Introduction
A growing trend in construction defect legislation around the country has seen the shortening of statutes of limitation and statutes of repose for a plaintiff to bring claims related to construction defects. Over the past ten years, several states, notably Florida and Texas, have shortened their statutes of repose. This is generally positive news for developers and contractors; however, the specifics and ramifications of these legislative and judicial updates are still unknown.
Statute of Limitations
A statute of limitations sets forth the time that a plaintiff has to sue or allege a particular cause of action against a defendant. These time limitations are codified into law and vary depending on the State and the cause of action. A statute of limitations starts at the occurrence of an injury or damage or at the time the injury or damage is discovered. The statute of limitations may be subject to some exceptions such as tolling for reasons such as the injured party being a minor in which case depending on the particular statute, the statute does not begin to run until after the minor reaches the age of majority.
Statute of Repose
A statue of repose also bars action or lawsuits from being filed after a certain date. However, the statute of repose is triggered by the completion of an act such as when construction is completed. The statute of repose in the context of construction defect litigation may start to run upon completion of the project and it is possible that this statute may run before the statute of limitations runs. The statute of repose is not subject to exceptions such as those applicable to personal injury of a minor as set forth above. Exceptions to the statute of report may be allowed in cases involving fraud, misrepresentation, or concealment. Statutes of repose are most common in construction defect, product liability and medical negligence lawsuits.
Political Climate Favors Protections for Builders
Legislators have cited rising construction costs and the high construction demand as a key reason to introduce changes favorable to contractors. In many states the reduction of the statute of repose/limitations is part of a broader tort reform scheme[1]. Several states have referenced a growing housing shortage as a further impetus to enact protections for home builders[2]. In short, the states want more housing production and less risk for the builders undertaking those projects.
Changes by State
- Texas
Effective June 9, 2023, Texas has shortened its statute of repose from the existing ten year statute for builders of new homes to six years under specific conditions. The significantly shorter statute of repose bars suits against construction contractors of detached one-and two-family homes and townhomes, filed six years after the substantial completion of such homes, where the contractor also furnished a written warranty in compliance with the statute.
- Florida
Florida enacted SB 360 and maintained its four year Statute of Limitations but reduced the Statute of Repose for construction defect claims from ten to seven years.
Florida’s SB 360 also changes the “trigger date” for the statute of limitations and repose. Rather than running from the date a property owner takes possession, the statute(s) begin to run with the earliest of the following events: the issuance of a temporary certificate of occupancy, certificate of occupancy or certificate of completion, or the date of abandonment of construction, if construction is not completed, or the date of abandonment of construction if construction is not completed.
- Other States and Trends
Other states, including Oregon[3], Wisconsin[4], Minnesota[5], have taken similar steps through legislation or case law to reduce the risk of developers and contractors by reducing the period in which a party may bring a claim alleging construction defect.
Increased protections for homebuilders can be observed in unsuccessful proposed legislation as well. In 2020, the Colorado State Legislature killed Senate Bill 30-138, which would have extended the statute of repose from six years to ten years and made certain tolling arguments available. Maintaining the shorter statute period was seen as a benefit to contractors and developers.
Although in several states the trend is toward reducing the risk for contractors by shortening the period in which to bring claims, this trend not universal, as demonstrated in New Jersey with the implementation of Senate Bill 396 in 2022. Under that bill, the six-year statute of limitations to bring claims arising from planned real estate developments now begins to run when a homeowner takes possession of a unit, and not when the unit is completed. Similarly, Nevada revised Statutes11.202(1) and 11.202(2) that went into effect on October 1, 2019, extended the statute of repose from six years to ten years and eliminated the statute of response entirely for an action based on fraud.
Conclusion
New laws offering greater protections for builders are as a positive development for businesses engaged in new construction which is critical due to the current housing crisis. However, shortened statues of limitations and repose may result is increased litigation and further taxing on our already overwhelmed justice system.
[1] In March, Florida Governor DeSantis signed House Bill 837, which makes it more cumbersome for citizens to file claims against their insurance companies.
[2] In February, Florida Governor Ron DeSantis signed Senate Bill 102, known as the “live local act” providing incentives for the development of housing and removing regulations viewed as a hinderance to further development.
[3] Oregon Senate Bill No. 46 amends Oregon Revised Statute 12.135, shortening the repose period for claims against architects and engineers from ten years to six years on large commercial structures, effective January 1, 2014.
[4] While not relevant to construction defect litigation, Wisconsin reduced contractors’ risk by reducing the statute of repose for personal injury claims following construction from 10 years to seven years with the passage of Act 235.
[5] Following Moore v. Robinson Environmental, (2021) 954 N.W.2d 277 if a project is completed by two contractors and the first contractor does defective work, regardless of whether such work is demolition or addition, the cause of action accrues, and the statute of limitations begins to run.
