Massachusetts Court Clarifies Statute of Repose Trigger for Multi-Phase Construction Projects

Kyle Rice | White and Williams LLP

In D’Allesandro v. Lennar Hingham Holdings, LLC, C.A. No. 17-cv-12567-IT, 2019 U.S. Dist. LEXIS 185874, the United States District Court for the District of Massachusetts recently discussed a case against a general contractor and its related entities, all of whom were involved in the construction of a multi-phase construction project. The court held that, in this context, completion of the “improvement” – which was the whole project, rather than each individual phase – triggered the six-year statute of repose. The court also held that the plaintiffs’ misrepresentation, breach of fiduciary duty and unfair business practices claims were not claims based on the design and construction of the improvement and, thus, were not subject to the statute of repose. 

In D’Allesandro, the action arose out of the construction, marketing, sale and management of the Hewitts Landing Condominium (the Condominium) project. Ultimately, 150 units in 28 different buildings were constructed over 24 phases of construction. While construction was ongoing, the project’s architect submitted declarations to the Town of Hingham swearing that the individual units were “substantially complete” and could be occupied for their intended use. Shortly thereafter, the Town of Hingham issued certificates of occupancy for the units or buildings. 

Lennar Northeast Properties, Inc. d/b/a Lennar Northeast Urban was the developer and Lennar Higanham Holdings, LLC was the contractor and construction manager. Hewitts Landing Trustee, LLC (Lennar Trustee) acted as the trustee for the Hewitt Landing Condominium Trust between 2010 and 2015. On June 25, 2010, the Master Deed of the Condominium was recorded with the Plymouth County Registry of Deeds. On the same date, defendant Lennar Trustee executed a Declaration of Trust, establishing the Condominium Trust. In December of 2015, the unit owners of the Condominium took control of the Condominium Trust. On November 3, 2017, the Trustees of the Condominium Trust brought their action, alleging that a number of deficiencies and code violations were discovered in the design and/or construction of the common areas of the buildings. The Lennar-related entities moved for partial summary judgment arguing that, with respect to six of the buildings, the plaintiffs’ claims were barred by the statute of repose. The statute of repose bars tort claims arising out of any deficiency or neglect in the designing, planning or construction of an improvement to real property commenced more than six years after the earlier of: 1) the opening of the improvement to use; or 2) substantial completion of the improvement and the taking of possession for occupancy by the owner. Mass. Gen. Laws ch. 260, § 2B. For the six buildings at issue, the architect signed affidavits of substantial completion more than six years before the plaintiffs filed their action. For five of these buildings, the Town of Hingham issued certificates of occupancy for the buildings and all of their units more than six years before the plaintiffs filed their action.

The court found that only two of the plaintiffs’ seven claims, Counts V and VI (alleging negligence and a breach of implied warranty) were subject to the statute of repose. With respect to Counts III, IV and VII, which alleged intentional misrepresentation, negligent misrepresentation and a violation of Massachusetts’ unfair business practices statute, the court held that these claims were not subject to the statute of repose. These claims were not subject to the statute of repose because, as alleged, the actions arose from distinct facts and alleged distinct wrongdoing associated with representing the property to prospective buyers. Similarly, because Counts I and II (alleging breach of the Condominium documents and a breach of fiduciary duty) related to the Lennar Trustee failing to investigate and address construction problems and not the construction itself, these claims were not subject to the statute of repose.

With respect to the plaintiff’s negligence and breach of implied warranty claims, the defendants argued that because each building constituted an improvement to real property, the filing of the architects’ certificates of substantial completion for each building began the running of the statute of repose for that building. The plaintiffs contended the development was not conceived as 150 different subplots for each unit or 28 different projects for each building, but rather that the project should be taken as a whole. Therefore, the plaintiffs argued that the statute of repose did not begin to run until the entire construction project was completed.

The court sided with the plaintiffs. The court found that the 150 units were conceived as the potential scope of the project from the onset, that the same general contractor and architect were used throughout and that the project was legally defined as a single condominium with a single Trust maintaining exclusive control over the common and limited common elements of the entire condominium. Taking all of these factors together, the court found that the Condominium was not a series of improvements, but one improvement. Therefore, the repose period began to run upon completion of the entire improvement, not when the architect or township signed off on the individual buildings.

As explained by the court, the question before it was not whether construction of an individual building or improvement could trigger the statute of repose, but rather whether the construction of a portion of a project constituted completion of an improvement, thereby triggering the repose period while the overall project remained underway. The court emphasized the concerns addressed by the statute of repose, i.e. that the contractor would be subject to unforeseen liability for an extended period, the possibility that documents/witnesses would no longer be available and that memory of witnesses would have faded. Here, the same contractor and architect oversaw the project from start to finish and the project had been completed 2½ years before the suit was filed. Therefore, the court found that the concerns addressed by the statute of repose were not applicable.

