Minnesota Court of Appeals Defines Substantial Completion Under Statute of Repose

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On March 10, 2014, the Minnesota Court of Appeals issued its decision in Rosso v. Hallmark Homes of Minneapolis, Inc., No. A13-1304. The Court’s decision clarifies that Minnesota’s ten-year statute of repose for construction projects begins to run on the date that construction is complete, and not when a certificate of occupancy is issued. Rosso has the effect of further insulating residential contractors from claims for defective construction.

Rosso involved a claim brought by two owners against a residential construction contractor, Hallmark Homes of Minneapolis, Inc., arising out of moisture damage to their home. Hallmark completed construction on the home on November 14, 1995. The owners discovered the moisture damage just over ten years later, on November 20, 2005, and brought an action in 2007 against Hallmark seeking recovery for the moisture damage.

The district court dismissed the owners’ claim on the basis that the claim was barred by the ten-year statute of repose contained in Minn. Stat. § 541.051, subd. 1(a), which provides that no action arising out of defective construction may be brought more than ten years after substantial completion of the project. Under Section 541.051, subd. 1(a), the date of substantial completion is defined as “the date when construction is sufficiently completed so that the owner . . . can occupy or use the improvement for the intended purpose.”

On appeal to the Minnesota Court of Appeals, the owners argued that the date of substantial completion should be measured by the date of issuance of a certificate of occupancy rather than the completion of construction, because the issuance of a certificate is a legal requirement for use and occupancy of the home. The Court disagreed, relying on the fact that the statutory language defining substantial completion turned on the structure’s physical condition, and not the issuance of a certificate of occupancy. The Court upheld the district court’s dismissal of the claim.

In conclusion, Rosso establishes that an owner may not rely on the issuance of a certificate of occupancy in calculating the date of accrual of its claim for purposes of the ten-year statute of repose. In doing so, Rosso shortens the time available to owners to bring claims for defective construction and insulates residential contractors from construction defect claims.

The Court’s decision is available here.

Topics:  Construction Contracts, Construction Defects, Construction Disputes, Contractors, Hallmark, Statute of Repose

Published In: Civil Remedies Updates, Construction Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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