Construction Defect Statutes of Limitation and Repose Update Part 1, 1220 COBJ, Vol. 49, No. 11 Pg. 26

• Author: BY RONALD M. SANDGRUND AND JOSEPH F. “TRIP” NISTICO III
• Position: Vol. 49, 11 [Page 26]

49 Colo.Law. 26

Construction Defect Statutes of Limitation and Repose Update Part 1

Vol. 49, No. 11 [Page 26]

Colorado Lawyer

December, 2020

CONSTRUCTION LAW

BY RONALD M. SANDGRUND AND JOSEPH F. “TRIP” NISTICO III

This article examines significant changes in and clarifications to the law since 2005 interpreting and applying Colorado's real property improvement statutes of limitation and repose.

This Part 1 discusses the scope and application of these statutes, events that trigger the repose and limitations periods, claims and activities not subject to these statutes, and challenges in applying these statutes to multifamily construction activities.

This article examines significant changes in and clarifications to the law since 2005 that interpret and apply CRS § 13-80-104's real property improvement statutes of limitation (RP-SOL) and repose (RP-SOR).¹ This part 1 discusses to whom the RP-SOL and RP-SOR apply; the scope of these laws; what events trigger the running of the repose and limitations periods; claims and activities not subject to these laws; and the challenges of applying these laws to multifamily construction activities.²

Real Property Improvement Statute of Limitations

The RP-SOL is located in CRS § 13-80-104, which provides in pertinent part:

(1)(a) Notwithstanding any statutory provision to the contrary, all actions against any architect, contractor, builder or builder vendor, engineer, or inspector performing or furnishing the design, planning, supervision, inspection, construction, or observation of construction of any improvement to real property shall be brought within the time provided in section 13-80-102 after the claim for relief arises, and not thereafter....

(b) (I) Except as otherwise provided in subparagraph (II) of this paragraph (b), a claim for relief arises under this section at the time the claimant or the claimant's predecessor in interest discovers or in the exercise of reasonable diligence should have discovered the physical manifestations of a defect in the improvement which ultimately causes the injury.

(c) Such actions shall include any and all actions in tort, contract, indemnity, or contribution, or other actions for the recovery of damages for:

(I) Any deficiency in the design, planning, supervision, inspection, construction, or observation of construction of any improvement to real property; or

(II) Injury to real or personal property caused by any such deficiency; or

(III) Injury to or wrongful death of a person caused by any such deficiency. (Emphasis added.)

Actions subject to CRS § 13-80-102 "must be commenced within two years after the cause of action accrues ..." The RP-SOL is an affirmative defense to be pled and proven by the party asserting it.³

Real Property Improvement Statute of Repose

The RP-SOR is also located in CRS § 13-80-104:

(1) (a) Notwithstanding any statutory provision to the contrary, all actions against any architect, contractor, builder or builder vendor, engineer, or inspector performing or furnishing the design, planning, supervision, inspection, construction, or observation of construction of any improvement to real property shall be brought within the time provided in section 13-80-102 after the claim for relief arises, and not thereafter, but in no case shall such an action be brought more than six years after the substantial completion of the improvement to the real property, except as provided in subsection (2) of this section.

(2) In case any such cause of action arises during the fifth or sixth year after substantial completion of the improvement to real property, said action shall be brought within two years after the date upon which said cause of action arises.⁴

The RP-SOR does not deprive a court of jurisdiction. Instead, defendants must plead and prove it as an affirmative defense, and they may waive the defense if not timely raised.⁵

Construction Professionals Subject to the RP-SOL and RP-SOR

The RP-SOL and RP-SOR apply broadly to most construction professionals involved in real estate development and construction. They do not apply to a non- commercial real property improvement seller or common interest community declarant unless that person also "perform[s] or furnish[es] the design, planning, supervision, inspection, construction, or observation of construction of any improvement to real property... "⁶

