Thursday, August 2, 2012

New Jersey Decides Statute of Repose Rules for Multi-Phase Projects

Most states have rules relating to how long you have to discover defects, and potentially sue those involved in building the project, after construction is complete. These types of laws are called "statues of repose."  The idea is that the contractor or design professional should not be liable for problems with a building for forever, and that most buildings will indicate a construction defect within 10 years of their construction.  After 10 years, the problems with a building may be more related to age or other issues beyond the design professional or contractor's control.

But how does the statute of repose work when it is a multi-phase project? New Jersey recently weighted in on the issue in the matter of State of New Jersey v. Perini Corporation. In that matter, the State filed suit against four contractors that took part in the construction of a prison in the mid-1990s. The project’s hot water system was defective and required replacement. New Jersey has a ten year statute of repose, triggered by the “performance or furnishing of such services and construction….” The boilers and most of the piping were installed as part of Phase I of the project, completed more than ten years prior to the commencement of the action. The prison was also occupied more than ten years before the suit was filed. Less than ten years had elapsed, however, from the date the last phase of the project was completed, and the certificate of substantial completion was issued for the entire project. The issue before the court was the date the repose period commenced on a multi-phase project.

The court accepted the argument that multiple phases of a construction project that are clearly identified and documented can trigger separate periods of repose, even for the general contractor and other contractors that continue to work on the entire project. While separate periods of repose can exist for each phase of a project clearly identified as such in the construction documents, the court rejected the application of separate trigger dates for components of a project, whether multi-phase or not, that are not clearly identified in the construction documents as distinguishable improvements to real property.

Because the hot water system was not identified in the contract and other construction documents as a separate “improvement” that was substantially completed before completion of all buildings to which it was connected, a separate trigger date for the statute of repose did not exist for the hot water system. Instead, the trigger date was when each of the contractors to whom the statute of repose applied substantially completed its work on the entire project. Using this date, the court concluded that the State’s complaint was timely filed.
State of New Jersey v. Perini Corporation, 39 A.3d 918 (N.J. Ct. App. March 30, 2012).

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