Latent Defects: extending the statute of limitations (law note)
As we’ve previously discussed, the statute of limitations for construction claims in North Carolina is generally three years. That is, once 3 years have passed, you are generally protected from any lawsuit filed after that time.
Does that mean that no lawsuit can be filed against you subsequent to that time? No. First, the statute of limitations is an affirmative defense, meaning that you must timely assert the defense as part of your response to the lawsuit.
Secondly, it is sometimes not apparent when the three year period begins to run. Substantial completion or final completion? What if your work is finished, but the project is not– does the three year period not start until project completion? The issue of whether the statute of limitations has run is complex, and a mixture of law and fact questions. See, Lord et al v. Customized Consulting Specialty, Inc. et al, 182 N.C. App. 635, 643 S.E.2d 28 (2007).
Finally, be aware of the hidden danger of hidden dangers.
The three years does not start to run until it becomes obvious that there is damage stemming from your professional negligence. The applicable statute states that the three years “shall not accrue until bodily harm to the claimant or physical damage to his property becomes apparent or ought reasonably to have become apparent to the claimant, whichever event first occurs.” N.C. Gen.Stat. § 1-52 (2005).
In other words, if there is a defect that is not readily observable and visual, the three years may not start to run until it becomes observable (e.g., through destructive testing, repair work, or renovation work). This is what is known as a “latent defect”, and it can impose liability far beyond the initial 3 years.
Does the latent defect rule extend liability indefinitely? No, it does not. The statute of repose (6 years in NC; other states vary) will impose an absolute final date on real property improvements, after which no further liability can successfully be claimed.
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