A New Jersey judge earlier this year dismissed a construction defect complaint by a condominium association against the developer and contractor, finding that the lawsuit was filed outside the state’s six-year statute of limitations. An important aspect of this case was the time when the association learned of the defects—based on the developer’s public offering statement regarding the condominium—and whether the timeline for filing suit could be extended. The court determined that disclosures made by the developer of such defects in its public offering statement commenced the running of the applicable limitations period.  

Created and initially operated as rental apartments, the building was sold and converted to condominiums in June 2004, about two years after its substantial completion in May 2002. After transfer of control of the association to the unit owners in July 2006, the association retained an engineer to inspect the building. The engineer's report was issued in July 2007, detailing various construction and design defects. However, such defects were disclosed by the developer in its public offering statement received by all purchasers.

Under the statute of limitations, a cause of action generally accrues when construction is deemed substantially complete, though it may be tolled by the discovery rule (in which case the statute of limitations begins when the injured party discovers or should have discovered the basis for the claim). The discovery rule will not extend the statute of limitations if the injured party learns of the basis of the claim with reasonable time for action remaining within the statute of limitations to file a lawsuit.

The statute of limitations in this case began on May 1, 2002, at the time construction was deemed substantially complete. The association attempted to bring suit in March 2009, but the court determined that in accordance with the general rule, the statute of limitations had expired on May 1, 2008.

The court found no basis to toll the limitations period because the developer disclosed a number of the construction defects in the public offering statement. Additionally, when the 2007 engineer's report was obtained by the association, the statute of limitations had nearly a year remaining, which the court found to be sufficient time for the association to act.

While some jurisdictions have statutory warranties applicable to condominiums that are not significantly affected by either disclosures or the discovery rule, other legal claims that may be asserted regarding construction defects can be substantially limited by a developer’s disclosures.

Ballard Spahr’s Mixed-Use Development and Condominiums Team and Real Estate and Construction Litigation Group include many experienced lawyers who counsel developers, lenders, contractors, and investors on all aspects of condominium and mixed-use development. Among other services, we help clients anticipate disputes that can arise regarding construction defect claims and take steps to minimize and resolve such disputes.

For more information, please contact Roger D. Winston at 301.664.6201 or winstonr@ballardspahr.com, Shelah F. Lynn at 301.664.6204 or lynns@ballardspahr.com, or Katherine M. Noonan at 301.664.6212 or noonank@ballardspahr.com.

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