ORLANDO, FL - April 3, 2017 - Everyone in Florida's construction industry should be aware of and voice their support for Florida Senate Bill 204 and its counterpart, House Bill 377. These bills would amend Florida Statute §95.11(3)(c), the construction statute of repose, in order to close a recent loophole that has caused the statute, which was intended to be definite but is no longer.
The statute of repose bars unfiled lawsuits pertaining to latent defects in the design, planning or construction of improvements to real property after the passage of 10 years. Patent defects are subject to the four-year statute of limitations, not the statute of repose.
However, 10 years does not necessarily mean 10 years. It is not until 10 years after the last of four specified events to occur that construction-related liability ceases. In Florida, the 10-year deadline begins to run from the last date of the following: actual possession by the owner, issuance of a certificate of occupancy, date of abandonment of construction, or the date of completion or termination of the contract between the engineer, architect and licensed contractor with the owner.
The loophole the bills would close is in the fourth trigger: completion of the contract.
Florida courts have wrestled with the question of what does "completion or termination of the contract" mean and, if completion of the contract is the last of the four triggers to occur, from what date the 10-year window is measured.
Florida's Fifth District Court of Appeal weighed in on this issue in 2015. In Cypress Fairway Condominium v. Bergeron Construction, the court held that "contract completion" was the date on which final payment was made rather than when the work under the contract was completed. This distinction is critical as construction can be completed long before final payment is made. It further poses concerns if final payment on the contract is never made or is not made in full.
Because this issue has not been directly addressed by Florida courts, it leaves an open question about whether or when the statute of repose begins to run. In the Cypress Fairways case, had the statute of repose been tied to completion of construction rather than final payment, the lawsuit would have been barred. Instead, the developers, planners, designers and contractors found themselves in the unenviable position of defending against construction defect claims involving a project more than 10 years old.
The new legislation was, in large part, introduced in response to the Cypress Fairways court's holding; to now tie up the "completion of contract" loose end by linking it to completion of contract work (not including punch list work) rather than receipt of final payment.
Completion of the contract would be defined as: "Completion of the contract means the latter of the date of final performance of all the contracted services or the date that final payment for such services becomes due without regard to the date final payment is made." Both bills seek to provide clarity as to what "completion of the contract" means and could have a large effect on how courts interpret completion when applying the statute of repose to cases involving old construction.
While the bills will define what completion of the contract means, if it does not pass, planners, engineers, architects and contractors should take certain steps to help protect themselves. For one, payment deadlines should be included in contracts. For example, a contract could include a term that specifies the owner must make payment within 20 days of a final payment application, regardless of punch list items remaining. If payment is not made within 20 days or it is not full payment, the contract might still be deemed complete, just that the owner breached it. The owner should not be permitted to prevent the statute of repose from beginning by not making timely or full payment. Otherwise, construction-related liability could be open-ended.
Other legislative attempts involving the statute of repose have failed in recent years, including an effort to reduce the statute of repose window from 10 years to seven years. The current amendment to the law is certainly critical to avoid unnecessary litigation, but a three-year reduction would significantly help to reduce extended legal exposure.
Originally published 3/17/17 in the Daily Business Review.