Can a statute of limitations start to run in a construction case before substantial completion? In a case from late November, the Minnesota Supreme Court answered the question in the affirmative.

For those who may not know, statutes of limitations are time limits which prevent parties from bringing stale actions or law suits to court. They are determined by the legislature and establish the maximum duration of time that can pass between the occurrence of an event that gives rise to a cause of action, and the filing of that law suit. A law suit brought after a governing statute of limitations has run is time-barred, forever, no matter how meritorious the cause of action may be.

In 328 Barry Avenue, LLC v. Nolan Properties Group, LLC, construction began on a three-story commercial building in Wayzata, Minnesota. In October of 2009, near the punch list phase of the project, water intrusion was discovered around a window elevation on the east side of the building. The owner believed the issue was remedied at that time, and the project was “substantially complete” in May of 2010. In August of 2010, however, there was further water intrusion in the same location, and efforts were undertaken throughout 2011 and 2012 to investigate the possible causes.

The building owner, 328 Barry Avenue, LLC, sued the general contractor in June of 2012. The general contractor argued that a two-year statute of limitations for actions in contract, tort, or otherwise to recover damages in an action related to real property barred the law suit. Under the statute, the cause of action accrued at the time of “discovery of the injury,” and the contractor argued that the owner “discovered” the injury in the fall of 2009. The trial court agreed and dismissed the action.

On appeal however, the owner argued that the statute of limitations “cannot be triggered prior to substantial completion of a construction project. . . . [because] discovery of a defect during construction is different than the discovery of an actionable injury and is therefore insufficient to trigger” the statute of limitations. Thus, the leaking observed in August of 2010 should be the accrual date, making the June 2012 filing timely under Minnesota law. The leaking that occurred back in 2009, claimed the owner, was something that the contractor could still fix as part of the construction project, and indeed, the owner believed that had happened.

The Minnesota Supreme Court said its only duty was to interpret the statute. The statute used the “discovery of the injury” as the accrual date, and said nothing about “substantial completion” or the completion of the construction project. Because there was no question that the owner knew there was a water leak in the fall of 2009, the complaint filed almost three years later was time-barred.

This case serves as a reminder that time is of the essence when defects are identified on a job site. It is important to familiarize yourself with your local jurisdiction’s statute of limitations so that if necessary, you can initiate legal action before it is too late. Thinking that the accrual date can be no earlier than substantial completion, or the end of the project, may cause you to miss your filing deadline, and have your claim forever barred from the courts.