Category Archives: Construction Defects

HOMEOWNERS ASSOCIATIONS AND COMMON LAW IMPLIED WARRANTIES

Posted on by


The Florida Supreme Court’s decision in Maronda Homes, Inc. of Florida v. Lakeview Reserve Homeowner’s Association, Inc., 38 Fla. L. Weekly S573a (Fla. 2013) has been a long awaited decision for both homeowners associations and home builders.

 

This case started when a homeowners association sued the home builder of the residential subdivision for common law breach of implied warranties of fitness and merchantability (also known as the warranty of habitability in the residential context) due to construction defects. The association asserted that infrastructure, particularly as it pertained to the storm water drainage system, was defective and was causing substantial flooding and other damage (e.g., severe soil erosion, damage to roadways, etc.).

 

The trial court entered summary judgment for the home builder finding that common law implied warranties do not extend to infrastructure, private roadways, drainage systems, retention ponds, or other common locations in a subdivision because these structures (or construction improvements) do not immediately support the homes.

 

On appeal, the Fifth District reversed the trial court holding that the common law implied warranties are applicable to the facts of the case. The Fifth District maintained that the common law implied warranties “have application to improvements to real property that not only support residences in a structural sense, but also apply to improvements which provide ‘essential services’ for the habitability of homes.” Maronda Homes, supra. Essential services for the habitability of homes include “roads for ingress and egress, drainage systems to divert flooding, retention ponds to correct water flow damage, and underground pipes (whether they be storm water or sanitary sewer pipes) which are necessary for living accommodations.” Id. In other words, the Fifth District held that the common law implied warranties apply to structures / construction improvements in a subdivision that immediately support the homes in the form of essential services. Id.

 

After the Fifth District’s holding, the Florida Legislature enacted Florida Statute s. 553.835 which it intended to apply retroactively (meaning the homeowners association would have no claims against the home builder in Maronda). This statute was enacted as a reaction to the Fifth District’s ruling to apply common law implied warranties to improvements that support the homes in a subdivision. This statute provided:

 

“There is no cause of action in law or equity to a purchaser of a home or to a homeowners association based upon the doctrine or theory of implied warranty of fitness and merchantability or habitability for damages to offsite improvements.”

 

Offsite improvements were defined in the statute as follows:

 

“(a) The street, road, driveway, sidewalk, drainage, utilities, or any other improvement or structure that is not located on or under the lot on which a new home is constructed, excluding such improvements that are shared by and part of the overall structure of two or more separately owned homes that are adjoined or attached whereby such improvements affect the fitness and merchantability or habitability of one or more of the adjoining structures; and

(b) The street, road, driveway, sidewalk, drainage, utilities, or any other improvement or structure that is located on or under the lot but that does not immediately and directly support the fitness and merchantability of the home itself.”

 

Based on this new statute, the Florida Supreme Court needed to determine (a) whether the statute applied retroactively and (b) if it did not apply retroactively, do the common law implied warranties apply to structures / construction improvements in a subdivision that immediately support the homes in the form of essential services.

 

The Florida Supreme Court, agreeing with the homeowners association, held that (a) the statute did not apply retroactively, and (b) the Fifth District’s ruling was correct with their “essential services” test or standard to “determine whether a defect in an improvement beyond the actual confines of a home impacts the habitability and residential use of the home.” Maronda Homes, supra.

 

However, what the Florida Supreme Court importantly touched upon was the enforceability or constitutionality of Florida Statute s. 553.835 moving forward. Under this new statute, if the homeowners in Maronda sued today, its common law implied warranty claims would be barred by virtue of this statute (since its claims were asserted after the enactment of the statute).

