Florida Statute of Repose – When Does the Clock Begin?Print this article
By Bo Sutton, Florida Board Certified Construction Attorney and Partner with Railey Harding + Allen | PA
You are most likely familiar with the term “Statute of Limitations” and may even know it is four years long. There is more to it than that. In Florida we have a “Statute of Limitations” and a “Statute of Repose”. These two different but similar concepts provide deadlines by which a construction-based lawsuit must be filed.
The Statute of Limitations imposes a four year deadline to file a lawsuit, and is found in §95.11(3)(c), Fla. Stat. The Statute of Limitations usually involves “patent” claims related to design, planning, or construction of an improvement to real property. The term “patent” generally means easily recognizable, obvious or should have been discovered with the exercise of due diligence.
The four year deadline to file suit begins to run on the last of the following four triggers to occur:
1. Actual possession by the owner.
2. The date of the issuance of a certificate of occupancy
3. The date of abandonment of construction, if not completed
4. The date of completion or termination of the contract between the engineer(s), architect, and/or prime contractor.
The Statute of Repose is a ten year window in which to file a lawsuit, and is also found in §95.11(3)(c), Fla. Stat. The Statute of Repose usually involves “latent” (or hidden) claims related to design, planning, or construction of an improvement to real property.
The term “latent” generally means not yet developed or manifest; hidden; or concealed from discovery. The ten year deadline also begins to run on the last of same four triggers to occur as the Statute of Limitations.
Different than the Statute of Limitations, the Statute of Repose is often referred to as the “death knell” of claims. It quite literally cuts off someone’s right to file a construction-related lawsuit, no matter what, even if the claim has not accrued yet, i.e. been discovered. Whereas, the Statute of Limitations requires a claim be asserted within four years of its discovery. Should the Statute of Repose expire before the Statute of Limitations, the Statute of Repose trumps, and the lawsuit is forever barred.
You may ask, “what if one of the triggers never occurs or is late to occur?” This is where these two relatively straight forward concepts get tricky.
There are four dates that trigger when the Statute of Limitations and Statute of Repose begin to run, which starts to tick away at the time you can be sued for a construction-related work.
1. Possession by Owner
Actual possession by the owner seems simple to determine, but Florida law appears to require possession of the total project; not possession on a building by building basis. For example, on a five building project, the Limitations and/or Repose period does not begin until the fifth building is possessed by the owner.
Not so clear is how possession interplays with a phased project. If phasing is clear cut and finite (perhaps separate contracts for later phases), there is a better chance a court will not require the entire phased project be complete and turned over to the owner. As you can imagine, a phased project can go on for years, even decades. This means the Statute of Limitations and Statute of Repose may be late in getting started, which would allow for an extended timeframe for exposure to a lawsuit.
2. Certificate of Occupancy
Like possession, issuance of a certificate of occupancy seems straight forward, but courts have interpreted this to mean the last certificate of occupancy for the project. The same phasing issue poses a problem on when the Statute of Limitations and Statute of Repose begin.
Abandonment is usually determined by actions of the owner/developer. While precise determination of the abandonment date may sound difficult, there are ways it can be “ball parked”. For instance, construction funding ran out, last payments received, or a notice saying the project is no longer going forward. Most contracts will have a termination for cause or convenience clause that should require notice that the project is being abandoned.
4. Completion or Termination of the Contracts
First, what contracts fall within this category? Per the statute, these include the engineer(s), architect, and prime contractor. As a side note, these entities must be properly licensed, or else their contracts are deemed void and do not factor into the analysis.
Second, what constitutes completion and termination?
A contract is complete upon receipt of final payment. That was the easy part. What if final payment is withheld? What if final payment is for less than what was owed? Can the contract be considered complete for purposes of triggering the Statute of Limitations or Repose? The answer is maybe not. What if additional, non-warranty, work is performed much later under one of the contracts, although construction has long since been thought of as complete? At least one Florida District Court of Appeal has found the completion, and hence the trigger date would not occur until the subsequent work was complete. Warranty and punch list work does not extend the contract completion date for purposes of the Statute of Limitations and Repose.
