{"id":891223,"date":"2016-11-03T16:05:27","date_gmt":"2016-11-03T22:05:27","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=891223"},"modified":"2016-11-03T16:05:27","modified_gmt":"2016-11-03T22:05:27","slug":"colorado-court-appeals-defines-substantial-completion-subcontractors-work-shorten-period-time-can-sued","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/colorado-court-appeals-defines-substantial-completion-subcontractors-work-shorten-period-time-can-sued\/","title":{"rendered":"Colorado Court of Appeals Defines \u201cSubstantially Complete\u201d for Subcontractors\u2019 Work so as to Shorten the Period of Time in Which They Can Be Sued"},"content":{"rendered":"

David M. McLain | Colorado Construction Litigation<\/a> | October 10, 2016<\/p>\n

Over the past few years, there has been a battle raging on in district courts and arbitration hearing rooms throughout Colorado regarding when a subcontractor\u2019s work is to be deemed \u201csubstantially complete\u201d for purposes of triggering Colorado\u2019s six-year statute of repose.\u00a0 C.R.S. \u00a7 13-80-104 states, in pertinent part:<\/p>\n

Notwithstanding any statutory provision to the contrary, all actions against any architect, contractor, builder or builder vendor, engineer, or inspector performing or furnishing the design, planning, supervision, inspection, construction, or observation of construction of any improvement to real property shall be brought within the time provided in\u00a0section 13-80-102\u00a0after the claim for relief arises, and not thereafter, but in no case shall such an action be brought more than six years after the substantial completion of the improvement to the real property<\/strong>, except as provided in subsection (2) of this section.<\/p>\n

*\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 *\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 *<\/p>\n

(2) In case any such cause of action arises during the fifth or sixth year after substantial completion of the improvement to real property, said action shall be brought within two years after the date upon which said cause of action arises.<\/p>\n

C.R.S. \u00a7 13-80-104 (emphasis added).<\/p>\n

As the battle raged on at the trial court level, subcontractors and design professionals argued that their work should be deemed \u201csubstantially complete\u201d when they finished their discrete scope of work within a project.\u00a0 Developers and general contractors, seeking to maintain third-party claims against the subcontractors and design professionals, typically argued either that the subcontractors\u2019 and design professionals\u2019 work should be deemed \u201csubstantially complete\u201d upon the issuance of the final certificate of occupancy on the project, or upon the issuance of the final certificate of occupancy for the last building within a project on which the subcontractor or design professional worked.\u00a0 Trial court judges and arbitrators have been split on this issue, with perhaps a slight majority favoring one or the other approaches advocated by developers and general contractors, that the subcontractors\u2019 and design professionals\u2019 work is \u201csubstantially complete\u201d upon the issuance of the last certificate of occupancy in a project (the minority view) or upon the issuance of the last certificate of occupancy for the last building within a project on which the subcontractor of design professional worked (the majority view).<\/p>\n

When the Court of Appeals analyzed this issue in 2012, in Shaw Construction, LLC v. United Builder Services, 296 P.3d 145 (Colo. App. 2012), it held that: \u201can improvement may be a discrete component of an entire project, such as the last of multiple residential buildings. Therefore, we need not resolve subcontractors\u2019 argument that an improvement should be determined even more narrowly on a trade-by-trade basis.\u201d\u00a0 Id.<\/u> at 154.\u00a0 This case did not fully resolve the issue and the battle raged on at the trial court level, with more than a few judges and arbiters commenting in their orders on the issue that the Shaw<\/em>decision was not particularly helpful in explaining the applicable law.<\/p>\n

At the beginning of September 2016, the Colorado Court of Appeals again weighed in on the definition of \u201csubstantial completion\u201d for work completed by subcontractors and design professionals in Sierra<\/u>\u00a0<\/u>Pacific<\/u>\u00a0<\/u>Industries, Inc. v. Bradbury<\/u>, 2016 WL 4699116 (Colo. App. September 8, 2016).\u00a0 In discussing this issue, the Court of Appeals noted:<\/p>\n

Our prior decisions have recognized that, depending upon the circumstances, \u201csubstantial completion\u201d of a project can occur by the time mechanics\u2019 liens could be filed \u201cafter the completion of the building, structure, or other improvement,\u201d or, in the case of subcontractors working on the last building in a condominium complex, when a certificate of occupancy was issued.<\/p>\n

But as the division in Shaw<\/em> pointed out, CDARA does not define \u201csubstantial completion.\u201d In 1986, an amendment removed the prior definition, \u201cthe degree of completion of an improvement to real property at which the owner can conveniently utilize the improvement for the purpose it was intended.\u201d \u00a0The legislative history does not explain the reason for this deletion.<\/p>\n

Id.<\/u> at *4 (citations omitted).<\/p>\n

In settling this dispute, at least for the time being, the Court of Appeals ruled that \u201ca subcontractor has substantially completed its role in the improvement at issue when it finishes working on the improvement.\u201d\u00a0 Id.<\/u> at *5.<\/p>\n

The obvious impact of this ruling will be that if substantial completion of a subcontractor\u2019s or design professional\u2019s work is to be determined under Colorado case law, the claims against the subcontractor or design professional will become stale before the owner\u2019s claims against the developer or general contractor.\u00a0 For this reason, there will be a gap in the risk management program, such that developers and general contractors will be left holding the bag with respect to liability to the owner.<\/p>\n

In order to combat the risk of this occurrence, it would behoove developers and general contractors to include clauses in their subcontract agreements contractually defining \u201csubstantial completion\u201d in such a way as to make it contemporaneous with the substantial completion of the developer\u2019s or general contractor\u2019s work on the project.\u00a0 By doing so, developers and general contractors can prevent their claims against subcontractors and design professionals from becoming stale before an owner\u2019s claims against them become stale.<\/p>\n","protected":false},"excerpt":{"rendered":"

David M. McLain | Colorado Construction Litigation | October 10, 2016 Over the past few years, there has been a battle raging on in district courts and arbitration hearing rooms throughout Colorado regarding when a subcontractor\u2019s work is to be deemed \u201csubstantially complete\u201d for purposes of triggering Colorado\u2019s six-year statute of repose.\u00a0 C.R.S. \u00a7 13-80-104… Continue reading Colorado Court of Appeals Defines \u201cSubstantially Complete\u201d for Subcontractors\u2019 Work so as to Shorten the Period of Time in Which They Can Be Sued<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[172],"tags":[120,268,157,9835],"class_list":["post-891223","post","type-post","status-publish","format-standard","hentry","category-construction-law-2","tag-colorado","tag-statute-of-repose","tag-subcontractor","tag-substantial-completion","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nColorado Court of Appeals Defines \u201cSubstantially Complete\u201d for Subcontractors\u2019 Work so as to Shorten the Period of Time in Which They Can Be Sued - 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