Introduction:
There are time limits for when a party must file legal action or lose the right to seek relief. These are called statutes of limitations and any injured party must keep those in mind in determining when to file suit. The typical statute of limitations in California is four years from alleged breach for breach of written contract and two years from alleged breach for breach of an oral contract. Every cause of action has its own statute of limitations and the California statutes for various types of actions involving construction defects both overlap and may be confusing when applied to a set of facts.
To make matters even more confusing, if there is a cause of action for gross negligence, intentional wrongdoing, concealment or fraud, the statutes can be abrogated or the time limit extended in whole or part.
Determining the correct causes of action is vital in bringing or defending a claim and this article shall outline the essential statutes of limitations and the strategy inherent in using them. Prior to reading this article, read Construction Defect Law and SB 800 in California on this website.
Construction Defects
A defect simply means that some aspect of the construction or materials used in the construction does not meet the minimum standards required for that type of building. It can apply to commercial or residential property of any size or complexity. Normally, the law of the situs of the property is what applies: if the property is located in California, California law will apply.
The matter becomes more complex when one considers the types of defects and damages caused by the alleged defect. If one has a shifting foundation, then the value of the entire property is risked. If a defect causes injury or death, then a different set of statutes can apply. And the same legal action can involve all those causes of action.
Consider: Your deck was not designed correctly, there was no way for you to know that since the supports were buried without proper treatment for rot or termites, and you only discovered it when the deck collapsed and injured the back of a member of your family who could not work for the following six months. Then you discover that the builder knew that the supports were not treated but hid that fact from the developer. You have causes of action for fraud, gross negligence, property and personal injury and construction defect, all of which are different causes of action and all of which have different statutes of limitations.
It gets even more complicated…
Patent versus Latent Defects
A defect is considered “patent” if it was readily discoverable or apparent by reasonable inspection. If not, and if the defect is hidden, then it is “latent.” The distinction is of great importance because the two defects have different time limits for filing a lawsuit.
A four-year statute is applicable to patent defects. The time the statute begins to run is from “substantial completion” of the work. If a Notice of Completion is recorded, that begins the time. If none is filed, then it is a question of fact as to when substantial completion occurred.
Thus, for example, entities or individuals furnishing design, specifications, surveying, planning, supervision or construction observation services cannot have a lawsuit filed against them more than four years after the substantial completion of such improvement for any patent deficiency in the design, specifications, surveying, planning, supervision or observation of construction of an improvement to or survey of, real property, injury to property, real or personal, arising out of any such patent deficiency; or injury to the person or for wrongful death arising out of any such patent deficiency.
But just in case you find this too easy to understand, notice that if the damage or bodily injury or death due to a patent defect occurs during the fourth year, one can still go to court and seek relief within one year after the date on which the injury occurred, but not more than five years after completion of the work of improvement. Also, the four-year statute is not applicable to owner-occupied single-unit residences. California has enacted Senate Bill 800 provisions which pertain to claims for residential homeowners living in the property at issue as to buildings finished after a specified date and that is discussed in another article on this website.
A ten-year statute of limitation applies to latent defects. To use the example above, individuals who develop real property or are engaged in performing or furnishing design, specifications, surveying, planning, supervision, testing, or construction observation services cannot have a lawsuit filed against them more than 10 years after the substantial completion of such improvement for any latent deficiency and this pertains to any injury to property, real or personal, arising out of any such latent deficiency.
Note that in the case of both latent and patent defects, fraud or intentional hiding of the defect can void or extend the statute of limitations.
Note that once a defect is actually discovered, be it latent or patent, a one-year statute from date of discovery may apply. In the case of negligence or strict liability, the statute of limitations sets the time limit based on the type of injury sustained by the victim. Assuming the negligence of the contractor led to the wrongful death of the victim, the statute of limitations would be a two-year time limit to file the lawsuit. The same deadline also applies to cases of a bodily injury, while property damage claims might have a three-year time limit under the statute of limitations.
Why so complex? The reason is that the nature of the alleged wrong can be multiple: negligence, gross negligence, intentionally hiding, latent, patent, bodily injury, property injury, etc. etc. Each cause of action can have its own time period to file suit, and they can overlap.
And there are different laws applying to disclosure of conditions by the seller of real property, especially in the case of homes. Any homeowner selling must fill in numerous pages of disclosure and the statutes as to what must be disclosed are strict and usually cannot be waived by a buyer of residential property. Thus, failure to adequately disclose a condition can lead to additional causes of action against the seller who, in turn, may have his or her own action for defects against the original builder.