Normally, these contracts will contain provisions that require written notice be provided in order to be terminated. The latest termination notice would constitute the trigger date.
Condos are Different
The prior discussion pertains to construction in general; however, when it comes to Condominiums, the analysis is slightly different.
If determining the latest of the four trigger dates above seemed difficult, there is an added wrinkle if the project is a condominium. Neither the Statute of Limitations nor the Statute of Repose can begin to run until control of the condominium board is transferred from the developer to the unit owners. For example, the condominium statute (§718.301) requires turning over control of the board to the unit owners when a certain percentage of units are sold, among other things. If it took 5 years to reach the percentage, there is essentially a 15 year window in which the original design and construction team can be sued.
Condo conversions have an even longer delay in beginning the Statute of Limitations and Repose periods. During the time a project is not a condominium, an apartment complex for example, the standard analysis of the four triggers governs, but here comes the ludicrous effect of the conversion process, once converted to a condominium, the Statute of Limitations and Statute of Repose begin anew when control of the condominium board is transferred from the conversion developer to the unit owners. Despite this possibly leading to an absurdly long window of exposure, it is the legislatively-created world we live in.
Proposed Legislative Changes Affecting Architects and Engineers
In early 2015, Representative Jay Fant introduced House Bill 501: a bill aimed at reducing the current statute of repose for construction-related claims in Florida from 10 years to 7 years. Unfortunately, the bill died in the Judiciary Committee in late April 2015. The next time such a bill is introduced, the design professional community should voice its support by contacting local representatives.
Architects and Engineers oftentimes provide services well in advance of construction. Sometimes a project, and its design, is shelved, and then brought back out much later. Because the events triggering the repose period are construction-related, rather than design, Architects and Engineers may find themselves in limbo before the repose clock begins to tick. For example, an architect may have designed a project in 2008. Due to the market, the developer tabled the project. The project is later revived with construction set to begin in 2015. The statute of repose will not begin to run until construction is complete, perhaps in 2017 and will not expire until 2027. In this example, the architect and its consultants would have 19 years of legal exposure, because Architects and Engineers can be sued for defective plans long before repose period ever begins.
Architects and Engineers have Claims-Made insurance policies, whereas contractors have Occurrence insurance policies. Claims-Made insurance policies only cover claims made during the year the policy is in effect. In order to avoid liability, of both the firm and individually, for prior projects, Architects and Engineers must obtain professional liability insurance for 10 years following the project worked on. Any reduction in the repose period lessens the need to continue obtaining insurance policies, even if the Architect and Engineer are no longer practicing.
In the last decade, Florida has experienced a surge of design and construction-related claims on older projects. While some will disagree, there is a common thread to these lawsuits: maintenance. More specifically, lack of maintenance or improper maintenance. These lawsuits are often filed near the end of the repose period. For example, a building begins to leak in year 8 or 9 of the repose period. However, had the building been properly maintained, there would be no need for a lawsuit (in most instances), especially one over the design. To those not yet familiar, the process begins with a statutory 558 Notice and Opportunity to Cure letter from the claimant.
Pending House Bill 87 is currently seeking to add beneficial requirements to the procedure. Once filed, a maintenance-related lawsuit, implicates both the design and construction team, and take years and millions of dollars to defend against. If the repose period were 7 years rather than 10 (had Bill 501 passed), maintenance-related lawsuits would be weeded out. In other words, reducing the statute of repose would not eliminate legitimate claims. That is because true design and construction issues tend to manifest themselves short of 7 years.
Perhaps most telling, a 7 year statute of repose in Florida would not be out of line with the southeast region of the country: Alabama – 7; Georgia – 8; South Carolina – 8; North Carolina – 8; and Tennessee – 4.
When given the opportunity again, reducing the statute of repose would go a long way to eliminate Architects, Engineers and their firms from extended exposure to non-design-related lawsuits, and to reduce the number of years extended insurance is required to ensure protection from personal liability.
To voice your support, your local representative’s contact information can be found at: http://www.myfloridahouse.gov/sections/representatives/myrepresentative.aspx
To read more about attributes of the above amendments, please go to: