Many people are aware of the importance of California's ten-year statute of limitations when it comes to evaluating the possibility of pursuing a construction defect lawsuit.

Statutes of limitation are a bar to construction defect claims. If a lawsuit has been filed ten years after the substantial completion of an improvement or development, a dismissal of the lawsuit will result. However, due to other statutes of limitation that apply to construction defect claims, the ten-year statute is not the only law that should be relied upon. Other statutes of limitation are three and four years long. Depending on the facts of each case, these statutes can seriously impede or altogether prevent recovery for construction defect damages. The clock on these statutes can be stopped or "tolled" in certain circumstances. Following is a short summary of each statute and its application.

Four Year Patent Defect Statute of Limitations

Injury to property (also known as property damage), personal injury and wrongful death caused by a defect that is "patent" is subject to a four-year statute of limitations in California. The word "patent" means the defect is clearly visible or visible upon "reasonable inspection." This four-year statute of limitations, similar to the ten-year statute, runs from the time of substantial completion of construction.

The question of whether the construction defect is "latent" (hidden) or patent is one of fact. Accurate records should be kept regarding when a patent or latent defect was first discovered. If the defect was not visible until two years after construction was completed, most courts would start the clock on the four-year statute from the time of discovery. In doing so, a court may shift the burden of proof and require the association or homeowner to provide evidence that the defect was not discoverable until that later date.

Three Year Statute of Limitations for Injury to Real Property

Since this statute of limitations is the shortest, it is important to pay close attention to the time that goes by once any construction defect is discovered. This three year statute of limitations begins to run once "the damage is sufficiently appreciable to give a reasonable person notice that he or she has a duty to pursue his or she remedies." In the view of a court, this means discovery of the defect and an understanding of the cause of the defect. This statute of limitations is of particular importance because recovery of damages under this statute provides the broadest and most easily obtained measure of damages available. Under the law, this "tort" recovery includes all detriment proximately caused thereby, whether anticipated or not except that attorney fees are not usually recoverable.

Negligence, strict liability, misrepresentation and fraud are all "tort" causes of action. Since these are primary means of recovery in a construction defect suit, it is extremely important to be aware of the timeframe once a construction defect has been detected. If the three-year statute expires once a defect has been detected, the defendant (e.g. builders, contractors or subcontractors) can challenge the defect, and the recovery of damages for a time-barred defect may be lost.

Four Year Statute of Limitations for Breach of Contract in Writing

Claims for breach of contract, when the contract is in writing, are subject to a four year statute of limitations. However, this statute may provide limited or no relief to prevail on a breach of contract action unless there is a contract between the plaintiff and defendant. There must also be a material term in the contract that has been breached by the existence of construction defects.

The measure of damages is less extensive in a breach of contract action than a tort cause of action. Damages are limited to those which were likely to result from the breach and must be "clearly ascertainable." However, if a breach of contract action survives and the contract contains a provision awarding attorney fees arising from a breach, attorney fees may be recovered as part of the claim.

When construction defects breach the "implied warranty of habitability" in a home sales agreement, attorneys may be able to pursue recovery for a breach of contract. A warranty of habitability is implied by law in every contract for sale or lease of residential property in California. Although there is no appellate decision directly on point regarding construction defect claims, such a claim may succeed. Given that most construction defect claims are resolved before trial and few trial judgments are appealed, all meritorious legal theories should be exercised.

Stopping the Clock

A number of circumstances exist that stop the applicable statutes of limitation from running out. If there are circumstances under which it is unjust to apply the statute of limitations against a plaintiff, the court may find that the statute was tolled (stopped for a period of time). The amount of tolled time will depend on the facts and principles of fairness. Usually, this is due to an act on the part of the defendant. Examples include the following:

• The developer promised to make repairs over a period of time .and did not.
• The developer made repairs that proved to be inadequate or didn't correct the defective cause of damage.
• The developer was in control of the homeowner association for some period of time.
• The developer actively concealed or misrepresented the nature or cause of construction defects.
• The developer made a promise to "work it out" with the association or homeowner and did not.

Although the previous examples may seem rather clear-cut, sometimes the facts are ambiguous. When the developer makes repairs and the same problems resurface later, or worse, new problems arise, it may be difficult to determine whether these were original defects or new defects caused by defective repairs. This is a good reason for obtaining a "tolling agreement" from the developer prior to repairs being made. This type of agreement states that the statute of limitations against the developer will stop running for the period of time that the developer is making repairs. Please note that rarely, if ever, can the 10 year statute of repose be tolled.