HOW NOT TO LOSE THE STATUTE OF LIMITATIONS

DEFENSE - PART ONE OF TWO

This article is the first in a two part series regarding the applicable statute of limitations for claims arising out of defective improvements to real property, what builders can do to lose the protection of the statute of limitations, and how to avoid forfeiting the statute of limitations defense.

First, understanding what the statute of limitations is, and how it protects builders is necessary. Generally, in actions for damages based on construction defects, any lawsuit to recover damages caused by defective improvements to real property must be started within two years of the discovery of the defect. The two year period within which somebody may initiate a lawsuit for construction defects begins to run, not on the date of substantial completion or date of closing, but when the injury is discovered, or should have been discovered. However, knowledge of the precise nature of the defect causing the injury does not need to be known; only that there is in fact an injury.

In addition to a statute of limitations, a statute of repose exists to prevent stale claims. The statute of repose related to claims arising out of construction defects provides that no lawsuit may be initiated more than ten years after substantial completion of the construction regardless of discovery of an injury (extended to 12 years where discovery of the injury occurs in the last two years of the repose period).

In sum, generally, a person attempting to sue a contractor for defective construction must start the lawsuit within two years of discovering the injury, and in no circumstance may a lawsuit be started more than twelve years after substantial completion.

The Minnesota Court of Appeals recently ruled in Koes v. Advanced Design, Inc., that while warranty claims against contractors are subject to a two year statute of limitations, no statute of repose exists to prevent stale claims. Therefore, conceivably, a contractor faces liability 20 years after substantial completion. Presently BAM is working to have legislation passed in the 2004 Legislative Session which would close this statutory loophole.

While the statute of repose does not currently bar warranty claims made more than ten years after substantial completion, those claims are still subject to the two year statute of limitations. Accordingly, when faced with a lawsuit for damages caused by construction defects, it is very important to find out when the consumer first noticed the problems. The consumer is required to provide the contractor written notice of the problem within six months of first knowledge of the problem as a prerequisite to having a cause of action based on a violation of the Minnesota home warranty statute. Then the consumer is required to initiate a lawsuit within two years of discovery of the defect. If the consumer does not provide the contractor written notice within six months, they can lose their remedy under the Minnesota home warranty statute. If the consumer does not initiate the lawsuit within two years of discovery of the defect, the entire claim is barred by the statute of limitations. This is a useful tool in defending construction defect claims. Certain statements and actions by the contractor, however, can cause the contractor to lose the protection of the statute of limitations. Those will be discussed in part two of this series.

©2003, Rinke-Noonan and Ryan J. Hatton, St. Cloud, Minnesota.

Ryan J. Hatton is licensed to practice law in the Minnesota State and Federal Courts. He is a qualified neutral arbitrator by the Minnesota Supreme Court and currently serves on the SNBA governmental affairs committee.