HOAs Must Take Timely Action on Claims for Construction Defects
Due to the nature of construction, it typically takes a significant period of time for property owners and users to become aware of problems and conditions that may be related to defects in design, materials and/or workmanship related to the original construction of the improvements in question. If the basis for an action for construction defects exists, the action must be taken within specific time periods that are prescribed by state statutes. The state statutes that fix the time periods for filing actions are commonly known as “statutes of limitations.” The intent behind such statutes is to protect contractors and other professionals in the construction industry from perpetual exposure to liability.
To establish reasonable maximum limitations on the liability of those who participate in the improvement of real property, the state statutes create different maximum periods of limitations for “latent” and “patent” construction defects. Thus, the period for commencing an action based on “patent” defects may be 4 years after the substantial completion of the work of improvement, while the period for commencing an action based on “latent” defects may be 10 years. The statutes of the state where the homeowners association’s property is located should be carefully reviewed to determine the actual limitations period in a given state.
A defect that is considered “patent” is generally defined by statutes as a defect that is apparent by reasonable inspection. Such a defect is open, evident, or obvious, and would generally be discovered by an inspection made in the exercise of ordinary care and prudence. Owners of properties with patent defects typically know, or have reasonable opportunity to discover the cause of the defect within the given limitations period. Thus, defects that are susceptible to detection by a reasonable inspection would generally be found to be patent. What is “reasonable” in terms of the inspection is typically determined by an objective standard that is applied to the facts of the case. The test becomes whether a reasonable person, rather than the particular person alleging the damages, would have discovered the condition under similar circumstances.
A defect that is considered “latent” is one that is hidden, dormant, or potential. Such a defect is not apparent by a reasonable inspection and does not become apparent in the absence of an investigation. The determination of whether a defect is patent is based on the conditions that exist at the time when the injury is suffered and not the conditions that existed at the time that the construction was completed.
Whether a defect is classified as latent or patent is a question of fact that is determined on a case by case basis. However, in a case where there is no material conflict in the facts and reasonable minds could not differ on whether or not the condition in question is obvious to a reasonable person, the question could be decided as an issue of law.
When a homeowners association becomes aware of conditions that raise questions about whether or not there is a basis for pursuing an action for construction defects, it is best to take affirmative steps to investigate the matter so that, in the event there is a need to pursue an action, it can be timely instituted. In such a case, legal counsel that is experienced in construction defect litigation within the state where the subject property is located should be consulted. Claims that are pursued after the expiration of the statute of limitations period are likely to be dismissed by a court, and the inability to pursue legitimate construction defect claims due to the passage of time can have serious financial ramifications for the homeowners association and the individual members who will ultimately have to pay for the necessary repairs.