Changes to Construction Defects Statutes of Limitations: Are Subcontractors Now SOL?
by Sheylla Aceves, J.D. Candidate Florida State University College of Law
The Florida Legislature has changed the Statute of Limitations for construction defects twice in the last two years. In 2017, the Florida Legislature adopted a definition for “completion of a contract” under the statute that favored builders by limiting their long-term exposure to liability for construction defects. In 2018, the Florida Legislature revisited the same statute and made changes that give builders a way to surpass the limits of the statute of repose. But who are these changes really helping and who are they burdening? Are subcontractors now SOL? The new changes will go into effect on July 1, 2018 and will present new challenges to the area of construction law, particularly for subcontractors and suppliers.
In response to the Fifth District Court of Appeal’s decision in Cypress Fairway Condo. v. Bergeron Constr. Co., 164 So. 3d 706 (Fla. 5th DCA 2016), the Florida Legislature passed a bill amending the statute of limitations and statute of repose for lawsuits involving construction defects. Cypress Fairway Condominium defined “completion of a contract” as the date the contractor receives final payment. Id. The 2017 bill redefined the term “completion of a contract” as “the later date of final performance of all the contracted services or the date that final payment for such services becomes due without regard to the date final payment was made.” This provision serves to prevent owners from using a delay of final payment as a way to extend a builder’s potential liability for construction defects.
In 2018, Florida’s 10-year statute of repose was amended to include a provision that gives defendants in construction defect litigation more time to commence counterclaims, crossclaims, or third-party claims after being served. The bill will give builders faced with construction defect claims the chance to surpass the strict limitations imposed by Florida’s statute of repose by allowing them to file counterclaims, cross-claims or third-party claims for up to a year after being notified of a defects claim. The change gives builders more protection from being unfairly burdened by the strict limitations of the 10-year statute of repose. The extra time gives them an opportunity to properly investigate and commence an action against other responsible parties.
While builders are now more protected, what do these changes mean for subcontractors? It is likely that subcontractors and suppliers will see a small rise in claims brought against them due to the statute of repose’s new time extension provision. The new provision basically extends the liability of subcontractors and suppliers by one more year.
Florida’s 10-year statute of repose begins to run from the latest of four events:
- The date an owner takes actual possession.
- The issuance of a certificate of occupancy.
- The date construction is abandoned.
- The date when a contract between an engineer, architect, or contractor and its employer is completed.
Florida courts have traditionally leaned towards strictly enforcing statute of repose deadlines. Builders have not had much success when presenting arguments that the statute of repose prevented them from having sufficient time to identify subcontractors involved in an owner’s claim for defects.
However, the fourth event, the date of completion of the contract between the builder and owner, has caused some confusion in construction defect litigation. Most builders and contractors assume that the contract is complete at closing, or when construction has ceased, and that 10 years from that date they are no longer subject to legal action arising from construction defects. Changes in the statute of limitations and repose, in conjunction with judicial decisions from the Fifth District Court of Appeal in Busch v. Lennar Homes, LLC and Cypress Fairway Condominium prove that this is not always the case.
In Busch v. Lennar Homes, LLC, 219 So. 3d 93 (Fla. 5th DCA 2017), the Fifth District reversed an order dismissing a construction defect claim that had been filed past the 10-year limitation. The holding in Busch established the date of full performance under the contract as the date on which claims accrue, not the closing date. What event extended the completion date of the contract in Busch? A punch-list that allegedly had not been completed, thus extending the “completion date.”
The new statute, along with the interpretations by the Florida courts, will present Florida courts with the challenge of deciding how to interpret the new statutory language and apply it to construction defect issues. Although the new language of the statute provides applicability and time specifications, it is likely that courts will face challenges when deciding what kinds of corrections and repairs fall into the categories of those that do extend the period of time within which an action must be commenced, and those that do not. Subcontractors are not exactly SOL, but they should be aware that the new 2018 statute gives builders an extra year to bring a claim against them.