Let’s Break Up: The Minnesota Supreme Court’s Decision that Each Building in a Multi-Building Complex is a Separate Improvement - Construction and Procurement Law News, Q3 2021

Bradley Arant Boult Cummings LLP

Bradley Arant Boult Cummings LLP

Multi-building condominium projects often raise unique legal issues as they do not squarely fall within the definitions used in state statutes. The Minnesota Supreme Court recently addressed the unique nature of multi-building condominium projects in Village Lofts at St. Anthony Falls Association v. Housing Partners III-Lofts. The Minnesota Supreme Court held that each building in a multi-building condominium project is a separate “improvement to real property” triggering the beginning of the statute of repose. The holding in Village Lofts is a reminder of the importance of keeping in mind the statute of repose and understanding the closure effect the statute of repose has on construction defect claims.

Minnesota, like many states, has a statute of repose applicable to construction projects. A statute of repose acts to eliminate a cause of action after a specific period of time. In Minnesota, Minn. Stat. § 541.051 provides that no action arising out of a defect of an improvement to real property shall accrue more than ten years after substantial completion of the construction. The Minnesota Supreme Court in Village Lofts was tasked with determining when the statute of repose was triggered for two condominium buildings: Building A and Building B.

In Village Lofts, construction defects were discovered in both buildings after a significant amount of time. The defects in Building A were discovered more than ten years after Building A was substantially complete, and the defects in Building B were discovered more than ten years after Building B was substantially complete. Accordingly, the statute of repose would bar the claims if each building was considered separately. To avoid Village Lofts’ claims being barred by the statute of repose, Village Lofts argued that the two buildings were part of the same condominium project and thus should be considered one “improvement to real property” triggering the statute of repose only after Buildings A and B were both complete. 

The court ultimately held for the developer and contractors finding that each building was treated separately under the statute of repose. In reaching this conclusion, the court focused on the fact that Building A was completed and turned over for use before Building B was complete, and Building A was completed under a separate contract which did not include the construction of Building B or require Building B to be complete before Building A was completed. Accordingly, each building was a separate improvement which separately triggered the statute of repose. And since the defects in each building were discovered over ten years after the building was substantially complete, the statute of repose barred the common law claims for construction defects as to both buildings.

The Village Lofts decision stands as a notice that the statute of repose may be triggered (and therefore, claims barred) for a completed building in a multi-building project even before the completion of all buildings in the project. Accordingly, parties to any construction contract should pay close attention, not only to the timing limitations in their contract, but also to the applicable statutes of repose in that jurisdiction. Each party should seek a clear definition of the substantial completion of a building, seek to document that date carefully, and ensure, if possible, that a building’s substantial completion clearly defined as to whether it is tied to completion of stand-alone amenities (such as a common “club” or “pool” or “reception area”).

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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