The list below is a good general reference for latent defects but DO NOT just rely on those time limits without consulting with counsel for the reasons specified later in this article:
One Year
- Loud noise transmission
- Manufactured products (not covered still by warranty)
- Finished trim and items
- Irrigation and drainage systems
Two Years
- Dryer duct installation
- Wood fences and posts
- Landscape systems
Four Years
- Plumbing/sewer fixtures
- Electrical and mechanical system defects
- Pathways
- Steel fences
Five Years
- Paint or stain deterioration on building surfaces
Ten Years
All other defects or violations of building standards including but not limited to:
- Air conditioning systems
- Balconies
- Decks
- Doors
- Ceramic tile, tile backing and tile countertops
- Exterior stairs
- Exterior stucco, siding, walls, framing, finishes
- Foundations, load bearing components, slabs, and underlying soils
- Hardscape, paths, patios, irrigation systems, landscape systems, and drainage systems
- Heating systems
- Plumbing, sewer, and utility lines
- Retaining and site walls, associated drainage systems
- Roofs, roofing systems, chimney caps and ventilation
- Shower and bath enclosures
- Soils and engineered retaining walls
- Structures
- Windows, patio doors, deck doors, and related systems
Strategy and Reality
Any experienced attorney will know that statute of limitations is a tool that can be powerful but does not always work. Ask any defense counsel how many cases are not dismissed even when it seems obvious that the case was filed too late.
Courts normally do not like eliminating relief and barring people from filing a lawsuit. Most courts feel that everyone should have their day in court. Mitigating against this is the fact that the courts are crowded and if violation of a statute is obvious, the court is likely to enforce it. Filing suit for a patent defect fifteen years after completion of the project is likely to fail. But if within a year or two of the deadline, and if pled correctly, the case may stand.
Plaintiff’s attorneys know the danger of dismissal and often plead their case to evade the statute. Thus, if my client if filing suit fifteen years after completion for a latent defect, I will plead that the condition shows gross negligence or intentional hiding of the condition or the like to attempt to save the cause of action since the court may require the parties to engage in discovery to determine if the statute is applicable in the current action.
Further, courts are expensive and slow and legal counsel are paid to determine ways to both prosecute and defend claims aggressively. Put simply, the complaint filed will be pled with the statute of limitations in mind and will attempt to plead around it to the annoyance of defense counsel. It will cost many tens of thousands of dollars in fees and expert opinions to determine if the statute is applicable in many cases and this anticipated expense can lead to settlement prior to the case continuing.
As a typical example, for a latent defect claim filed fifteen years after completion of the project, the plaintiff’s lawyer will usually plead intentional concealment or gross negligence or some sort of claim that will abrogate the ten-year statute. And will further plead that substantial completion actually did not occur for years after the apparent completion since additional work was performed five years later, etc.
Defense counsel will, of course, seek to enforce the statute but that will be a fight in law and motion that can last many months and most judges are loathe to enforce a statute of limitations that could have homeowners facing massive damages without relief. Judges are human, and when faced with a large developer (or the insurance company of the developer) seeking to avoid liability to fifteen homeowners in a middle-class condominium, the judge may lean over backwards to allow the action to proceed.
Thus, this writer has witnessed a judge allow an action to go forward eleven years after completion based on the theory that the developer should not have relied on an expert’s report on soil conditions because the developer, who was out of state, should have visited the site and felt the soil himself(!). The probable actual reason for the judge’s ruling was that a child was injured by the shifting foundation, the child was in court staring at the judge, and the judge was going to make sure that some relief was available. (The parents were alcoholics who never investigated the remedies they might have until the statute ran.)
Further, the statutes are overlapping and confusing, as described above, and the courts and parties often become mired in the issue of what statute applies when, when the job was completed, what the builder knew and did not know, and whether the defect was truly latent.
Conclusion:
The lesson is simple: First, get good counsel to investigate the claim to determine if the statute will truly bar the action. It is far more complicated than you might think. Be ready to provide all the facts: hold nothing back. And if there is a chance to survive the defendant pleading the statute of limitations, seriously consider attempting it. If you are defense counsel do not think that the timing of the action will automatically protect your client. Be ready to address, either directly or indirectly, the “politics” of the case as well as the timetable of the action. Be aware that plaintiff’s counsel will almost always over plead the case precisely to avoid the statute of limitations and be ready for a difficult fight in court.