By Tyler LaMarr, Attorney at Miller Harrison LLC
Construction Defects can financially cripple community associations. The cost to repair leaky and sinking buildings is not budgeted for when the community is created, is not planned for in reserve analyses, and is not anticipated by homeowners at the time of purchase. Purchasers legitimately expect the residences are well constructed in a manner that “can be maintained.”[1]
Similarly, lawsuits over defective construction can be a major setback for community association builders and developers. Builders and developers rely on their trade contractors for quality work. New homes are sold at a price point that does not often factor in expensive and protracted litigation. Such litigation can harm reputation and be a distraction to ongoing work. Builders and developers legitimately expect reasonable expectations and cooperation from homeowners during the warranty phase following construction.
When possible community associations and their developers and builders should work cooperatively towards a resolution that avoids lengthy and costly litigation. Sometimes, however, litigation is necessary.
Statute of Limitations/Repose
Both homeowners and builders commonly inquire how long such claims may be brought following completion of construction.
In Utah, the answer is fairly straightforward: 6 years from the date of completion or abandonment.[2]
“Completion” is most commonly measured by the date on the certificate of occupancy issued for the relevant building by a governing agency. When available, it will be measured from a certificate of substantial completion. When neither are available, it will be measured from the date the improvement was put to its intended use .
Because the relevant time period for bringing such claims is measured from an event unrelated to injury it is referred to as a “statute of repose.” In contrast, when the deadline for filing a lawsuit is measured from when the injury occurred, it is referred to as a “statute of limitations”.[3]
With few exceptions[4], claims brought after the 6-year deadline may not move forward and are subject to dismissal. This hard deadline applies to claims brought by homeowners against a builder and claims brought by builders against subcontractors.
2020 Amendments
In 2020, through House Bill 223, the Utah legislature made minor revisions to Utah’s code section establishing the statute of repose and limitations for construction claims.
The revisions:
· clarify that that statute applied to product liability claims;
· expand the definition of a “provider” who is subject to the code to include suppliers of construction materials.
· clarify that “If a provider is required by an express term of a contract or warranty to perform an obligation later than the six-year period . . ., and the provider fails to perform the obligation as required, an action for that breach of the contract or warranty shall be commenced within two years after the day on which the breach is discovered or should have been discovered.”
The bill originally proposed a reduction of the repose period from 6 years to 3 years. After discussion with stakeholders in the construction and community association industries this proposal did not move forward.
For now, to be timely filed, most construction claims in Utah must be brought within 6 years of Completion or abandonment.
[1] Restatement of the Law – Property Restatement (Third) – See Illustration 1(c).
[3] Willis v. DeWitt, 2015 UT App 123, ¶ 8, 350 P.3d 250, 253 “A statute of limitations requires a lawsuit to be filed within a specified period of time after a legal right has been violated or the remedy for the wrong committed is deemed waived.” Berry ex rel. Berry v. Beech Aircraft Corp., 717 P.2d 670, 672 (Utah 1985). “A statute of repose bars all actions after a specified period of time has run from the occurrence of some event other than the occurrence of an injury that gives rise to a cause of action.” Id. Once the statutory period set by a statute of repose expires, “any cause of action is barred regardless of usual reasons for tolling the statute.” Perry v. Pioneer Wholesale Supply Co., 681 P.2d 214, 219 (Utah 1984) (internal quotation marks omitted). Thus, a party's ignorance of the injury, which is generally a ground for equitable tolling of a statute of limitations, does not toll a statute of repose. See id.
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[4] Exceptions include defects that cause death, bodily injury, or damage to something other than the building itself (see 78B-2-225(7); fraudulent concealment of defects and intentional acts Id. at §5; or claims that should be brought while the developer/builder still controls the improvement Id. at §8.