You have all heard the adages about time: time waits for no man; time marches on. These sayings have appropriate application to some aspects of the law, especially in the area of construction defects. Many people are aware of, and many pages have been written, about statutes of limitation. These laws (there are actually several limitations periods provided under several different statutes or parts of statutes) require a party who knows of a defect in the construction of its property (including community associations) to bring an action to address that problem or condition within a certain period of time after the triggering event. Usually, that trigger is the date the party learned of the problem or condition at issue.
The Statute of Repose, however, is even more likely to cause claims to slip away with the sands of time than any statute of limitation. This is because, while the limitations period may wait for your discovery of the problem, the repose period can march on whether you discover the problem or not. Additionally, despite its potential to run without notice or warning, the Statute of Repose has the same potentially devastating effects as a statute of limitation.
What is the Statute of Repose?
The Statute of Repose is found in Minn. Stat 541.051, the same statute that gave us the two-year limitation period to commence a lawsuit for defective and unsafe conditions caused by an improvement to real property. The Statute of Repose acts like a statute of limitation because it will bar claims if the claim is not brought within the stated period of time. The difference between the two, however, is when they start to run. The repose period is 10 years and begins to run upon "substantial completion” of the construction. It is different than typical limitation periods because it does not matter when the association discovered, or even if it has discovered, the defective condition. Once the 10 years expire: time’s up! No claims can be brought against the contractor for the construction. It is the proverbial finish line for contractors that; once they have crossed it they are free from liability for defects.
The term "substantial completion” of construction is important because this is the event that triggers the commencement of the 10-year repose period. The statute defines substantial completion "as the date when construction is sufficiently complete so that the owner…can occupy or use the improvement for its intended purpose.” In most cases this will mean the date the local municipality issues a Certificate of Occupancy. Ten years later, and often after many properties have been sold at least once, the repose period may sneak past an owner or community association.
How Does a Community Association Protect Itself From the Effects of the Running of the Repose Period?
First, the association needs to know when its buildings or units were substantially completed. This may have occurred in phases. A review of the association’s governing documents and early Board meeting minutes may provide insight as to when construction was substantially completed. Municipalities should also have documentation showing when certificates of occupancy were issued, and may have copies of the certificates themselves. Count forward 10 years from the earliest date that appears applicable to estimate the applicable deadline. Any estimates should err on the side of assuming the repose period will end earlier, rather than later. An attorney can help to advise you regarding the anticipated expiration of your particular repose period and whether any exceptions may apply to you.
Second, the association should undertake property reviews, especially when the repose period is set to expire. Associations should always be inspecting or at least performing a "walkthrough” of its property annually or semi-annually and be on the lookout for potential defects or dangerous conditions. However, when the end of the repose period appears close (think about years eight, nine and ten) a more detailed and earnest evaluation of conditions should be undertaken. Simply walking around is not enough to accomplish this more thorough kind of examination. Consider hiring an engineer, experienced contractor, or other professional who will look at your roofs, examine your windows and flashings, and is prepared to look behind the surface of your building(s) to truly see whether damage may be lurking unseen in the walls, roofs, basements or crawlspaces.
Third, understand that the Statute of Repose operates as a complete bar to a suit to seek reimbursement for damage or the cost of repairs arising from construction defects. Unless you can show fraud was involved, it does not matter that the condition may have been hidden and not discoverable until after the repose period expired.
Can We Call A Timeout?
Even 10 years after "substantial completion” you may still have a claim if you have the right gameplan. Like most areas of the law there are few absolutes, even when dealing with statutes of limitations or the Statute of Repose. Particularly in the area of community associations, it may be possible to pursue some warranty claims even after the repose period in certain factual situations. That is why it is critical when problems are discovered, whether through periodic property inspections or just randomly, that you immediately contact legal counsel.
Going Into Overtime
There are other possible means for extending the game as well. If a defective condition or problem is discovered before the end of the 10th year, the association then has an additional two years to bring a claim. For example, if a building was substantially completed on January 1, 2000, and a condition is discovered on December 31, 2009, the association would then have until December 31, 2011 (11 years and 364 days) to bring suit and not run afoul of the Statute of Repose. The only remaining exception is if the contractor engaged in fraud to hide the condition, but it can be very difficult to prove the intent required to show fraud.
In conclusion, property owners should keep in mind the repose period. It marches on unabated for a 10-year period (other than in the exceptional cases noted herein) and will become a complete bar if the association seeks compensation or repairs for conditions that it may discover after the period expires. The owner should identify when the property was substantially completed so as to know the date of expiration of the repose period. The property should be inspected periodically, especially as the expiration of the repose period approaches.
Like time, the statute of repose will not wait for you. It is important for property owners and community associations to watch the clock so they can make sure they beat the buzzer.
The information contained in these materials is intended to provide legal information in general terms and is not intended to be used as a basis for specific legal advice. The facts and circumstances specific to a particular association or matter may dictate a certain course of events or necessary action which may require specific legal advice or assistance.