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Construction Defect Statute of Repose

Court of Appeals Holds that Construction Defect Statute of Repose May Run From Completion of a “Discrete Component” of a Larger Project

February 7, 2012

In Shaw Construction, LLC v. United Builder Services, Inc. and MB Roofing, Inc., 11 CA 2351 (Colo. App. Feb. 2, 2012), the Colorado Court of Appeals held that a “discrete component” of a larger construction project can be “substantially completed” for purposes of the running of the construction defect statute of repose.

Left expressly undecided by the court of appeals was whether the work of a given building trade could be considered as a separate “improvement to real property,” to which the statute of repose might apply.  Treating each subcontractor’s work as a separate improvement might have a profound effect on their defense, and an issue the construction defect lawyers at Markusson Green & Jarvis will remain acutely aware of in the future.  That is particularly true with respect to certain building trades, such as excavators, who may be among the first contractors to start work on a large construction project, and the first to leave. 

While sympathetic to arguments by United Builder Services and MB Roofing that their work should be analyzed independently under the statute of repose, the court of appeals declined to address that issue in this case.  The fate of individual construction trades in a statute of repose analysis remains highly controversial and may continue to be the subject of vigorous debate for some time yet to come.

The case involved Roslyn Court, a condominium community in Denver consisting of 80 residential units in 33 separate residential buildings, plus 15 detached garage structures, and additional elements such as sidewalks, alleys, benches, courtyards and landscaping.  The project was built in three phases, and certificates of occupancy were issued for each building.  The last certificate of occupancy for the last building issued on March 10, 2004.  About 12 weeks later, on June 8, the project architect certified that the entire project had been completed.

The Roslyn Court homeowners association initiated a construction defect lawsuit on January 21, 2009.  Just over a year later, on January 28, 2010, the homeowners association joined the general contractor, Shaw Construction, as another Defendant.  Two months later, on March 29, Shaw Construction filed a Third-Party Complaint against a number of building trade subcontractors, including United Builder Services and MB Roofing.

United Builder Services and MB Roofing moved for summary judgment, arguing that the Third-Party Complaint had not been filed until after the applicable six-year statute of repose for construction defect claims had run.  The statute of repose bars any claims against a construction professional brought more than six years following “substantial completion” of the real property forming the subject matter of the claim.  No definitions of the terms “substantial completion” and “improvement to real property” are found in the statute.  The trial court granted the Motions, and dismissed the Third-Party claims.

On Appeal, Shaw Construction argued that the Third-Party Complaint had been filed within the six-year statute of repose because the controlling date was June 8, 2004, when the project architect had certified the entire project complete, not the date when a certificate of occupancy for a particular building had issued.  The court of appeals disagreed, and affirmed the judgments.  The ruling turned on its definitions of the critical terms “improvement to real property” and “substantial completion.” 

The Court of Appeals rejected Shaw Construction’s position that the improvement to real property was the entire project.  It held that “an improvement may be a discrete component of an entire project, such as the last of multiple residential buildings.”  It also disagreed with Shaw that “substantial completion” in this project only occurred when the project architect certified the construction. Instead, it held that the buildings were each substantially complete when the certificates of occupancy had issued, which demonstrated that they were habitable.  Based on that analysis, the court of appeals determined that each and every improvement at Roslyn Court had been substantially completed more than six years before the Third-Party Complaint was filed, and concluded that Shaw’s action against the subcontractors was therefore time-barred under the statute of repose.

SOURCE: www.mgjlaw.com

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