Statute of Repose: Putting your Risk to Bed

Ferret's new hammock

Last week, I discussed the statute of limitations  and how it is generally applied to North Carolina construction projects.  Today, I want to introduce you to another important concept: the statute of repose.

What is the Statute of Repose?

The Statute of Repose is another time-barring statute within which your claim must fit. Like the statute of limitations, it depends on what state’s law will apply to your case, which is usually, but not always, the state where the project is located.

The Statute of Repose, under N.C. Gen. Stat. §1-50(a)(5)(a) provides:

“No action to recover damages based upon or arising out of the defective or unsafe conditions of an improvement to real property shall be brought more than six years from the later of the specific last act or omission of the defendant giving rise to the cause of action or substantial completion of the improvement.”

When does it run for North Carolina construction projects?

The Statute of Repose in North Carolina for improvements to real property is currently six (6) years from substantial completion or the last specific act or omission of  the defendant, whichever is later. N.C. Gen. Stat. §1-50(a)(5)(a); Nolan v. Paramount Homes, Inc., 135 N.C. App 73, 518 S.E.2d 789 (1999).  Once you have been off of a job for 6 years, you cannot (successfully) be sued for any construction defect, regardless of when the defect was or is discovered.  It is an extreme, bright line bar to any claim after that time; that is, it puts your risk to bed.

How is it different from the Statute of Limitations?

Unlike the Statute of Limitations, the Statute of Repose starts running whether or not you are aware of any defect.  Bryant v. Don Galloway Homes, Inc.,, 147 N.C. App. 655, 556 S.E.2d 597 (2001). This is a double-edged sword—if you are the one whose work is being questioned, you can rest easy that after you have been off of a project for 6 years, no claim can thereafter be (successfully) brought against you.

On the other hand, you are also bound by the repose statute, regardless of any equitable considerations. For example, in Monson v. Paramount Homes, Inc., homeowners sued a general contractor for defective construction, and the contractor brought a third-party action against his subcontractor. The claims against the subcontractor were deemed time-barred under the statute of repose.  133 N.C. App. 235,515 S.E.2d 445 (1999). In Monson, the contractor had to defend the action but had no ability to recover from the subcontractor who actually performed the poor construction.

Does punch list or warranty work extend the Statute of Repose?

In most cases, no.  Once the statute of repose starts to run, it generally cannot be tolled by any subsequent action.  For example, in one case, even when the contractor had performed some punch list work after substantial completion, and even though the architect failed to issue a certificate of substantial completion, the court held that the statute began to run at the date of substantial completion of the contractor’s work.  Mitchell v. Mitchell’s Formal Wear, Inc, 168 N.C. App, 212, 606 S.E.2d 704 (2005).

This is also true if you return to the job for minor warranty type issues during the 6 year period. The statute of limitations is tolled during the repair time, but in general, the statute of repose is not tolled once it begins running. The policy behind this interpretation is that the Statute of Repose is a substantive right designed to limit the potential liability for a set period of time.

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Photo “Cama nova do furas / Ferret’s new hammock” by Isa Costa via Flickr via Attribution-NoDerivs 2.0 Generic Creative Commons license.

 

Tools in your Toolbox

A fun link for “over the hump” day.

A light-hearted post from the “Art of Manliness” blog discusses 12 essential tools for a toolbox.  Pretty basic stuff here, but something everyone–man, woman, or college-aged child–should have access to in their home.

Read it and see if you agree, and let me know what (other than duct tape, which is a given) should be added to the list………….

tool box

Tomorrow, back to the law part of the blog when we’ll be discussing, by popular demand,  the Statute of Repose.

 

Tues Tip: Construction Marketing ideas from a pro

DeAnna Radaj

DeAnna Radaj

 

Last Tuesday I posted about the importance of properly handling the business of your construction business through having written contracts.

For today’s tip, I’ve opened up the floor to DeAnna Radaj, owner of Bante Design LLC. DeAnna has a division of workshops & programs that help design and construction professionals with their businesses.  She is the author of “Designing the Life of Your Dreams from the Outside In” and “Feng Shui for Teens.”

Here are DeAnna’s tips for clients and workshop participants to market themselves better:

  • Have an electronic signature that includes any awards, tag lines and website info that gets included on all emails. You can also have logo included as well to help brand your company.
  • You MUST have  a website, even if it’s only 1 page that has mission statement, logo, services/products offered, contact info, location/address and hours of operation. Keywords and meta tags need to be used so they appear at top of search engines (i.e. John’s Roofing would have “johns roofing, roofing, construction” and city/area serviced)
  • Great sites to promote self/company: LinkedIn, Twitter, Facebook, ConstructionDeals.com, any association groups. Join appropriate groups that are for your IDEAL CLIENT!
  • Go to where your IDEAL CLIENT frequents/posts/shops. If your market is luxury remodel, you wouldn’t advertise at the Dollar Store.
  • Start a blog. This is great to have on your website. Use this in email signature & any correspondence & marketing. Submit blog to eZine articles, ConstructionDeals.com and link to your profile on LinkedIn and Facebook so it’s always updating & keeping your prospective clients updated.
  • Speak at local business groups, trade associations,  community colleges, or even the local park & recs group. Who couldn’t use some “handy man tips”? Proper way to hold/use tools for women? Be creative. Establish yourself as THE EXPERT. Workshops are one of THE #1 ways to attract new clients!!
  • ASK for referrals from current/past clients. Offer a “commission” for referrals, or entry into a raffle for each referral…be creative!
  • Write an eZine/newsletter to keep clients and/or list current on trends, new products/services and appearances. Do NOT send out more than 1x a month! Offer incentives/coupons to increase sales.
  • Host an open house of other event at your office/store or in conjunction with similar businesses…kind of like a joint venture. Are you a plumber? Team up with a tile shop for a joint offering, workshop or open house.

