It’s a contractor’s worst nightmare: someone you haven’t heard from in ages, or ever, sues you, claiming a defect in the construction you performed years ago. But when is it too late to bring such a claim? You may think that the statute of limitations will protect you, and it will, but typically, the statute of limitations will not even begin to run until someone knows or should have known that there is a defect, which may not be for years and years after the project was completed. For example, you finished construction in 2005, but an unknown defect was not revealed for 10 years (2015). Assuming a four-year statute of limitations, a claim would not expire under the statute of limitations until 2019. Enter the statute of repose, which essentially places an upper time limit on when claims can be filed. Under the Pennsylvania statute of repose, “a civil action or proceeding brought against any person lawfully performing… construction, or any construction of any improvement to real property must be commenced within twelve years after completion of construction[.]” However, an exception exists that extends the time limit from 12 years to 14 years if any injuries occur between 10 and 12 years after the completion of construction. But what does this really mean—when is a construction “lawful,” and what if the defect was present years ago but has only worsened? What triggers when the statute of repose begins to run? A Pennsylvania court recently clarified these questions and rejected a homeowner’s argument that sought to extend the statute’s 12-year deadline.
In the case of Johnson v. Toll Brothers, a Pennsylvania Superior Court determined that a “lawful” construction, for purposes of the statute of repose for construction defects, means one that is authorized by the governing body with jurisdiction over the project, regardless of any technical violations of applicable building codes. The Johnson court additionally clarified that while the statute of repose contains an exception extending the 12 years to 14 for injuries that occur in the tenth to twelfth years after construction is complete, this only applies to injuries that first arise in years 10 – 12—not to injuries that began or occurred years prior but have continued or recurred into the tenth to twelfth years.
What Does “Lawful” Mean?
In Johnson, Toll Brothers designed a home, obtained a building permit authorizing its construction, completed construction, obtained a certificate of occupancy on October 18, 2004, and conveyed the home to its original purchasers. These original purchasers sold the home to the second purchasers, who subsequently sold the home to the Johnsons. On August 12, 2018, more than 13 years after the certificate of occupancy had been issued, the Johnsons brought suit against Toll Brothers, asserting claims for violation of the Unfair Trade Practices and Consumer Protection Law, civil conspiracy, and negligence. All of the Johnsons’ claims were based on Toll Brothers’ alleged violations of applicable building codes when originally constructing the home.
The Johnsons claimed that the statute of repose for construction defect claims was inapplicable because the building code violations by Toll Brothers made the construction unlawful. Alternatively, the Johnsons attempted to take advantage of the two-year extension of the statute by claiming that because the injuries they sustained were in the final three years of the filing window, they had 14 years to file a claim.
In its ruling, the Pennsylvania Superior Court compared the word “lawful,” as used in the statute of repose, to “legal.” In comparing the words, the court looked to an unpublished Pennsylvania case, Evangelical Lutheran Church of the Atonement at Wyomissing, PA v. Horst Construction, in which the plaintiff claimed that certain construction was unlawful. However, the court rejected the claim because it found that while the construction violated building codes and local ordinances, it had been lawful because an occupancy permit had been granted. The Johnson court additionally looked to another Pennsylvania case, Branton v. Nicholas Meat LLC, in which a Pennsylvania Superior Court explained that “if an individual who possesses a valid driver’s license is speeding, he is not legally operating the vehicle because he is driving over the posted speed limit. Nonetheless, he is lawfully operating the vehicle because he is licensed to do so.”
After reviewing the decisions made by the courts in both Evangelical Lutheran Church of the Atonement at Wyomissing, PA and Branton, the Johnson court concluded that when construction that has been performed pursuant to a building permit, such as the construction done by Toll Brothers, it is lawful, regardless of whether the construction was done in violation of applicable building codes and local ordinances. Based on this finding, the court has now made it clear that the statute of repose is applicable so long as the construction project is performed under a permit, i.e., is lawful, even if not performed per local building codes.
When Does the 14-Year Exception Apply?
The Johnson court then turned to the second issue, deciding that the exception delineated in the statute of repose for construction defects that extends the statute from 12 years to 14 applied only when damages first arrive in the tenth, eleventh, or twelfth year after construction is completed—not to damages that appear earlier but continue into the tenth, eleventh, or twelfth year. According to the court, allowing the exception to apply to injuries that occurred before the 10 years but continued into the 10 – 12 year range would be unworkable, thwarting the intent of the legislature in enacting the statute of repose and leading to an arbitrary application of it.
It is important to note that in January of 2023, Senator Dan Laughlin of Erie, a former homebuilder as well as a former partner of a construction firm, proposed a bill to the Pennsylvania Senate that would change the statute of repose for construction defects from 12 to six years after completion of construction, and would change the exception to allow claims for damages that arose in the fourth, fifth, and six years to be brought within eight years after completion of construction. The proposed bill would additionally define the word “lawfully” as it is used in the statute of repose to mean construction done by “a person who has secured a permit for the construction[.]”
Conclusion
So, what does this all mean for contractors hoping to use the statute of repose to defeat a defense to a construction defect claim? First, it means that to use the statute of repose as a defense to construction defect claims, the construction must have been performed pursuant to a building permit but does not necessarily have to have been done in compliance with all relevant building codes or local ordinances. Second, it means that where damage first occurred within 10 years after construction was completed but continued occurring after the 10-year mark, the exception extending the statute of repose to 14 years will not be allowed.
Construction defect claims are nuanced and can be difficult for contractors to understand. As soon as you learn of a construction defect claim against you, you should turn to the experienced attorneys at Cohen Seglias to help determine and protect your rights, including whether the statute of repose has caused the claim to expire.
