Clarification on New Jersey Time to Sue for Construction Defect

In many complex construction defect lawsuits, whether or not the property owner filed its claims on time is a critical issue. Generally speaking, a property owner has six years to assert claims pursuant to N.J.S.A. 2A:14-1. Applying this six-year statute of limitations is not always so simple. Numerous factual and legal considerations come into play when determining the precise deadline for a property owner to file a lawsuit stating its claim in any given case. The New Jersey Supreme Court recently rendered an opinion in The Palisades at Fort Lee Condominium Association, Inc. v. 100 Old Palisade, LLC, that clarifies how courts are to determine when a property owner’s time to assert a construction defect claims runs out.

New Jersey Supreme Court Specifies When the Six Year Period to File Suit Based Upon a Construction Defect Begins

In Palisades, the Court reviewed the existing case law governing time to file property tort lawsuits arising from construction defects. The court reiterated that in a construction-defect case, the date on which an architect certifies to the owner that the structure is substantially complete typically starts the running of the six-year property tort statute of limitations. The exception to this general rule occurs when, despite the exercise of reasonable diligence, the property owner is unaware of an actionable claim. The running of the six-year period will not begin to run until the property owner becomes, or should have become, reasonably aware of the defect. The Court specified that the six-year period begins is “the date that the plaintiff knows or reasonably should know of an actionable claim against an identifiable defendant.”

The Palisades Court rejected the argument that, if the property owner discovered the defect before the end of the six year period, the property owner could only file claims between the time of discovery and the end of the six year period starting with the date of substantial completion. The Court also rejected the arguments that a sale or transfer of property delays the running of the six-year period, saying that the “clock is not reset every time property changes hands.”

The Court concluded by offering a succinct summary of the framework for determining the deadline to file construction defect claims in a given situation:

The date that a structure is deemed substantially complete oftentimes is when a cause of action accrues because some construction defects will be readily apparent on inspection and therefore the plaintiff will have a reasonable basis for filing a claim. But many construction defects will not be obvious immediately. In such instances, a cause of action does not accrue until the plaintiff knows or, through the exercise of reasonable diligence, should know of a cause of action against an identifiable defendant. A plaintiff who is a successor in ownership takes the property with no greater rights than an earlier owner. If the earlier owner knew or should have known of a cause of action against an identifiable defendant, the accrual clock starts then.

The determination of when a claim accrues is to be made at a hearing held before the trial court. At the hearing, the plaintiff (property owner) bears the burden of proving that the claim accrued at a time after a project’s substantial completion.

New Jersey Supreme Court Clarifies How the Statute of Limitations and Statute of Repose Operate to Allow or Bar Claims

The Palisades Court also discussed the interaction between the statute of limitations and the applicable statute of repose. The Court explained that “an accrual statute”, like the statute of limitations, “generally has no certain end date, given that the trigger of the limitations period may depend on when a plaintiff discovers the basis for his cause of action.” By contrast, a repose statute has fixed beginning and ending dates, thus providing certainty to defendants when their exposure to liability concludes. The statute of repose in construction-defect cases, N.J.S.A. 2A:14-1.1(a), bars actions

[A]against any person performing or furnishing the . . . construction of such improvement to real property, more than 10 years after the performance or furnishing of such services and construction. This limitation shall serve as a bar to all such actions . . . at the time the defective and unsafe condition of such improvement constitutes the proximate cause of the injury or damage for which the action is brought.

The ten-year repose statute begins at the date of a project’s substantial completion. The statute of repose sets the outer limit for the filing of a construction defect claim. For example, if for purposes of the property damage statute of limitations, N.J.S.A. 2A:14-1, a construction defect action accrues eight years after a project’s substantial completion, a plaintiff will only have two years to file a claim before it is barred by the repose statute.

New Jersey Supreme Court Avoids Question of Application of Statute of Repose to Defective, But Safe Conditions

The Palisades Court declined to address a problem with the property damage statute of limitations raised by the defendants. The defendant argued that because the repose statute appears to bar only claims involving “defective and unsafe” conditions arising from construction, the statute would not apply to a defective condition that does not raise safety concerns. This would mean that no outer limit exists on the time to assert claims for defective conditions not raising safety conditions. The Court suggested the defendants take this issue up with the Legislature.

Construction Defect Lawyers

Our firm devotes a significant amount of its practice to New Jersey construction law and litigation. We welcome you to contact us for further information if you have a dispute relating to an existing or planned residential or commercial construction project.

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