RP-SOL and RP-SOR Scope

The RP-SOL and RP-SOR apply only to claims arising from real property improvement construction where the improvement is essential and integral to the function of the construction project.⁷ A highly relevant feature of an improvement to real property is "permanence"—whether the property owner intends it to remain permanently even if it can be removed.⁸ An "improvement" within the meaning of the RP SOL and RP-SOR can be "a discrete component of a larger undertaking," such as one building in a multi-building condominium project.⁹ However, the RP-SOL and RP-SOR do not apply to claims against a developer or seller of unimproved lots.¹⁰

Statutory Exception for Persons in Actual Possession or Control

CRS § 13-80-104(3) creates an exception to the RP-SOL and RP-SOR where the party seeking to apply the RP-SOL or RP-SOR had actual possession or control of the defective real property improvement when the injury or damage occurred:

The limitations provided by this section shall not be asserted as a defense by any person in actual possession or control, as owner or tenant or in any other capacity, of such an improvement at the time any deficiency in such an improvement constitutes the proximate cause of the injury or damage for which it is proposed to bring an action.

Although Colorado's appellate courts have not yet construed this provision, the North Carolina Supreme Court construed a substantially similar statute¹¹ and held that the language "by its terms, plainly excludes" from the repose statute's reach "any person who is in possession or control of property at the time that person's negligent conduct proximately causes injury or damage to the claimant."¹² The Court held that the exception did not apply in that case because the damage occurred after the plaintiff had purchased the house.¹³

A later North Carolina decision similarly held that the North Carolina repose statute does not bar claims brought against a construction professional who the plaintiff alleged had "possession or control" over the subject condominium buildings and "knew or should have known of the existence of the defects upon which [the plaintiff's] claim rests."¹⁴ The North Carolina Court of Appeals found that the trial court erred by granting summary judgment in favor of the construction professional, given disputed questions of fact regarding whether the statutory exception applied. For example, it noted that the defendant "arguably" controlled the condominium association through its appointment of board members until turnover, and the defects allegedly manifested before turnover.¹⁵ The court therefore concluded that "the extent to which the 'possession or control' exception to the statute of repose defense applies to [the defendant] is a question for the jury."^[16]

A number of Colorado district courts have applied CRS § 13-80-104(3). Several courts applied this subsection to declarant-developers who controlled a common interest community and its homeowners association (HOA) during the declarant control period, precluding or tolling application of the RP-SOL and RP-SOR during that time.[^17] One district court held that the statute applied to a developer declarant who controlled an HOA before turning its control over to its unit owners, but not to a general contractor who performed the construction work.¹⁸Another district court held that § 104(3) applied to a developer, its principals, and the project's general contractor, but not to the designer or concrete subcontractor.¹⁹

Relationship between RP-SOL and Other Statutes of Limitations

The RP-SOL is written quite broadly and is intended to cast a wide net. Yet Colorado courts have, on occasion and under unique facts, found that the RP-SOL did not apply, and that a different, more specific, or later-enacted, statute of limitations controlled. For example, in Hersh Companies v. Highline Village Associates, the Colorado Supreme Court held that the specific breach of warranty statute of limitations rather than the RP-SOL applied to a breach of a "warranty to repair" defects because the claim is beyond the RP-SOL's scope.²⁰The Court also noted, "[w]hen more than one statute of limitations could apply to a particular action, the most specific statute controls over more general, catch-all statutes of limitations."²¹

In Stiff v. BilDen Homes, Inc., the Colorado Court of Appeals applied CRS § 6-1-115, rather than CRS § 13-80-104, to homeowners' Colorado Consumer Protection Act²² deceptive trade practices claims arising from alleged misrepresentations regarding various construction defects.²³ And in Frisco Motel Partnership v. H.S.M. Corp., the Colorado Court of Appeals held that the specific limitations statute applicable to breaches of fiduciary duty, rather than the RP-SOL, governed a breach of fiduciary duty claim arising from defective construction.²⁴

Property owners often argue that CRS § 13-80-101(l)(c)'s three-year statute of limitations rather than CRS § 13-80-10's two-year statute of limitations applies to misrepresentation claims (including for nondisclosure) arising from construction defects. Several Colorado district courts have embraced this view.²⁵ This argument is based, in part, on the fact that a misrepresentation claim is founded on a defendant's material misrepresentation or omission, not its participation in...