 

An important portion of the Florida Supreme Court’s opinion provides:

 

“Article I, section 21 of the Florida Constitution declares the right to access the courts, stating that ‘The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay. In Kluger v. White, 281 So.2d 1, 3-4 (Fla. 1973), this Court interpreted the meaning of the phrase ‘redress of any injury.’ It held that where a cause of action exists under the statutory or common law of Florida, the Florida Legislature may not abolish that action unless it provides a reasonable alternative for redress of injuries, or demonstrates an overpowering public necessity for its abrogation and no other means by which to meet that necessity.”

 

Here, Lakeview Reserve [association] contends that section 553.835 violates article 1, section 21, because it abolishes the cause of action for breach of the implied warranties and fails to provide a reasonable alternative or demonstrate an overpowering public necessity for that abrogation. Maronda Homes…allege that although section 553.835 curtails the cause of action for breach of the implied warranties, it preserves other viable remedies that may exist in tort, contract, or by statute, such as negligence, misrepresentation, and rescission.

 

Section 553.835 violates the right of access to courts because it attempts to abolish the common law cause of action for breach of the implied warranties for certain injuries to property. In section 553.835(4), the Legislature establishes its intent to abolish some implied warranties by expressly limiting a cause of action for their breach by eliminating “offsite improvements for that action’s scope, even if such improvements impact the on-site habitability of the home….The statute even provides that the purpose of the law is to place limitations on the applicability of the doctrine or theory of implied warranty of fitness and merchantability, and to reject the decision by the Fifth District Court of Appeal in the Maronda case. This is a clear violation of separation of powers because the Legislature does not sit as a supervising appellate court over our district courts of appeal.”

 

Based on this portion of the decision, a homeowners association that has potential claims for “offsite improvements” after the enactment of s. 553.835 may still have these common law implied warranty claims based on an argument that the statute violates constitutional rights. If the statute is determined to violate constitutional rights by trying to abrogate common law implied warranties, the association will still have to satisfy the “essential services” standard set forth by the Fifth District and approved by the Florida Supreme Court in Maronda.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

OWNERS: UNDERSTAND AND APPRECIATE THE STATUTE OF LIMITATIONS FOR CONSTRUCTION DEFECTS

Posted on by


Having an understanding of the statute of limitations when an owner notices a construction defect with their property is essential to ensure that legal actions are timely filed. Not having this appreciation could have a devastating impact. It could result in an owner being legally barred from pursuing an action for debiltating construction defects or damages. This should never be the case.

 

The statute of limitations for construction disputes is primarily governed by Florida Statute §95.11(3)(c). This section provides that there is a four year statute of limitations for:

 

“An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.”

 

Now, what exactly does all of this mean? To begin with, this means that the statute of limitations for construction disputes commences on the latest of: i) the owner’s possession of the property, ii) the issuance of the certificate of occupancy by the governing building department, iii) the date construction was abandoned if the project was not completed, or iv) the date the contract was terminated (which would also typically be the case if the project was not completed).

 

For a completed construction project, the dates I like to focus on are the temporary and/or permanent certificates of occupancy dates because these signify the dates the owner is entitled to occupy their property in whole or in part. These are also hard dates that can be confirmed through the building department and the closing of the building permit. The owner has four years to initiate a lawsuit from this date.

 

However, when an owner discovers a construction defect or damage to their property (i.e., water intrusion or leak, mold, cracked or spalling stucco, etc.), it is frequently a discovery that occurs many years AFTER completion and occupancy. When this occurs, the statute of limitations becomes less clear.

 

The discovery of a defect or damage after completion is referred to as latent defect because the defect or damage was not patently visible during construction (or reasonably discovered with the exercise of due diligence prior to the owner’s acceptance and occupancy of the property). In this circumstance, the statute of limitations commences on the date the latent defect was discovered. But, under the law, in no event can the cause of action be pursued more than ten years after the factors referenced above (project completion). This cap on when an action can be filed with respect to a given construction dispute is referred to as the statute of repose.

