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Construction Defect Claim Accrues When Any Property Owner Knows of Potential Claim (NJ)

September 29, 2017

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Condominium construction defect cases present thorny issues for contractors caught up in litigation years after the work is completed.  Statute of limitations defenses are often raised with a key issue being whether the trigger is substantial completion of work or whether the statute has been tolled for discovery.
In the recent case of <a href="http://blog.wcmlaw.com/wp-content/uploads/2017/09/The-Palisades-at-Fort-Lee-Condominium-Association-Inc.-v.-100-Old-Palisades-LLC.pdf">The Palisades at Fort Lee Condominium Association, Inc. v. 100 Old Palisades, LLC</a>, the New Jersey Supreme Court ruled that a construction defect cause of action accrues at the time the building's original or subsequent owners first knew or, through the exercise of reasonable diligence, should have known of the basis for a claim.
In <em>Palisades,</em> the plaintiff condominium association filed several suits against contractors in 2009 and 2010 after it assumed control of the Board and had its own engineer investigate conditions on the property.  However, the history of the building began years earlier.  The building was constructed beginning in 1999 with substantial completion in 2002.  Initially built as a residential apartment building, the original owner had an engineering evaluation performed in 2004 that found some issues with the construction but generally reported it to be in good condition.  That same year, the property was sold and converted to condominiums.
The public offering for the condominiums included the 2004 engineering report.  By July 2006, 75% of the units had been sold and control of the association turned over to the unit owners.  The association commissioned an engineering inspection by Falcon that found a number of defects identified in a 2007 report.
The defendants moved for summary judgment, arguing that the claim was barred due to the six-year statute of limitations using the 2002 substantial completion date as the trigger for the statute. The trial court agreed with the defendants.  The Appellate Court rejected this and found that the  action had not accrued until the 2007 Falcon report when the unit-owned association learned of the defects.  In doing so, the Appellate Court rejected potential notice of the original owner.
Ultimately,  the New Jersey Supreme Court struck a middle position.  It eschewed a substantial completion of work trigger, but found that the statute of limitations begins to run when either an original or subsequent owner first has a reasonable basis to believe that a cause of action exists.    The Court remanded the case for further findings on when an owner (original or subsequent) knew or should have known of a cause of action.  This case highlights the importance of obtaining specific and targeted discovery concerning the date that a plaintiff became aware of, or should have known of, a construction defect on their property.
Thanks to Heather Aquino Obregon for her contribution.
For more information, contact Denise Fontana Ricci at <a href="mailto:dricci@wcmlaw.com">dricci@wcmlaw.com</a>.
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