Homebuilders and Contractors Beware

Construction Defect Claims May Be Filed More Than Ten Years After Construction is Complete

A statute of repose sets a firm deadline by which a lawsuit may be filed after the occurrence of a particular event. Once the statute expires, a prospective defendant is no longer exposed to legal action. Florida has a ten-year statute of repose for construction defect claims. The statute provides that an action for construction defects must be commenced within ten years after the latest of four events, the fourth of which is the “date of completion” of the contract between the contractor and the owner. In construction defect disputes, many homebuilders and contractors assume that the contract is complete at closing or when construction is complete, and that they are no longer exposed to legal action after ten years. As shown by two recent cases from Florida’s Fifth District Court of Appeal, that assumption may not be correct in all cases.

Busch v. Lennar Homes, LLC

In Busch v. Lennar Homes, LLC, the Fifth District Court of Appeal reversed a judgment dismissing a construction defect claim filed more than ten years after the buyer closed on his home. The trial court found that the contract was complete when the parties closed and dismissed the complaint because it was filed more than ten years after the closing. The Fifth District Court of Appeal disagreed, relying on an inspection provision in the parties’ purchase contract that allowed the builder to correct defects noted by the buyer within a reasonable time after closing. The court found that this provision would have allowed the closing to occur even if there was additional work to do under the contract. Because the complaint did not conclusively establish that all the work required by the contract was completed before closing, the court concluded that the complaint was not barred by the statute of repose.

Cypress Fairway Condominium v. Bergeron Construction Co. Inc.

The Busch case followed another case from the Fifth District Court of Appeal, Cypress Fairway Condominium v. Bergeron Construction Co. Inc., which held that the statue of repose did not begin to run until final payment was made to the contractor. The plaintiff in that case was a condominium association that brought a construction defect claim against one of the contractors who built the condominium. The contractor argued that the claim was barred by the statue of repose because it was not filed within ten years after the date construction was completed. The Fifth District Court of Appeal rejected that argument, finding that the statute began to run from the time both parties completed performance under the contract, which was the date on which final payment was made to the contractor. Conceivably, the court’s decision in Cypress Fairway would enable a prospective claimant to extend the ten-year statute of repose simply by delaying payment to the contractor, a problem the Florida legislature has tried to address in a recent bill which provides that the statute of repose begins to run at the later of the date of final performance of construction services or the date that final payment for those services is due, rather than the date payment is made.

How to Limit Exposure to Defect Claims in a Purchase Contract

The Busch and Cypress Fairway decisions illustrate that builders and contractors should not automatically assume that they are free from construction defect claims ten years after closing on a home or completing construction. Under these cases, builders and contractors are at risk of being sued for alleged defects more than a decade after a home is sold or a construction project is completed, if there were any additional items to be performed by either party under the contract. To limit their exposure for construction defects, builders and contractors should carefully review their contracts to ensure that they contain clear and specific language regarding when the contract will be complete, and should make an effort to document the date on which completion occurs. Following these simple steps will provide a greater degree of certainty in determining when the ten-year statute of repose for construction defects begins to run.

About the Authors:

Michael Furbush is a member of the Litigation department in Dean Mead’s Orlando office. He focuses his practice on resolving complex, commercial matters in state and federal courts throughout the country. He has represented large public corporations, small companies, and individuals from a wide range of industries, including entertainers, real estate developers, general contractors, retailers, physicians, and manufacturers.

Mr. Furbush has obtained multi-million dollar settlements on behalf of his clients and is highly experienced in arbitration, mediation and other forms of out-of-court dispute resolution. In addition, he has litigated and resolved cases involving covenants not to compete, trade secrets, trademark and copyright infringement, breach of contract, construction litigation and lien disputes, corporate dissolutions and shareholder disputes, employment discrimination, and antitrust matters. He may be reached at mfurbush@www.deanmead.com.

Thomas P. Wert is Board Certified in Construction Law by The Florida Bar and has practiced in the area of business litigation, with an emphasis in construction law since 1993. He is also a Circuit Civil Court Mediator certified by the Florida Supreme Court, who has mediated numerous business disputes. He has represented numerous businesses and individuals in cases involving construction defects, delay claims, lien law, design liability, dispute resolution, licensing issues, procurement, condominium and home owner associations, credit agreements, contract disputes, business torts, government bid protests, intellectual property rights and bankruptcy. He has also counseled clients in the drafting of customized construction contracts. He may be reached at twert@www.deanmead.com.