 

For example, let’s assume a project was completed on December 31, 2010. Many years later, on December 31, 2017, the owner discovers serious latent defects. This discovery starts the running of the statute of limitations. But, the owner would not have four years to sue on these latent defects because if he waited the four years until December 31, 2021, his suit would be barred by the statute of repose, which would cap suits relating to the project ten years from completion on December 31, 2020.

 

Understanding when the statute of limitations would commence and when actions would be barred under the law is important and, many times, factually complicated. Recently, the Third District Court of Appeal in Hochberg v. Thomas Carter Painting, Inc., 36 Fla. L. Weekly D1200f (3d DCA 2011), analyzed the running of the statute of limitations in a construction dispute. In this case, owners hired a contractor to build their beautiful new home. After the home was completed in 2003 and the owners moved in, they discovered mold and water intrusion damage. The owners immediately hired an engineer to analyze their discovery and the root of the defects. The expert produced a preliminary report in 2004 addressing the cause of the defects.

 

In 2008, the owners sued the subcontractors responsible for the defects for negligence and violation of Florida’s building code. Subcontractors argued that the owners filed their lawsuit outside of the statute of limitations because they discovered the defects in 2003 but waited until 2008 to file their lawsuit. The owners argued that the statute of limitations should be tolled until they discovered the exact nature of the defects or magnitude of the underlying problem and which trade subcontractors the defects could be attributed to.

 

The appellate court held that, “Florida law is clear that ‘where there is an obvious manifestation of a defect, notice will be inferred at the time of manifestation [discovery] regardless of whether the plaintiff has knowledge of the exact nature of the defect.’” Hochberg quoting Performing Arts Center Auth. v. Clark Constr. Grp., Inc., 789 So.2d 392, 394 (Fla. 4th DCA 2001). In other words, even though the owners did not understand the magnitude of the defects or what specifically was causing the water intrusion into their home, the court maintained that their initial discovery of water intrusion and related damage (i.e, mold, wet carpeting) triggered the commencement of the statute of limitations.

 

This holding is important because when an owner discovers construction defects and damage, they do not discover or appreciate the magnitude of the discovery. For instance, an owner may discover wet interior finishes, smell or discover mold, discover cracks in their exterior finishes, or a roof leak, but will not typically know the specific defects causing these problems. They also typically will not have an appreciation as to the overall significance of the problem. Owners hire expert consultants to analyze these issues to not only determine the root and significance of the problem, but the method to fix the problems. The owners in this case tried to cleverly argue that the statute of limitations for latent defects should be tolled until an owner discovers the precise nature and cause of the defects, which would often correspond with the date the owners receive an opinion from their expert consultants. However, the court focused on the actual discovery of the defects or damage by the owners, rather than when the owner learned the magnitude of the problem.

 

Owners that discover a defect or damage with their home or property should absolutely not ignore the problem. Ignoring the problem could only exacerbate the underlying problems while potentially putting the owner in a situation where he is outside of the statute of limitations or repose and can no longer pursue an action against the parties responsible for the problems. Again, this should never be the case.

 

For more information on the statute of limitations and the statute of repose, please see: https://floridaconstru.wpengine.com/watering-down-the-10-year-statute-of-repose-period-for-construction-disputes/

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

SUPPORTING CONSTRUCTION DEFECT DAMAGES WITH AN ESTIMATE

Posted on by


One of the issues in construction defect disputes is whether the owner can prove damages with an estimate, which is often the case. Recently, in Kritikos v. John T. Anderson d/b/a Anderson Builders, et al., 38 Fla. L. Weekly D931a (Fla. 4th DCA 2013), the Fourth District Court of Appeals confirmed that an estimate as to the costs to repair construction defects can support a plaintiff’s (owner) damages. In other words, the plaintiff does not actually have to incur the costs to repair in order to be entitled to recover damages to correct a construction defect.

