July 19, 2016

We often hear that Florida has a ten year statute of repose for claims arising out of construction.[1]  Contractors design their risk management plans (such as they are) assuming there is an absolute ten year bar against lawsuits.  But the ten year respose period was never quite so clear, and less so since May 2015.  In Cypress Fairway Condominium Ass’n, Inc. v. Bergeron Constr. Co., 164 So. 3d 706 (Fla. 5th DCA 2015), the court reversed an orange County Circuit Court summary judgment for a subcontractor on a 2001 condominium project, leaving the subcontractor to face a $15 million damages claim.

[1] For an explanation of the difference between a statute of limitation and a statute of repose, e mail us.

The subcontractor’s repose argument made common sense.  The sub presented its last pay application on January 31, 2001.  Sec. 95.11(3)(c), the statute of repose for construction claims, says no claim may be brought more than ten years after “completion of the contract.”  The sub argued its contract was “complete” not later than its final pay app.  The circuit court agreed and granted the summary judgment, which was reversed by the court of appeal.  The court of appeal held that because a contract is a set of promises with (at least) two sides – a contractor who does work, and an owner or general contractor that pays money – the contract is not “complete” until the last performance due from either party has occurred.  Normally, that last performance is paying the money, not doing the work.

I participated in the Cypress Fairway case representing another subcontractor and was at the circuit court hearings on this issue.  Many fine lawyers made the common sense arguments to the circuit judge about why “completion of the contract” meant “completion of the job,” not “making the last payment.”  If the repose period starts to run from final payment, then the owner can keep the contractor, architect and subs on the hook for claims forever, by simply failing to pay one penny of their final payments.  Or, a bumbling contractor can deprive itself, and its subs, of the statute of repose, by failing to, say, deliver 3 full sets of as built drawings to the owner, if that is part of its promise to perform.

The circuit court judge (wisely, in my opinion) agreed that using “completion of the contract” to mean “finishing the job, finishing the project,” was more consistent with the Legislature’s purpose in passing the statute of repose – protecting contractors from stale claims.  She made a gutsy and common sense ruling finding that, in the construction business, “the contract” can have two meanings — “the bundle of rights” or “the project” — and that the Legislature had to have meant “the project”, and upheld the statute of repose defense.  The court of appeal disagreed, and held “completion of the contract” doesn’t happen until the last penny is paid, and, implicitly, the last as built drawing and warranty is delivered  — or whatever else the contract requires.

Other courts have limited the value of the statute of repose to contractors.  In Allan & Conrad, Inc. v. Univ. of Cent. Fla., 961 So. 2d 1083 (Fla. 5th DCA 2007), the 5th DCA held that, regardless of who is being sued, the ten year period does not start to run for anyone until it starts to run for the last to complete the work of the “professional engineer, registered architect, or licensed contractor and his employer, whichever date is latest.”  (e.s.)  Therefore, the site clearing subcontractor’s or engineer-surveyor’s statute of repose does not run out until ten years after the owner pays the GC.  This could be months or years after the sitework sub or surveyor finishes its work.

There is no short term prospect for a legislative fix.  So is this a problem which the parties can draft a contract to fix?  Possibly.  It’s worth a try, in an increasingly litigious environment, where some are starting to think the statute of repose is an old dog that no longer hunts.

There is a statute, Sec. 95.03 Fla. Stat., passed in 1975, which prohibits any contract clause shortening the statute of limitations for the contracting parties.  At first glance, that would seem tp preclude drafting a contract clause to address the repose problem.  However, many cases have explained that a statute of limitations is different from a statute of repose.  The 1975 law changed the Florida common law, which permitted contracts to shorten the limitation period.  There are a number of arguments that Sec. 95.03 does not, by its plain language, prohibit a contractual limitation on the statute of repose.

One approach might be for the parties to agree that, notwithstanding matters such as payment or delivery of documents or approvals, the contract for construction is deemed “complete” when the project architect signs a certificate of substantial completion, or when a certificate of occupancy is issued, or some other neutral, objective event.  This isn’t an agreement to shorten the statute of repose; it’s simply an agreement to define, by contract, what events “matter” for purposes of calculating the start date.

The starting point is analyzing who stands to benefit.  Is this an owner-occupied property? Then it’s a straight conflict of awareness and bargaining power between owner and GC.  If the GC asks, will the owner notice, or care, or ask for a concession?  If a sub asks a GC for custom language, the questions are the same.  A sub initiating a request for this change in its subcontract may trigger the GC to ask the owner for the same.

Is it a project the owner is selling or leasing?  Then the owner and construction team have a common interest in working toward a true ten year statute to protect the whole team. The clause defining “completion” would need to be placed in the unit sales contracts or leases.  This won’t happen unless the owner and construction team act with foresight to get the language into the contracts early, before the first sale or lease.

A clause defining what “completion” means will not bind anyone who doesn’t sign the contract (like a slip and fall plaintiff). It may not defeat a statutory condominium warranty claim even if the unit owner signs an agreement saying his contract is complete when he gets a certificate of occupancy.  However, for parties in a contractual chain of a project, it may give a fighting chance in the fact of arguments that the statute has never started to run because the GC failed to deliver extra AC filters and attic stock tile to the owner.

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