When Can You Rest Easy? A Primer on Statutes of Repose

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Recently, the Montana Supreme Court affirmed that Montana’s statute of repose is an absolute bar that cannot be tolled.[1] There, problems emerged almost immediately after a school roof was installed in 1998.  The contractor worked to address the problems and, in 2003, informed the school district that the problems were solved.  After a snowstorm collapsed the roof in late 2010, the school district filed a lawsuit in 2011.  The trial court dismissed the claim pursuant to Montana’s 10-year statute of repose found in MCA § 27-2-208, which barred the claim because the project was “complete” pursuant to the statute in 1998, when the school district was able to “utilize the improvement for the purpose for which it was intended.”  On appeal, the school district argued that the roof was not “complete” because of ongoing problems associated with the roof.  In rejecting that argument, the Montana Supreme Court stated that completion occurred when the roof was finished and able to be used for its intended purpose but did “not require that an improvement be finished to the owner’s final satisfaction.” In affirming dismissal, the court noted again that the statute would not be extended, “even if a party is late in discovering facts” and even if those facts were concealed.

The Montana case is a good reminder of the finality imposed by statutes of repose related to construction claims. A statute of repose is different from a statute of limitations.  A limitations period begins when the facts regarding a particular claim are, or should have been, discovered.  In other words, once one knows or should know about a construction defect, a statute of limitations provides a period whereby the person must file a lawsuit on the claim.  As such, a statute of limitations may be tolled, or extended, to account for a late discovery of the facts giving rise to a construction defect claim.  Statutes of limitation require those with a claim to diligently pursue the claim before the evidence (witness memory, for example) becomes stale.  In contrast, a statute of repose is triggered by an event (the completion of the construction project) and provides an outside limit as to when claims can be brought, regardless of the date the facts giving rise to the claim are discovered.  Such statutes are designed to give contractors and design professionals some certainty as to when the risk associated with claims on a particular project diminishes.

Utah, where I practice, provides a six-year statute of repose for breach of contract/warranty actions and a nine-year statute for all other actions.[2] In Washington, 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.[3] Notably, the Washington statute applies even if the entire project is not complete, so long as the claims pertain to the portion of the project that has been completed.[4] In Oregon, the statute of repose depends on the type of project, providing an outside limit of 10 years for a “small commercial structure,” “residential structure,” or “large commercial structure” owned by a homeowners association, and six years for other “large commercial” structures.[5] California imposes a 10-year repose period[6] except in the case of willful misconduct or fraudulent concealment.  Because of this exception, the California statute provides less certainty than those of other states.

To successfully assert a statute of repose defense, the defendant must show when the project was completed or substantially completed.  Generally, as discussed by the Montana Supreme Court, this is the date that the project was able to be used for its intended purpose.  Documentation of this important date, such as a certificate of occupancy, is key in maintaining the defense and knowing when the claims are time-barred.

"When Can You Rest Easy? A Primer on Statutes of Repose" was originally published by the Daily Journal of Commerce on May 19, 2017.

[1] Hill Cty. High Sch. Dist. No. A v. Dick Anderson Constr. Inc., 2017 MT 20.
[2] Utah Code Ann. § 78B-2-225. With regard to actions that are not breach of contract or warranty, the statute does allow two additional years if the cause of action is discovered or discoverable in the eighth or ninth year of the nine-year period.  
[3] RCW 4.16.326(1)(g).
[4] Bordak Bros., Inc. v. Pac. Coast Stucco, LLC, 169 Wn. App. 1008 (table), 2012 WL 2510956, at *3 (2012) (unpublished opinion). 
[5]  ORS 12.135.  The definitions of “large commercial,” “small commercial,” and “residential” structures are found at ORS 701.005.
[6] Cal. Civ. Proc. Code § 337.15; see also Acosta v. Glenfed Dev. Corp., 128 Cal. App. 4th 1278 (2005).

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