Contractor Has Reasonable Expectation Of No Liability 10 Years After Substantial Completion of Work (NJ)

When it comes to construction defects, New Jersey courts and Legislature have wrestled with how to provide time for claims to be brought without an unending risk to contractors and developers. At common law, there was a “completed and accepted rule” that limited the exposure of architects, contractors, and the like once the work was completed and approved by the property owner. However, as the courts whittled away at this with the discovery rule, the Legislature reacted with the Statute of Repose, which fixes a ten year period in which a party can bring a suit for defective design or construction. With this statute providing an outside date by which a contractor or architect could reasonably expect to have no further potential liability, the courts entirely repudiated the completed and accepted rule. One might think that the statute settled the issue once and for all. However, an argument can always be made, and it was.

In Fairview Heights Condominium Association, Inc. v. R.L.Investors, the plaintiff condominium association brought suit against the developer and others related to construction issues dating to 1988. The association sought to circumvent the Statute of Repose since the development was not turned over to the association until 75% of the units were sold in 2001. Thus, the association argued that the statute should not be applied the same against it as it is against other potential claimants and sought exception for its suit filed in 2008 – twenty years after substantial completion of the project.

The New Jersey Appellate Division did not agree. It held that the triggering point for the statute of repose is substantial completion of the project irregardless of when the developer relinquishes control of the managing association. Ten years means ten years. The court thus, upheld summary judgment granted to the developer. In reaching this decision, the Court spoke of fairness to the defendant and its right to be “secure in its reasonable expectation that the slate has been wiped clean of ancient obligations.”

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.