Published on: November 4, 2015
The transition of a condominium association from developer to unit owner control can be a complicated process. In a transition circumstance in which the association is dealing with the defective construction of a condominium’s common area, those complexities are multiplied. Often times – with the distraction of many competing issues that all must be addressed simultaneously – unit owners and associations miss critical deadlines that limit, or even prevent, an association from obtaining recovery for substantial construction defects. Associations should be aware of the statutes of limitations and repose, which each create deadlines by which suits for defects associated with the construction and/or design of the condominium must be filed.
The Statute of Limitations
The statute of limitations establishes a window within which a party must file a lawsuit. In connection with the defective construction of condominium’s common area, the claims generally must be brought within three (3) years of the party suffering the harm. Where the evidence of harm is effectively hidden and, therefore, unknown, the statute of limitations does not begin to run until a party knows, or has reason to know, the harm has occurred. In most instances, the statute of limitations begins to run against a condominium association when the board learns that there are conditions that reasonably suggest the common area is defective. For instance, if a board learns water is dripping out of the recessed lighting, it would put the board on notice that the common area is defective. It may not matter that the board is unaware of the specific cause of the water leaking or that it has not had an engineer provide an opinion that the leak is caused by a design defect. When a board becomes aware of facts that would put a reasonable person on notice that there is, or that there could be, a defect in the common area, it is likely that the statute of limitations has started to run.
The most notable exception to this rule occurs within the period of developer control. If a developer-appointed board learns of a construction defect during the period of developer control, a court would likely find that the statute of limitations does not run against the association. During the period of time the developer controls the association, the statute of limitations would likely be “tolled,” at least as to claims against the developer. While the law is unclear with regard to how broadly the tolling would apply, the question of when the statute of limitations would begin to run against the developer (and thereby fix the three (3) year period within which most claims have to be brought) would be answered by when – after transition to unit owner control – the unit owner controlled board discovered the facts relating to the defective condition(s).
The Statute of Repose
The statute of repose works together with the statute of limitations to impose an absolute deadline of six (6) years for all tort (e.g., negligence) claims concerning improvements to real property. Pursuant to the statute of repose, claims for negligent construction of the common area must be brought within six (6) years of the substantial completion of the improvement or the opening of the improvement to use. The six (6) year time period applies even if the defect has not been discovered and even if the association is still under the control of the developer. One can think of the statute of repose as an outside time limit on the statute of limitations. Generally, if a unit owner controlled association is aware of facts suggesting the common area is defective, it has three (3) years to file its lawsuit for tort claims relating to such defects. As discussed above, if a construction defect is hidden, the statute of limitations does not begin to run until evidence of the defect is discovered and, once discovered, the association has three (3) years to file a lawsuit for such defects. However, regardless of whether a defect is hidden and regardless of when a defect is discovered, the statute of repose requires an association to bring its tort claims within six (6) years of the earlier of substantial completion or opening of the improvement to use. While the meaning of “substantial completion” and “open to use” are subject to some question in this context, a reasonably conservative approach for a condominium association is to use the date of the first temporary or partial certificate of occupancy for the condominium as the commencement of the six (6) year period. A condominium association must bring its tort (e.g., negligence) claims against the developer and potentially responsible members of the developer’s design and construction teams within six (6) years of that date. A failure to advance such claims within the six (6) year time frame will, at a minimum, limit the scope of remedies available to the association and could eliminate any viable means of securing a recovery for construction defects in the common area.
It is advisable for any condominium association transitioning from developer to unit owner control to identify, to the extent possible, the deadlines within which it must file suit in order to protect the association’s rights. In most circumstances, the board will not be put in a position to file suit, but in those rare circumstances in which suit is necessary, action within the deadlines imposed by the statutes of limitation and repose is essential.