable diligence, should have discovered the facts justifying suit. The period for a fraud or nuisance action is three years dating from the plaintiff's discovery of the fraud.
Can a Statute of Limitations be extended? If so, under what circumstances?
Yes. If a contractor or developer attempts to repair the defective workmanship, they may be "equitably estopped" (prevented) from asserting a statute of limitations defense. The statute is also "tolled" (extended) while the remedial work is being performed. Negligent repairs may also act to toll the statute. However, a Statute of Repose is not tolled by repairs or attempted repairs.
There are other possible grounds upon which a statute of limitations can be tolled. They include, but are not limited to a promise to perform, a promise to settle, fraudulent concealment of a defendant or a cause of action, the defendant's absence from the state, and disabilities which prevent the plaintiff from filing the action such as incarceration, insanity, and war.
What is the Statute of Repose for filing a construction defect claim?
California has two Statutes of Repose relative to actions for construction defects against builders, designers, and others involved in construction. They are found in Code of Civil Procedure Sections 337.1 and 337.15. They apply both to actions for repair of defects and to actions for property damage and personal injury caused by defects.
Section 337.1 requires an action for a "patent deficiency" in design, specifications, surveying, planning, supervision, observation of construction, or construction to be filed within four years of substantial completion of the construction. That section defines a "patent deficiency" to mean "a deficiency which is apparent by reasonable inspection." If the defect causes injury or property damage in the fourth year, the action can be brought on that defect for one year from the date of injury.
Section 337.15 requires an action based on a "latent defect" be brought within ten years of substantial completion. Unlike the four-year statute of repose, Section 337.15 does not limit actions for personal injuries, but does apply to actions for indemnity brought against others supplying services or materials to the construction, however, if the initial action is timely, a defendant can file a cross-complaint for indemnity in the same action even though the ten-year period has expired. Section 337.15 also does not apply to actions based on willful misconduct or fraudulent concealment.
A plaintiff must bring its action both within the period of the applicable statute of limitations and statute of repose. Thus, once the defect or injury is discovered the one, three, or four-year limitations period begins to run, but does not extend past the end of the repose period.
Neither statute of repose applies to homeowner actions based on defects in new construction or to situations where the builder owns or has control of the property.
So how long am I exposed to a construction defect lawsuit?
Generally, the longest period should be ten years with a one or two year extension for possible indemnity claims. However, that period may be shortened if the plaintiff did or should have reasonably discovered the existence of the defect. If the plaintiff does or should have reasonably discovered the defect the time for filing a lawsuit is reduced to 3 years for a negligence cause of action and four years for a breach of contract, but in any event no longer than ten years after substantial completion. For example, if the plaintiff discovers the defect eight years after substantial completion he only has two years remaining to file the lawsuit.
It should be noted that application of the relevant statutes of limitations and statutes of repose that have been discussed in this article are subject to a number of exceptions and that plaintiffs' attorneys can be expected to attempt to prove such exceptions. This article is for general information, not legal advice and is not an exhaustive discussion of the complex issues associated with the statutes and their exceptions. If you have question or a case that concerns a statute of limitation or statute of repose you should consult an attorney.
This article, ©2006, was written by William C. Last, Jr. Mr. Last is an attorney who has been specializing in Construction Law for over 27 years.. In addition to belonging to a number of construction trade associations, Mr. Last holds a California "A" and "B" license. He can be contacted at 415-764-1990 or 650-425-7679. A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.