The court noted, however, that discrete obligations performed by subcontractors may constitute an improvement subject to the running of the six-year repose period. Additionally, the court noted that this suit applied specifically to common areas, rather than individual units, and stated that a failure in an individual unit may achieve a different result. However, because these hypothetical issues were not before the court, it did not decide when the statute of repose would be triggered in these situations. Based on the analysis in D’Allessandro, when faced with phased construction in multi-phase projects in Massachusetts, subrogation professionals should always be mindful of the specific circumstances of their claim. Similarly, subrogation professionals should be mindful that claims based on facts unrelated to the construction itself may not be subject to the statute of repose.

“Slow and Steady Doesn’t Always Win the Race” – Applicability of a Statute of Repose on Indemnity/Contribution Claims in New Hampshire

Rahul Gogineni | The Subrogation Strategist | September 12, 2019

In Rankin v. South Street Downtown Holdings, Inc.2019 N.H. LEXIS 165, the Supreme Court of New Hampshire considered, pursuant to a question transferred by the trial court, whether RSA 508:4-b, the statute of repose for improvements to real property, applies to indemnity and contribution claims. The court concluded that based upon the plain reading of the statute, it applies to indemnity and contribution claims. As noted by the court, a holding to the contrary would violate the intent of a statute of repose, which is to establish a time limit for when a party is exposed to liability.

In Rankin, after falling and injuring himself while leaving a building, John Rankin and his wife brought an action against the property owner, South Street Downtown Holding, Inc. (South Street) in 2017. South Street subsequently filed a third-party complaint against multiple parties including an architectural company, Wagner Hodgson, Inc. (Wagner), who was involved in a renovation project at the property. The project was substantially complete in 2009. Wagner responded by moving to dismiss the action, arguing that South Street’s indemnification and contribution claims were barred by the applicable statute of repose.

RSA 508:4-b specifically states,

Except as otherwise provided in this section, all actions to recover damages for injury to property, injury to the person, wrongful death or economic loss arising out of any deficiency in the creation of an improvement to real property, including without limitation the design, labor, materials, engineering, planning, surveying, construction, observation, supervision or inspection of that improvement, shall be brought within 8 years from the date of substantial completion of the improvement, and not thereafter. (Emphasis added).

After reviewing the basis of South Street’s claims against Wagner, the court concluded that South Street’s indemnification and contribution claims specifically fell within the statute of repose. In so doing, the court reaffirmed its prior holdings that indemnity and contribution actions are actions to recover economic loss. It then concluded that because there was no exception in the section for indemnity and contribution actions, they both fell squarely within the meaning of the phrase “all actions.” Having found that the statute of repose was applicable to South Street’s claims, the court answered the transferred question in the affirmative.

This case serves as a good reminder that contribution and/or indemnification claims may be governed not only by a different subset of laws within respective jurisdictions but also by the terms of any applicable time limitation statutes. As such, practitioners should be aware that merely because an indemnity or contribution statute does not discuss either a statute of limitation or a statute of repose, such limitations may still apply to their claims. Moreover, just because a statute of limitations and/or repose does not specifically mention indemnity or contribution claims, does not mean they are exempt from the statute.

Ten-Year Statute of Repose to Sue For Latent Construction Defects

David Adelstein | Florida Construction Legal Updates | August 18, 2019

If you are dealing with latent construction defects, it is imperative that you consult with counsel to understand your rights.  This not only includes claims for property damage stemming from latent construction defects, but also personal injury stemming from such defects.  There is a ten-year statute of repose to sue for latent construction defectsSee Fla.Stat. s. 95.11(3)(c).  After the expiration of this statute of repose you are out of luck, meaning you can no longer sue.

Now, I probably will not be the first to tell you that the statute of repose is not written so clear that you know the precise date it ends (or the last date you can sue for a latent defect).  For this reason, you really want to operate conservatively, meaning it is always better to sue early if you think you could be running on the end of the statute of repose period.  It is always advisable to avoid any legitimate argument that you filed your construction defect lawsuit too late.

In Harrell v. The Ryland Group, 44 Fla. L. Weekly D2054b (Fla. 1st DCA 2019), a subsequent owner of a house sued the original homebuilder in negligence for a construction defect causing a personal injury. The subsequent owner claimed the homebuilder defectively installed an attic ladder (that provided access to the attic for the original construction) which collapsed as he was using it. The homebuilder filed a motion for summary judgment that the statute of repose expired so the owner’s claim was time-barred. The First District agreed.

