A Look at Statutes of Limitation and Repose in California Construction Claims
Like everything in life, all good things must come to an end, even a plaintiff’s right to sue. Known as the Statute of Limitation or Statute of Repose1, these government-imposed laws set the time limit on a plaintiff’s the right to file a lawsuit on a particular cause of action. Which statute applies depends on the claim.
Breach of Contract
When two parties enter into a contract, be it written or oral, the legislature has imposed a time limit on when claims under that contract must be brought in a court of law. If it is an oral contract, the SOL is 2 years from the date the agreement was breached. If the agreement is written, then the SOL is 4 years from the date of the breach. What constitutes a breach, you might ask? When one party claims that another party did not perform as promised.2 Couple of caveats, generally only the parties to the agreement can bring a lawsuit. Of course, like hand-me-downs, parties can assign their rights to other or forfeit them by dirtying their own hands first.
When a party, let’s call this one the homeowner, claims that another party, say the contractor, fails to perform its work on a project within the “acceptable standard of care” then the homeowner can bring a lawsuit for negligent work provided that: 1) the work caused property damage or personal injury, and 2) the action is brought within 3-years of suffering damage.3 Unlike breach of contract, the damaged homeowner does not have to be the one that actually hired or paid the contractor, rather subsequent homeowners can sue for negligence work.
SB800 - Right to Repair
Just to complicate things further, in 2003, California created a new kind of claims process for defective construction work, known fondly as SB 800 – The Right to Repair Act (Civil Code (“CC”) §895-945.5.).4 This Act was designed to create performance standards for new residential construction after January 1, 2003. The SOL for SB800 claims runs either from the close of escrow date or, in condo cases, the date the developer relinquishes control to a condominium association, whichever is later, for one to five years depending on the defect.
For example, fit and finish of flooring, paint, trim, countertops, and exterior walls, 1 year from close of escrow – CC §900; plumbing and sewer, 4 years – CC §896(e); Electrical, 4 years – CC §896(f); driveways, patios, sidewalks, 4 years – CC §986(g)(1); stucco, siding, 4 years – CC §986(g)(2); irrigation and drainage, 1 year – CC § 986(g)(7); exterior paints and stains, 5 years – CC §986(g)(10); and landscaping, 2 years – CC §986(g)(12), you get the idea.5
Extending the Statute of Limitation
Like the old saying goes, no good deed goes unpunished. Performing repairs to alleged defective work may toll the statute of limitations for negligence or even “reset” the statute for breach of contract if further promises to perform are made. Of course, there are times when a contractor may want to toll the SOL in order to make repairs or allow the parties time to resolve a dispute. Such times should be discussed with your counsel and reduced to writing to ensure all parties are on the same page.
Construction Defect Claims
California has two statutes of repose related to actions for construction defects – CCP §337.1 and CCP §337.15. Both SOR apply to property damage or personal injury caused by defective construction work.
Section 337.1 requires a lawsuit be filed for “patent defects” to design, specifications, surveying, planning, supervision, observation of construction, or construction within four (4) years of substantial completion of the construction. See what they did there? The trigger is the completion of construction, not injury. For SOR it doesn’t matter when you discovered it, it only matters when the construction was substantially completed. Patent defects are defined as “deficiencies which are apparent by reasonable inspection.” If the defect causes injury to person or property within the 4 years, then an action must be brought within one year of the date of injury.
Section 337.15 relates to “latent defects” and requires claims be brought within ten (10) years of substantial completion of the construction. Different from patent defects, the SOR for latent defects is not limited to actions for personal injury or property damages. Section 337.15 also applies to actions for indemnity brought against other supplying services or materials to the construction. Meaning, a general contractor can file a cross-complaint against its subcontractor for indemnity in the same action even if the 10-year has expired so long as the homeowner filed within the SOR.
The fun thing about SOLs and SORs is that a plaintiff must bring their action within both periods. For example, when a defect is discovered then the one, three or four-year limitation period starts to run, but will not extend past the end of the repose period. Said another way, if a homeowner discovers property damage caused by negligent roofing work 9 years after completions of construction, all claims cut off in one (1) year, be it negligence, or otherwise.
Here’s a fun twist, according to the First Appellate District of the California Court of Appeal Section 337.15 (that’s the 10-year SOR), imputes actual and constructive knowledge of the prior landowner to the current landowner. (Estuary Owners Association v. Shell Oil Company, No. A145516, (Cal. Ct. App. July 26, 2017).)
In that case, Estuary Owners Association (“EOA”) claims that in 2008 it discovered that the condominiums complex had been constructed with moisture barriers beneath the building slabs instead of the called-out vapor/gas barriers trapping toxic chemicals in the soil and groundwater beneath a complex. The EOA filed suit against the project’s developers, design professionals, subcontractors, and prior owners, including Shell. The complaints alleged, among other things, that the defendants knew of the soil and groundwater contamination, failed to adequately remove and clean the contamination, and failed to properly construct the vapor/moisture barriers underneath the slab.
Shell moved for summary judgment arguing that: 1) all of EOA’s causes of action were barred by the 10-year statute of repose for latent construction defects; and 2) all of EOA’s causes of action were barred by the 3-year statute of limitations for damage to real property. The trial court agreed and granted Shell’s Motion for Summary Judgment. EOA appealed.
On appeal, EOA’s argued two things. First, EOA claimed that its injuries were caused by Shell’s negligent actions after the fuel distribution terminal was completed and thus the 10-year SOR was inapplicable – the Court of Appeals agreed. In doing so, the Court held that “section 337.15 can bar only claims alleging injury caused by latent construction defects.” The Court reasoned section 337.15’s “protection applies to claims for damage due to defects in how an improvement was designed and constructed, not to claims based on how the improvement was used after its construction is complete.”
EOA’s second argument was less successful. EOA argued its allegations concerned “new and different” damage to their property, which they did not learn was caused by Shell until 2008 or later. On this issue, the Court affirmed that a cause of action for damage to real property accrues when there is “actual and appreciable harm” to the property. The Court further emphasized that, while the limitations period to present such an action may be tolled until the plaintiff discovers or should have discovered all facts essential to her claim, the actual and constructive knowledge of the prior landowner is imputed to the current landowner and the transfer of ownership does not restart the limitations period. Imputing the prior owner’s knowledge of the harm in 2002 to EOA, the Court affirmed that the EOA’s actions were barred by the three-year statute of limitations for damage to real property.
Now, you know all you need to about SOL/SOR to impress your friends at your next dinner party.