Source: http://fwhtlaw.com/briefing-papers/legislative-updates-claim-accrual-reasonable-expectation-finishing-project/
Timestamp: 2019-09-17 23:37:28
Document Index: 13805887

Matched Legal Cases: ['§541', '§541', '§541', '§541', '§541', '§541']

Legislative Update: A New Statutory Scheme for Determining When the Statute of Limitations Begins to Run | Fabyanske Westra Hart & Thomson
Dean Thomson is a Shareholder in the firm’s Construction Law Department. Dean can be reached at dthomson@fwhtlaw.com or 612.359.7624. He also served as the Co-chair of the MSBA Construction Law Section Legislative Committee that advocated the statutory amendment discussed in the Briefing Paper.
The Minnesota Supreme Court surprised many in the construction industry when it determined that the Statute of Limitations for construction claims could begin running before substantial completion of the project. 328 Barry Ave., LLC v. Nolan Properties Group, LLC, 871 N.W.2d 745, 746 (Minn. 2015). As explained in this month’s Briefing Paper, this past legislative session, the statutory language that enabled this result was modified, bringing the law into alignment with prior expectations. The new amendment to the Statute of Limitations became effective on May 9, 2018.
In 328 Barry Ave., the developer, Barry Avenue, LLC, brought a negligence action against Nolan Properties Group due to water infiltration caused by faulty window installation. The leakage was first noticed during construction in 2009, but the project was not substantially completed until May of 2010. The contractor undertook a repair, but it was not effective and water infiltration was again noticed after substantial completion. Despite the attempted repair, the Court found that the statute of limitations nevertheless could begin running before substantial completion when the injury was first discovered, but remanded to the lower courts to determine exactly when Barry Avenue, LLC became aware of the injury.
This decision was based on Minn. Stat. §541.051, which at the time held that “no action . . . to recover damages for any injury . . . shall be brought . . . more than two years after discovery of the injury.” Minn. Stat. §541.051 Subd. 1(a) (2014). Many practitioners assumed that injuries to property were not considered “discoverable” until substantial completion, but the Supreme Court, based on the plain language of the statute, declared that assumption incorrect.
The Supreme Court’s decision placed owners, contractors, and design professionals in a potentially difficult dilemma. Many construction defects that arise during construction can be – and usually are – addressed and fixed before substantial completion. No project participant wants to keep track of all potential defective work “injuries” as they may be noticed or discovered during a job and confirm that they have all been properly remedied before substantial completion – or else be at risk that the statute of limitations has begun to run on the “injury”. Indeed, some projects run longer than two years, and if the parties could not wait until substantial completion to investigate and become aware of any defective work injuries that occurred during the job, they may find that the statute of limitations regarding that defective work had run before the job was completed!
The Court in 328 Barry Ave acknowledged these policy concerns, but determined it was compelled to make its ruling based not upon policy considerations but the actual language in the statute. Accordingly, the Minnesota State Bar Association Section on Construction Law undertook an effort to amend the statutory language upon which the Court’s decision was based.
To address the concerns created by the 328 Barry Ave decision, the amendments to Minn. Stat. §541.051 now provide that no action can be brought “more than two years after the cause of action accrues, as specified in paragraph (c).” Paragraph (c) now provides that the two year Statute of Limitations begins to run “for an action for injury to real or personal property, upon discovery of the injury, but in no event does a cause of action accrue earlier than substantial completion, termination, or abandonment of the construction or the improvement to real property.” Minn. Stat. §541.051 Subd. 1(c)(2) (2018)(emphasis added).
The language and effect of this amendment is relatively clear. First, accrual of an injury still requires the discovery of the injury. The time to file a claim does not begin running when the defect occurs, but when it is discovered. Even then, the statute of limitations cannot begin running until substantial completion. Substantial completion is defined to have occurred when the construction is sufficiently completed so that the owner or owner’s representative can occupy or use the improvement for the intended purpose. See Minn. Stat. §541.051 Subd. 1(a) (2018).
As a party to a construction project, it will always be critical to be on the lookout for injuries that could entitle you to legal remedy. However, following the 2018 amendments to Minn. Stat. §541.01, the parties’ primary focus can be performing and completing their contract, safe in the knowledge that any claims for problems not remedied during construction will be preserved until after substantial completion.
This discussion is generalized in nature and should not be considered a substitute for professional advice. © 2018 FWH&T.