The Impact Of Covid-19 On Construction Defect Claims
May 5, 2020
Claim professionals are often reminded that even the most meritorious claim is worthless if not filed within the applicable statute of limitations or statute of repose. In the world of construction defect claims, Florida law provides for a 10-year statute of repose. Under § 95.11(3)(c), the action must commence within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.
Not surprisingly, the parties do not always agree on the specific date that the countdown clock on the statute of repose commenced running. In a recent appellate decision, Florida’s 5th DCA reversed a trial court’s dismissal of a homeowner’s construction defect claim that was filed just beyond 10 years after the closing date on the property. See Busch v. Lennar Homes, LLC, 219 So.3d 93 (Fla. 5th DCA 2017).
In Busch, the defendant had taken the common position that the plaintiff’s claim was barred by the statute of repose because the Purchase and Sale Agreement, i.e. “the contract,” was completed on the date of the closing on the property, which was the latest date applicable under §95.11(3)(c). Therefore, argued the defendant, the claim expired exactly 10 years later and before the complaint was filed. The trial court agreed with the defendant and dismissed the claim upon the determination that the contract was completed on the date of the closing, which commenced the running of the statute of repose.
The 5th DCA reversed on appeal and held that the trial court erred in finding that the contract was completed on the date of closing. The court held that a contract is not completed until both sides of a contract have been performed. The court pointed to the “inspection and punch-list clause” of the contract which stated: “Any remaining items that Seller has agreed to correct will be corrected by Seller at Seller’s sole cost and expense prior to closing or at Seller’s option within a reasonable time after closing.” In other words, the court found that the contract was not completed at the time of closing because there were remaining punch-list items that the Seller was obligated to correct. As such, the clock on the 10-year statute of repose did not start ticking until the contract was completed (i.e. when the Seller completed the punch-list items, post-closing).
In the context of residential construction, the closing date is generally the date when the statute of repose commences. It is typically the date on which the homeowner takes possession, final payment is made, and the contract is completed. However, the 5th DCA’s decision in Busch is a reminder that there are other factors to consider as well, including if there is a contractual obligation to complete any remaining work after the closing, such as punch-list items.
It is also worth noting that the defendant in Busch is a large production home builder who likely built thousands of homes with the same contract language. Other builders may have similar clauses incorporated into their contracts, too. The Busch case is an important new decision because of the sheer volume of homes that were likely built with this language. As such, it stands to reason that Florida practitioners engaged in residential construction defect litigation may begin to see these same issues arise in their cases, too. And in all cases where the statute of repose may become a critical issue, a careful analysis of the contract should be undertaken in order to identify a similar language.