The subsequent owner tried to argue that the statute of repose did not apply because the installation of an attic latter does not constitute an “improvement” to real property and the statute of repose is based on actions “founded on the design, planning, or construction of an improvement to real property.”  The First District was not having this argument because “the attic ladder at issue here was installed as part of the construction process of the home, required labor and money, made the property more useful/valuable in that it provides a more convenient means of access to another level, was not mere repair or replacement, and was affixed to the attic, making it an integral part of the home.

Even something perceived as nominal like the installation or construction of an attic ladder can constitute an improvement to real property making it subject to the ten-year statute of repose to sue for latent defects.   Hence, do not sit idle if you are dealing with a latent construction defect – take the conservative approach and start the required litigation process sooner than later.

Nevada Legislative Update: August 2019

Edward Garcia and Brittany Walker | Holland & Hart | August 30, 2019

CONSTRUCTION

AB 421 amends the laws governing residential construction defects. Key changes include extending the statute of repose from six to ten years and no longer requiring an expert to be present at an inspection concerning an alleged construction defect. Proponents of this legislation stated that it will protect Nevada’s homebuyers and encourage homebuilders to build to a higher standard. Opponents of this legislation stated that it will increase costs to new homebuyers and exacerbate the affordable housing issues facing Nevada.

AB 440 requires contractors who build new, single family residences to provide a disclosure of the purchaser’s rights and a one-year warranty from punch list completion that guarantees all home systems, workmanship, materials, plumbing, electrical and mechanical systems, appliances installed by the contractor, fixtures, equipment, and structural components.

SB 397 authorizes a licensed contractor to perform work in other license classifications which he or she does not have a license for when: (1) the value of the work is less than $1,000 and does not require a permit; and (2) the work is not of a type performed by a plumbing, electrical, refrigeration, or air-conditioning contractor. Essentially, this bill provides a handyman exception for contractors to perform work outside the scope of their license, which will help consumers by allowing a contractor to complete a small project which he or she does not typically perform.

“Slow and Steady Doesn’t Always Win the Race” – Applicability of a Statute of Repose on Indemnity/Contribution Claims in New Hampshire

Rahul Gogineni | White and Williams | September 3, 2019

In Rankin v. South Street Downtown Holdings, Inc.2019 N.H. LEXIS 165, the Supreme Court of New Hampshire considered, pursuant to a question transferred by the trial court, whether RSA 508:4-b, the statute of repose for improvements to real property, applies to indemnity and contribution claims. The court concluded that based upon the plain reading of the statute, it applies to indemnity and contribution claims. As noted by the court, a holding to the contrary would violate the intent of a statute of repose, which is to establish a time limit for when a party is exposed to liability.

In Rankin, after falling and injuring himself while leaving a building, John Rankin and his wife brought an action against the property owner, South Street Downtown Holding, Inc. (South Street) in 2017. South Street subsequently filed a third-party complaint against multiple parties including an architectural company, Wagner Hodgson, Inc. (Wagner), who was involved in a renovation project at the property. The project was substantially complete in 2009. Wagner responded by moving to dismiss the action, arguing that South Street’s indemnification and contribution claims were barred by the applicable statute of repose.

RSA 508:4-b specifically states,

Except as otherwise provided in this section, all actions to recover damages for injury to property, injury to the person, wrongful death or economic loss arising out of any deficiency in the creation of an improvement to real property, including without limitation the design, labor, materials, engineering, planning, surveying, construction, observation, supervision or inspection of that improvement, shall be brought within 8 years from the date of substantial completion of the improvement, and not thereafter. (Emphasis added).

After reviewing the basis of South Street’s claims against Wagner, the court concluded that South Street’s indemnification and contribution claims specifically fell within the statute of repose. In so doing, the court reaffirmed its prior holdings that indemnity and contribution actions are actions to recover economic loss. It then concluded that because there was no exception in the section for indemnity and contribution actions, they both fell squarely within the meaning of the phrase “all actions.” Having found that the statute of repose was applicable to South Street’s claims, the court answered the transferred question in the affirmative.

This case serves as a good reminder that contribution and/or indemnification claims may be governed not only by a different subset of laws within respective jurisdictions but also by the terms of any applicable time limitation statutes. As such, practitioners should be aware that merely because an indemnity or contribution statute does not discuss either a statute of limitation or a statute of repose, such limitations may still apply to their claims. Moreover, just because a statute of limitations and/or repose does not specifically mention indemnity or contribution claims, does not mean they are exempt from the statute.