 

Do you have a good idea for finding and keeping your construction clients in today’s economy?  If so, drop me a line or comment below and tell me about it!

 

The Sticky Statute of Limitations in NC

sticky notesIf you are not a lawyer, but you play one on TV, you may have a passing understanding of the legal concept of a statute of limitations.  This is post is to provide you just a little more information about the concept, and how it applies to your North Carolina construction project.

What is a statute of limitations, and why is it important?

The Statute of Limitations is a time-barring statute which gives you a set time within which to bring an action (i.e., lawsuit) against another party.  If you do not bring your lawsuit within that period of time, the court will kick it to the curb.  The reasoning behind the statute of limitation (often, ironically, abbreviated as “SOL” in legal circles) is that people need to have some certainty in how long they can be sued for an event that happened in the past.  Witnesses die or forget, papers are destroyed, and in general it is extremely difficult to try a case years after the fact.  The law has, therefore, established a somewhat arbitrary deadline for when you can sue or be sued, and it is vital that you do not go past that deadline if you hope to bring a lawsuit.

What is the statute of limitations on a construction project?

The answer, as always, is:  it depends.  The statue of limitations is governed by whatever state’s law will apply to your case—usually, but not always, the state the project was built in.  The statute of limitations is also determined by what type of lawsuit you are trying to bring (or defend against).

 In North Carolina, the statute of limitations for most construction disputes (breach of contract, professional negligence, implied warranty of plans) is generally 3 years from the date time when you knew or should have known about the issue.   N.C. Gen. Stat §1-52.1  ABL Plumbing and Heating Corp. v.  Bladen Co  Board of Education, N.C. App. 623 S.E.2d 57 (2005). See also AIA A201 para. 13.7.   As always, there are exceptions.  If a contract is “under seal”, a claim can be brought for up to 10 years. (N.C. Gen. Stat. §1-47).

 If the contract involves merchandise and falls under the Uniform Commercial Code, the statute of limitations is 4 years. N.C. Gen. Stat §25-2-725.  However, where a defect in merchandise results in bodily injury or damage to real property, the shorter 3 year statute still applies.  Hanover Ins Co. v. Amana Refrigeration, Inc., 106 N.C. App. 79, 415 S.E.2d 99 (1992). In Hanover, a defective HVAC unit caused a fire, which destroyed a building. The court held that the shorter 3 year statute of limitations applied because the defective merchandise caused damage to the real property.

Therefore, it is best practice to assume that the Courts will find that the statute starts running at the first inkling of a problem, and bring your action accordingly. Also, regardless of the length of any warranty period, contractors can still be liable until the statute of limitations period expires.

What happens to claims after the owner accepts the project?

Once a project has been accepted by an owner, the owner waives his right to claim damages for all but latent defects. Acceptance by the owner with knowledge of a defective performance may be deemed a waiver of the defective performance.

Where, however, the defect is unknown (or “latent”), the owner’s acceptance does not waive the defective performance. Tisdale v. Elliott, 13 N.C. App. 598, 186 S.E.2d 685 (1972).   If a defect is a “latent” defect, hidden or not readily discoverable, the statute of limitations starts running from the date of discovery. Under AIA A201 para 13.7, any statute of limitations is deemed to have accrued in any and all events not later than the date of Substantial Completion.   This section may shorten the statute of limitations in some cases of latent defects.

Can the Statute of Limitations be lengthened or shortened?

Yes.  But, as they say on television, “don’t try this at home.”  Carefully drafted agreements for a shorter or longer period of time can be executed.  Consult your attorney before you do so, however.  You may also want to check with your insurance carrier to make sure you have sufficient insurance coverage for a longer warranty period.

What if the parties are working together to fix construction problems?

If the parties are working to fix problems, but the statute of limitations is fast approaching– run, don’t walk, to your attorney to discuss a tolling agreement to stop the running of the statute, or otherwise enter into legally enforceable agreements concerning the statute of limitations.  Just because the parties are all working together to solve a construction issue now doesn’t mean that the finger-pointing won’t begin once the bill is presented.

Have a question about the statute of limitations?

Comment below, drop me an email, or find me on twitter @melissabrumback .

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Photo (Public Domain):  “brightly coloured sticky notes and tags” by Adrian van Leen via OpenPhoto.


Tues Tip: “Business” of architecture & engineering

Love your work but hate the “job” portion of it? You know, quoting scope of work, dealing with fees, and getting paid?  If so, check out Milton Gregory Grew’s great article about setting fees that can realistically account for your overhead and other indirect costs, “The Business of Architecture (Oxymoron?)”.

Of  the tips Greg discusses, step #2, “Put it in writing” is key,  as I’ve discussed earlier here.

Moreover, for fee issues, a written agreement is the gold standard.  In a written agreement you can even account for collection costs, higher interest charges, and “reasonable” attorney fees if you later (heaven forbid) have to sue a (former) client for payment of services.  Without a written agreement, you are stuck with statutory limits on what you can recover.

As they say, an ounce of prevention is worth a pound of cure.Gold 1 oz

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Photo “Gold1oz” by Olegvolk via Creative Commons Attribution 2.5 license.  

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