August 3, 2020

Volume X, Number 216

August 03, 2020

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New Jersey Supreme Court Clarifies Statute of Limitations in Construction Defect Cases

In The Palisades at Fort Lee Condominium Association, Inc. v. 100 Old Palisade, LLC, ___ N.J. ___ (2017), the plaintiff was the Condominium Association that brought suit based upon defects in the condominium building after the Association took over control from the Sponsor and after the Association obtained its own engineering report.  Summary judgment on statute of limitations grounds was obtained by the defendants in the trial court; the Appellate Division reversed.  The New Jersey Supreme Court held that a cause of action for construction defects, for statute of limitations purposes, accrues when any owner in the chain of title “first knows or reasonably should know of the actionable claim against an identifiable party.”  A plaintiff’s case must be commenced within six years after a claim “accrues.”  The general rule is that accrual begins upon substantial completion of the project.  However, under the “discovery rule” the statute begins to run from when a plaintiff “knows or reasonably should know of an actionable claim against an identifiable defendant.”  The Court has now made it clear that if an “earlier owner knew or should have known of a cause of action against an identifiable defendant, then the accrual clock starts then.”  “The statute of limitations clock is not reset every time property changes hands.”

Thus, the plaintiff Association in The Palisades took title subject to the rights of the prior two owners – the entity that operated the building as apartments and the second entity which converted the units to condominiums.  The second owner had obtained an engineering report during its ownership.  Based on the facts before it, the Court remanded the case for a so-called Lopez hearing, in order to determine when the Association’s claims accrued.  The Court made it clear that it is the plaintiff’s burden, for the purposes of the Lopez hearing, to prove that its claims accrued sometime later than substantial completion.

While the issue was not specifically before it, the Court also took the opportunity to address the ten year statute of repose.  This statute begins to run upon a project’s substantial completion; the ten years sets the outer limit for filing of a construction defect claim.  This outer limit remains unaffected by the decision in The Palisades.  “For example, if for purposes of the property-damage statute of limitations … a construction-defect action accrues eight years after a project’s substantial completion, a plaintiff will have only two years to file a claim before it is barred by the repose statute.”  Thereafter, a claim will still be barred by the statute of repose.

The holding in The Palisades has significant potential impact on construction defect property damage/tort claims as it can mean that there is a significantly shorter time period within which plaintiff Associations must file suit over claimed defects as the Associations will be charged with knowledge of an actionable claim that is possessed by a Sponsor.  On the flip side, this decision also imposes on Developers/Sponsors the need to be diligent about pursuing claims of which it becomes aware, particularly in slow-selling communities.  The holding also potentially impacts how Successor Sponsors approach transactions for existing or partially-complete communities.

Christopher J. Marino and Timothy J. DeHaut also contributed to this article.

© 2020 Giordano, Halleran & Ciesla, P.C. All Rights Reserved National Law Review, Volume VII, Number 270


About this Author

Michael J. Canning, Giordano Law Firm, Litigation Professional Liability Insurance Law

Mr. Canning, co-chair of the Litigation Practice Area, has been certified by the New Jersey Supreme Court as a civil trial attorney. He devotes his practice primarily to commercial litigation with emphasis in the following areas: professional malpractice, general civil and commercial litigation; insurance litigation; contract and corporate litigation. Mr. Canning litigates and tries contested civil cases in state and federal courts including the Third Circuit Court of Appeals and U.S. District Court.

Mr. Canning represents policyholders seeking declaratory judgments for insurance...

Paul H. Schneider, Giordano Law Firm, Litigation Attorney

Paul, Chair of the Environmental & Land Use Litigation Practice Area, focuses his practice in environmental, redevelopment, land use, regulatory, real estate and affordable housing law, and litigation. He also handles a wide variety of redevelopment matters as well as corporate and commercial litigation. In addition to handling major litigation before both the state and federal courts and the Office of Administrative Law, he has extensive experience before the New Jersey Supreme Court and the Appellate Division.

Paul represents real estate developers and other businesses in all types of environmental and land use matters, including permitting and compliance in the areas of water, wetlands, waste, and air; brownfields redevelopment; site remediation; and transactional. He also represents landowners in cost recovery actions, as well as in enforcement actions brought by government or environmental groups.

James M. Andrews, Giordano Law Firm, Corporate litigator,Litigation Matrimonial & Family Law,Insurance Law,Corporate Commercial Litigation, Employment Litigation, Patent Litigation, Product Liability Defense, Matrimonial

Jim Andrews focuses his practice in the areas of corporate/commercial litigation, environmental law, matrimonial law and product liability defense. He has tried over seventy significant corporate/commercial cases to conclusion in both federal and state courts and has been recognized for his work in legal malpractice cases and attorney ethics. An accomplished litigator, Mr. Andrews has appeared before the New Jersey Supreme Court on three occasions, and the U.S. Court of Appeals for the First, Second and Third Circuits on three occasions. Jim has received the highest...

Catherine J. Bick, Giordano Law Firm, Business Litigation, Litigation Construction Law & Litigation Insurance Law Community Association Law

Cathy devotes her practice to commercial and business litigation matters. She represents individuals and entities in the business community on all manners of disputes and stages of litigation, as well as in alternative dispute resolution including mediation and arbitration. Cathy counsels and represents clients involved in contract and corporate disputes, business tort claims, insurance disputes and other general business matters.

Cathy has specific experience representing and counseling developers, contractors and other members of the construction and real estate communities in...

Sean E. Regan Shareholder Giordano Law Firm, Commercial Litigation Attorney

Sean focuses his practice on commercial litigation and general litigation. He is primarily involved in real estate, construction and corporate disputes.

With regard to real estate, Sean handles all varieties of matters involving construction, liens, real estate development, commercial leasing, municipal land use and zoning disputes. Sean litigates and counsels clients in connection with public contracting and public contract disputes. Sean also provides construction contracting services and subcontractor program reviews, and contract reviews for compliance with New Jersey public...