Thereafter, the rough grading improvement at the subject property was completed fully on or before June 7, 1999. On
June 7, 1999, the supervising grading engineer executed a rough grading certification, certifying the satisfactory completion of rough grading. After the project was completed, Mohammadi decided to sell the property. Feng purchased the property in June 2000, but did not occupy the property until sometime in 2002. Feng subsequently claimed the house and lot developed damage due to earth movement and structural defects. Feng allegedly discovered the cracking or damages sometime during 2007.
On September 25, 2009, Feng filed suit against Hawkins, Mohammadi and others. As pertinent to this appeal, Feng's operative complaint, the first amended complaint pled a cause of action for negligence against Hawkins and sought damages stemming from the alleged design and/or construction defect of the subject property. Mohammadi also filed a cross-complaint against Hawkins. Hawkins sought dismissal of the claims on the basis that the 10-year statute of repose expired prior to the litigation claims.
In opposition, both Feng and Mohammadi argued that Hawkins’ work was not substantially complete because he failed to provide a final report including an as-graded geotechnical map. Further, they argued that the date of the final grading
certification controlled, because the grading of the property cannot be completed until such time as the final grading certification is executed and issued. The trial court disagreed finding that the date of substantial completion relates specifically to the performance by each profession or trade rendering services to the improvement. The 10-year statute
of limitations on suits for latent defects in improvements related to a trade is based on when the prime contractor is substantially completed, rather than when the improvement itself is substantially completed.
The Court of Appeals agreed with the trial court. The Court reasoned that “while the evidence that Hawkins may have failed to complete all of his obligations with regard to a final report may be relevant that he breached his agreement with Mahammadi, it does not raise a triable issue of fact as to when Hawkins substantially completed his services. Because Hawkins’ rough grading improvement was fully completed by June 7, 1999, more than 10 years before litigation was filed, the action was time barred.
Statutes of Repose set a maximum time period after an event (e.g., Substantial Completion of a construction project) that legal proceedings arising from improvements to real property can be initiated, regardless of whether there has been an injury or discovery of an injury. All except two U.S. states have statutes of repose that bar claims arising from improvements to real property after the passage of a certain number of years. See the ACEC Summary of State Statutes of Repose and Limitations.
In contrast, Statutes of Limitation set a maximum time period after an event (such as a design or construction defect) that legal proceedings based on that event can be initiated. Statutes of Limitation are often subject to the Discovery Rule -- which provides that the statute of limitations did not begin to run until the defect or injury was discovered or reasonably could have been discovered by the claimant. The Discovery Rule emerged to avoid harsh results where the alleged defective design or construction was undetectable for years (such as latent defect cases) and the injury resulting from these defects was not known until after the limitation period expired. One purpose of Statutes of Repose is to eliminate the uncertainties with Statutes of Limitation as a result of the Discovery Rule.
For Owners: Do not presume that the substantial completion date will control the date in which potential claims begin to accrue.
For Trade Contractors: Documet when your portion of he project’s work is substantially complete to the extent the date of substantial completion for the prime contractor's trade will come at a much later date. It would also be good business practice to calculate the date when the statute of repose period will expire for purposes of document retention policies and risk management strategies, etc. --- so that you can use that calculation to establish the date when you should no longer be at risk for any potential claims -- that is, unless you are working on project for a state entity -- in which case you should see my prior blog posts.