By Paul R. Cressman Jr.
The time limit on a claim for a construction defect is governed by a statute of repose and a statute of limitation. A statute of repose terminates a right of action after a specified time even if injury has not yet occurred. Under RCW 4.16.310 the statute of repose terminates an action for construction defects that does not accrue six years from the time of substantial completion of construction or termination of services whichever is later. A statute of limitation bars a plaintiff from bringing an already accrued claim after a specific period of time. Under RCW 4.16.040 the statute of limitations prohibits an action upon a written contract to be commenced after six years.
Generally a statute of limitation runs from the time a claim accrues (i.e. when a party has the right to apply to a court for relief) which usually occurs at the time the defect is discovered. Under RCW 4.16.326(1)(g) however construction defect claims cannot be filed after six years of substantial completion of construction or termination of services whichever is later regardless of when the claim was discovered. Thus even if the owner only discovers the defect seven years after substantial completion the owner is precluded from bringing his or her claim.
In a recent unpublished opinion the Washington Court of Appeals provides contractors with some clarifying answers as to the meaning of substantial completion or termination of services. The case of Bordak Bros. Inc. v. Pac. Coast Stucco LLC involved a mixed-use building with a Bartells Drugs on the bottom floor and residential units above. At issue was whether a general contractors claims for indemnity against subcontractors fell within the six-year statute of repose.
The trial court granted the subcontractors Motion to Dismiss the contractors claims finding that they were barred by the statute of repose. The general contractor and owner appealed arguing that the statute of repose did not begin to run because the architect had not decided the project was substantially complete items were unfinished or defective there was an outstanding punch list and the entire project was not completed because the drugstore had not received a certificate of occupancy. Alternatively the general contractor and owner argued that a subcontractor did not terminate its services until after substantial completion thereby extending the statute of repose.
The subcontractors argued and the Court of Appeals agreed that substantial completion was achieved because the certificate of occupancy was issued for the residential units certain residential units at the project were sold and any remaining defects or unfinished work did not prevent the units from being used for their intended purpose. The Court of Appeals held that the entire project (i.e. commercial portion – the drugstore) need not be complete if the claims are only related to the portion that is completed. Furthermore the condominium units were actually being used and occupied for their intended use at that time. Although the architect declared the building was not substantially complete due to unfinished punch list items he did not declare these items prevented the building from being used for its intended purpose.
Significantly the Court in response to the general contractors alternative argument held that there must be a nexus between the services performed after the date of substantial completion and the cause of action in order for the termination of services prong to extend the statute of repose. In this case the Court noted that there was no nexus between the original work provided by the subcontractor that gave rise to the cause of action and the services that the subcontractor performed after the date of substantial completion. Stated another way had the work performed by the subcontractor after substantial completion been the cause of the defects the statute of repose date may have been extended to the date that the subcontractor performed the additional work.
Comment: Although some answers have been provided by the Court of Appeals the case creates new questions. Are the factors presented in this case the minimum combination in which substantial completion can be decided by the court or will the combination of factors be decided on a case by case basis? Is there a separate limitation on the nexus between the termination of services and the original work or can the statute of repose be extended indefinitely as long as there is some proof that a nexus exists? For the time being it appears that the courts are making further efforts to help narrow the six-year timeframe in which claims against construction contractors can be made in this state.
Paul Cressman is founding partner with Ahlers & Cressman PLLC and a member of AGC’s Board of Trustees.