 
In this case, the contractor recorded a construction lien. The owner asserted, as a defense, that it is entitled to set-off the amount of the lien due to construction defects and delay-related damages. (The owner in this case ended up terminating the contractor when the project was substantially over budget and behind schedule.) It was the owner’s position that the defective work was subject to a design change so the measure of damages needed to be based on an estimate of what it would cost to complete the work (i.e., repair the defects) according to the original design / contract. The owner’s argument, as supported by the Fourth District, was based on precedent discussing an owner’s measure of damages when there is a construction defect, particularly the Florida Supreme Court decision of Grossman Holding Limited v. Hourihan, 414 So.2d 1037 (Fla. 1982) and the Second District Court of Appeals’ decision of Temple Beth Shalom & Jewish Center, Inc. v. Thyne Construction Corp., 399 So.2d 525 (Fla. 2d DCA 1981).  Both the cases of Grossman and Temple Beth Shalom maintain that the measure of damages when dealing with construction defects / unfinished construction contract is the reasonable cost to complete / repair per the original design / contract provided this does not result in economic waste. Kritikos, supra.

 
The key is that whether using an estimate or actual costs to support damages from a construction defect, the measure of damages is the reasonable cost to complete per the original design / contract (versus a subsequent and better design to repair the defects) provided that the repair costs do not amount to economic waste.

 
Interestingly, this case also discussed the owner’s set-off for delay damages. It is uncertain in this case whether the owner utilized any expert to establish delay damages, which is often and properly the case, or how the owner specifically presented the delay damages (as there is no discussion that there was a liquidated damages provision in the contract). The Fourth District simply stated: “Delay damages were properly presented to the jury. By their very nature, delay damages may not be subject to exact calculation, making the owner’s opinion of the value of his loss of use of his property admissible and relevant.” Kritikos, supra. Based on this limited statement, it would seem that these damages are not referring to liquidated damages or delays to the critical path of a construction schedule, but rather an owner (without any expert testimony) testifying as to “loss of use damages,” i.e., an owner testifying that due to the circumstances of the case, he/she was damaged by being not being able to utilize his residence. But, it is uncertain what the owner did to support these damages.

 

 

For more information on loss of use damages, please see: https://floridaconstru.wpengine.com/the-difference-between-lost-profit-and-loss-of-use-damages/

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

STATUTORY IMPLIED WARRANTIES FOR CONDOMINIUM ASSOCIATIONS

Posted on by


Statutory implied warranties are a valuable tool for condominium associations (as well as purchasers of units) of newly formed condominiums.  The warranties provide the association with direct claims to assert against the developer, the general contractor, subcontractors, and even suppliers, if there is defect with the condominium.  The specifics of the implied warranties, and the timing as to when these statutory warranty claims must be brought, can be found in Florida’s Condominium Act, specifically Fla. Stat. s. 718.203.

 

Recently, in Harbor Landing Condominium Owners Association, Inc. v. Harbor Landing, L.L.C., 2012 WL 254971 (Fla. 1st DCA 2012), a condominium association initiated a lawsuit that included a breach of the statutory implied warranty claims provided for in Fla. Stat. s. 718.203.  The association sued, amongst other entities, the manufacturers of coating that was applied on the exterior railings.  The association argued that the statutory implied warranties extended to the manufacturer because the manufacturer was a supplier (and a statutory implied warranty claim extended to suppliers).  While there are certainly situations whereby a manufacturer could also be a supplier, in this case, the manufacturer of the coating did not supply the exterior railings.  Rather, a separate entity supplied the railings.  For this reason, the court said that the statutory implied warranties could not extend to the manufacturer of the coating applied to the railings (since a different entity supplied the railings). This ruling simply means that the association could bring the statutory warranty claim against the supplier of the railings, just not the manufacturer of the coating.

 

The relevance of this case is that if there are defects with a condominium, particularly a recently built condominium, it is important for the association (or unit owner) to seek legal counsel to best preserve rights in seeking recourse based on the defects.  This includes the appropriate entities to sue as well as the arguments / claims to include against the entities based on the asserted defects.

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.