{"id":891596,"date":"2017-02-01T10:04:07","date_gmt":"2017-02-01T17:04:07","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=891596"},"modified":"2017-02-01T10:04:07","modified_gmt":"2017-02-01T17:04:07","slug":"legal-matters-potential-defense-construction-defect-claims","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/legal-matters-potential-defense-construction-defect-claims\/","title":{"rendered":"Legal Matters: Potential Defense to Construction Defect Claims"},"content":{"rendered":"

Nick Dolejsi | Finance & Commerce<\/a> | January 26, 2017<\/p>\n

Anyone in the construction industry would likely acknowledge that litigation \u2013 and particularly construction defect litigation \u2013 is a part of doing business. But it is an expensive and time-consuming part of the business.<\/p>\n

The costs and likelihood of litigation increase when dealing with larger buildings \u2013 such as apartments, condos or townhome complexes \u2013 because economies of scale start shifting in the owners\u2019 favor. For example, it is more cost-effective for members of a condo association to pool their association money to prosecute a perceived construction defect in a large building than it is for a homeowner to fund a lawsuit involving a single-family home.<\/p>\n

It is no coincidence that the proliferation of construction defect litigation coincided with the condo boom around the turn of the century. Given the widespread nature of construction defect litigation, it is surprising that general contractors sometimes ignore a relatively straightforward legal defense that may be available under certain circumstances.<\/p>\n

There is a simple concept in the law with a not-so-simple name: \u201cprivity.\u201d The formal definition of privity is \u201ca legally recognized interest in the same subject matter.\u201d The informal definition is whether someone \u2013 here, a property owner \u2013 has a legal right to sue someone else \u2013 here, a general contractor. Under certain circumstances, the answer is no. And in those circumstances, the general contractor may have an absolute defense even when construction was defective.<\/p>\n

With certain exceptions, there are basically three separate legal claims a property owner asserts in a construction defect lawsuit: breach of contract, negligence, and breach of statutory warranties.<\/p>\n

But, to assert a breach of contract claim, the property owner generally needs contract rights, which they do not always have. For example, it is common for a developer to sell an apartment building after construction is completed. Under this scenario, the general contractor typically has no contract with the second owner, so the second owner may not have contract rights.<\/p>\n

Similarly, general contractors typically do not sign contracts directly with condo or townhome associations. The construction contract is instead between the general contractor and the developer, who then later cedes control of the building to the association. The association may have no contract rights in this scenario.<\/p>\n

A general contractor is neither the guarantor nor the insurer of all problems that may occur with a building. Instead, a general contractor\u2019s responsibilities are usually defined and limited by the construction contract it signed and applicable warranties.<\/p>\n

If the current owner of the building is not a party to the construction contract \u2013 because the property was sold by the original owner or turned over to an association \u2013 then the current owner may be precluded from suing the general contractor for breach of contract for defective construction.<\/p>\n

The same is true for a negligence claim. Negligence claims are generally limited to situations involving personal injury or damage to other property \u2013 that is, damage to something other than the building itself. Minnesota generally does not recognize negligence claims based purely on the disappointment of commercial expectations, which oftentimes is the essence of a construction defect claim.<\/p>\n

These defenses are not always asserted by general contractors \u2013 but they should be, and they have been successful in Minnesota.<\/p>\n

In a 2013 case, a Ramsey County district court dismissed a condo association\u2019s defective construction claims against a general contractor relating to a large condo building in St. Paul. The judge did so because the association was not a party to the construction contract and the claimed defects were limited to the building itself, meaning that there were no personal injuries or damage to \u201cother property\u201d to support a negligence claim.<\/p>\n

But statutory warranty claims are different. Statutory warranties are warranties that Minnesota imposes on builders and developers by law, hence the name \u201cstatutory.\u201d They generally apply even after the property changes ownership.<\/p>\n

Statutory warranties are often blamed as a primary culprit for the rise in construction defect litigation. Although legislation has been drafted to curb statutory warranty claims \u2013 including a bill that would require a two-thirds majority vote among residents before initiating a construction defect lawsuit on behalf of an association \u2013 these efforts have not been enacted into law.<\/p>\n

Even under the current law, however, a property owner\u2019s claimed damages may fall short of a statutory warranty claim. Minnesota Chapter 327A generally requires a \u201cmajor construction defect\u201d to successfully assert a statutory warranty claim after two years post-construction.<\/p>\n

The defenses discussed in this article are somewhat untested, and they are only available in certain situations. But when they are available, they may provide an efficient way to end or narrow a dispute. The defenses may be particularly effective when the alleged defects fall short of a \u201cmajor construction defect\u201d because, in that case, the general contractor may have a complete defense to all claims brought in the lawsuit.<\/p>\n

It is advised that general contractors facing construction defect claims analyze whether the property owner has any legal rights to sue in the first place.<\/p>\n","protected":false},"excerpt":{"rendered":"

Nick Dolejsi | Finance & Commerce | January 26, 2017 Anyone in the construction industry would likely acknowledge that litigation \u2013 and particularly construction defect litigation \u2013 is a part of doing business. But it is an expensive and time-consuming part of the business. The costs and likelihood of litigation increase when dealing with larger… Continue reading Legal Matters: Potential Defense to Construction Defect Claims<\/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":[4],"tags":[9895,228,19],"class_list":["post-891596","post","type-post","status-publish","format-standard","hentry","category-construction-defects","tag-advise-consult","tag-construction-defect-claims","tag-construction-defects-2","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nLegal Matters: Potential Defense to Construction Defect Claims - 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