With apologies to the music legend, Oregon’s statutes of limitations and repose for construction defect claims can be as open to interpretation as Bob Dylan’s lyrics. Recently, the Oregon Court of Appeals appears to have settled (for now) the question of how many years a lawsuit can exist before it is forever barred. However, the Oregon Supreme Court recently dampened the hopes of contractors in regard to the statute of repose.
Statute of Limitations for Residential Construction: Six Years from “Discovery”
In the footnote heard round the state, in 2011 the Oregon Supreme Court noted that “tort claims arising out of the construction of a house must be brought within two years of the date that the cause of action accrues.”1 This footnote upended the long-standing consensus that a six-year statute applied, and led trial courts in Oregon to apply three different limitations periods: two years with a discovery rule and six years with and without a discovery rule.
More recently, the Court of Appeals in Riverview Condominium Association v. Cypress Ventures rejected the Supreme Court’s footnote as dictum and held that the six-year statute of limitations—with a discovery rule—applied to tort claims for construction defect.2 In other words, a plaintiff with a residential construction defect claim must bring the claim within six years of either actual discovery of the injury or “when a person exercising reasonable care should have discovered the injury, including learning facts that an inquiry would have disclosed.”3
Nevertheless, we await the Oregon Supreme Court’s final decision on the statute and what the Court meant in its earlier footnote. Last year, the Supreme Court (again in a footnote), noted the issue without addressing it.4
For now, tort claims for construction defect are subject to a six-year statute of limitations, with a discovery rule. It should be noted that design professionals have their own statute of limitations (ORS 12.135(3)): two years after “damage is first discovered or in the exercise of reasonable care should have been discovered,” i.e. two-year statute with a discovery rule.
These recent developments raise the question of whether the six-year statute of limitations for contract claims in construction defect has a discovery rule. The latest decision (in 2008) held that contract claims for construction defects do not have a discovery rule.5 However, based on the reasoning in the recent decisions, the statute of limitations for contract claims arguably should include a discovery rule. No appellate courts have yet addressed the issue.
Statute of Limitations: What Is Discovery?
While clarifying the time period (six years), the Court of Appeals in Riverview made statute of limitations defenses in construction defects cases more difficult to resolve on summary judgment. The court reiterated that the "discovery rule applies an objective standard--how a reasonable person of ordinary prudence would have acted in the same or a similar situation."6 The court noted that “[o]rdinarily, the application of that standard presents a factual question for the jury,” and that “the question is susceptible to judgment as a matter of law if ‘the only conclusion a reasonable jury could reach is that the plaintiff knew or should have known the critical facts at a specified time and did not file suit within the requisite time thereafter.’”7
The decision in Riverview underscored just how difficult that standard is for defendants to satisfy on summary judgment. In Riverview, by the time of the critical date for the six-year statute (July 22, 2004), the plaintiff homeowners’ association was aware that unit owners and board members were having “problems with leaking windows” in the units, and that the contractor hired to repair leaks in one unit believed they were caused because the “original siders” had improperly installed building paper so that water was entering and running down the walls and into the windows. The later lawsuit was premised on wide-spread water intrusion due to faulty installation of the building paper (among other installation errors). The court reasoned that “based on those facts, a trier of fact could find that the Association, as of July 22, 2004, was aware of window leaks but reasonably believed those problems to have been confined to certain windows.”8 In other words, actual notice of a defect in some places may not be constructive notice of that same defect in other parts of the same building or complex. Further the court stated that these facts did not necessarily put the Association on notice that the contractors supervising the project “themselves engaged in tortious conduct by failing to discover or concealing defects that caused pervasive leaks that would damage common elements of the buildings and require the buildings to be re-sided.”9
Statute of Repose: When Is Substantial Completion?
On its face, Oregon’s statute of repose appears straightforward: claims for residential and small commercial construction defects are barred “ten years after substantial completion.” Claims for large commercial structures are barred six years after substantial completion.10
Recently, the Oregon Supreme Court held that “substantial completion” for the statute of repose is not necessarily triggered by the statutory “substantial completion” notice of completion provided by owners and used by contractors to assert liens for their work.11 Rather, to invoke the protection of the statute of repose, a defendant must “establish the date on which the construction was fully complete, not the date on which it was sufficiently complete for its intended use or occupancy.”12
Subsequent Court of Appeals decisions have not clarified what, exactly, would constitute substantial completion for the statute of repose. In one decision, the court of appeals suggested that the certificates of occupancy and city permits did not necessarily satisfy the requirement, while the formal recording of a “Notice of Completion” for a condominium project might satisfy the requirement.13 Likewise, in a subsequent Oregon Supreme Court decision, the court held that the dedication of a new building did not necessarily constitute “substantial completion” because some construction activities continued past that date.14
In Oregon, residential construction defect tort claims against contractors are governed by a six-year statute of limitations, which runs from actual or constructive notice of the defect. Defendants will have more difficulty moving for summary judgment premised upon the statute of limitations when relying upon constructive/inquiry notice. Under new case law, “substantial completion,” which triggers the ultimate statute of repose, is fact-intensive and less susceptible to summary judgment motions.