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The Sticky Statute of Limitations in NC

July 22, 2010

sticky notesIf you are not a lawyer, but you play one on TV, you may have a passing understanding of the legal concept of a statute of limitations.  This is post is to provide you just a little more information about the concept, and how it applies to your North Carolina construction project.

What is a statute of limitations, and why is it important?

The Statute of Limitations is a time-barring statute which gives you a set time within which to bring an action (i.e., lawsuit) against another party.  If you do not bring your lawsuit within that period of time, the court will kick it to the curb.  The reasoning behind the statute of limitation (often, ironically, abbreviated as “SOL” in legal circles) is that people need to have some certainty in how long they can be sued for an event that happened in the past.  Witnesses die or forget, papers are destroyed, and in general it is extremely difficult to try a case years after the fact.  The law has, therefore, established a somewhat arbitrary deadline for when you can sue or be sued, and it is vital that you do not go past that deadline if you hope to bring a lawsuit.

What is the statute of limitations on a construction project? 

The answer, as always, is:  it depends.  The statue of limitations is governed by whatever state’s law will apply to your case—usually, but not always, the state the project was built in.  The statute of limitations is also determined by what type of lawsuit you are trying to bring (or defend against). 

 In North Carolina, the statute of limitations for most construction disputes (breach of contract, professional negligence, implied warranty of plans) is generally 3 years from the date time when you knew or should have known about the issue.   N.C. Gen. Stat §1-52.1  ABL Plumbing and Heating Corp. v.  Bladen Co  Board of Education, N.C. App. 623 S.E.2d 57 (2005). See also AIA A201 para. 13.7.   As always, there are exceptions.  If a contract is “under seal”, a claim can be brought for up to 10 years. (N.C. Gen. Stat. §1-47). 

 If the contract involves merchandise and falls under the Uniform Commercial Code, the statute of limitations is 4 years. N.C. Gen. Stat §25-2-725.  However, where a defect in merchandise results in bodily injury or damage to real property, the shorter 3 year statute still applies.  Hanover Ins Co. v. Amana Refrigeration, Inc., 106 N.C. App. 79, 415 S.E.2d 99 (1992). In Hanover, a defective HVAC unit caused a fire, which destroyed a building. The court held that the shorter 3 year statute of limitations applied because the defective merchandise caused damage to the real property.

Therefore, it is best practice to assume that the Courts will find that the statute starts running at the first inkling of a problem, and bring your action accordingly. Also, regardless of the length of any warranty period, contractors can still be liable until the statute of limitations period expires.

What happens to claims after the owner accepts the project?

Once a project has been accepted by an owner, the owner waives his right to claim damages for all but latent defects. Acceptance by the owner with knowledge of a defective performance may be deemed a waiver of the defective performance.

Where, however, the defect is unknown (or “latent”), the owner’s acceptance does not waive the defective performance. Tisdale v. Elliott, 13 N.C. App. 598, 186 S.E.2d 685 (1972).   If a defect is a “latent” defect, hidden or not readily discoverable, the statute of limitations starts running from the date of discovery. Under AIA A201 para 13.7, any statute of limitations is deemed to have accrued in any and all events not later than the date of Substantial Completion.   This section may shorten the statute of limitations in some cases of latent defects.

Can the Statute of Limitations be lengthened or shortened?

Yes.  But, as they say on television, “don’t try this at home.”  Carefully drafted agreements for a shorter or longer period of time can be executed.  Consult your attorney before you do so, however.  You may also want to check with your insurance carrier to make sure you have sufficient insurance coverage for a longer warranty period.

What if the parties are working together to fix construction problems?

If the parties are working to fix problems, but the statute of limitations is fast approaching– run, don’t walk, to your attorney to discuss a tolling agreement to stop the running of the statute, or otherwise enter into legally enforceable agreements concerning the statute of limitations.  Just because the parties are all working together to solve a construction issue now doesn’t mean that the finger-pointing won’t begin once the bill is presented. 

Have a question about the statute of limitations?  

Comment below, drop me an email, or find me on twitter @melissabrumback . 

_______________________

Photo (Public Domain):  “brightly coloured sticky notes and tags” by Adrian van Leen via OpenPhoto.

[tweetmeme source=’melissabrumback’ only_single=false   http://constructionlawnc.com/2010/07/22/stickysol/ ]


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From → contracts, law notes

20 Comments
  1. Wayne Smith permalink

    I enjoyed your reading your analogy of the basic statute of limitations.
    At best the statute of limitations can be a sticky subject in most jurisdictions.
    As a Construction Defect Litigation Specialist for Commercial Insurance Policies I have noticed a trend over the last few years in that the Judges will often remand such statute of limitation arguments back to a jury as a question of fact as to whether or not a statue has tolled. The arguments to prevail on a summary judgement motion from the court have to include clear and convincing evidence as to when a party knew or should have known of the problems in which prompted the claim to begin whith.
    Can you give your opinion on the North Carolina Statute of Repose as it concerns New Construction, Renovations and Improvements to Real Property as to the discovery of latent defects?

    • Wayne:
      Thanks for reading and commenting! Yes, most judges in North Carolina are very conservative with the granting of summary judgment on SOL issues or others. I tell clients- it can be done, but it is often an uphill battle.

      Next Thursday I will have a dedicated post to the Statute of Repose, but for a sneak peak: essentially, and in general, 6 years regardless of latentness of the defect.

  2. Benton permalink

    Have you heard of a NC construction statute concerning a situation where a client has an idea that probably won’t work, so the contractor makes them sign a waiver and informs them that it may not work but if it fails the contractor is liable anyway. Possibly on the basis that the contractor should not have taken the job because in his professional knowledge he know the chances of success were to low.

    • Benton:
      Thanks for your comment. Not sure of a specific statute on this, although contractors, designers, and others who are licensed have a duty to perform in accordance with how others in their industry/area would perform. (See http://constructionlawnc.com/2010/06/24/standard-of-care/ for example). If the client wants something that violates the standard of care and/or law/Code/regulations, than the professional should inform the client. The standard can, by agreement, be changed, but law/Code/regs cannot and the professional has a duty to abide by them. If it is not a Code issue, then arguably if the client is well informed that the job will likely *not* work, then the professional likely has a valid defense. However, I would never advise the construction professional to rely on such a waiver because it is always subject to challenge.

      Call me if you have further questions.

  3. Kelly Baker permalink

    Can you tell me about the statute of limitations in NC for a home inspection company? We bought our home (built in 1897) in 2003. The inspection company was extremely thorough with one major exception. Our entire upstairs floor was not stable. We didn’t notice the problem until 2 years ago when we had a baby and tried to put his nursery upstairs. Before then we lived downstairs on a day to day basis – the only exception being holidays when we would bring down decorations. The upstairs only contained spare bedrooms. We paid nearly $7000 last year to replace the flooring (sub floor and all). Thanks for your help!

    • Kelly:

      Thanks for your comment. I’m sorry to hear of your situation– sounds like the inspector really missed a big item! The statute of limitations would be the same- 3 years from when you knew or should have known about the problem. Unfortunately, the statute of repose may be an issue for you, in that the work was done more than 6 years ago. You may still have a claim against the inspector depending on whether a court would view (1) his work as relating to the property enough to be subject to the repose statute and (2) when you reasonably should have learned of the defect. You may also have claims against whoever sold you the home. If you’d like to talk further, give me a call. [As always, I can only offer general information based on many assumptions here on the blog, and cannot give legal advice here]

  4. evan permalink

    We own a swimming pool company.We built a pool for a customer about 2.5 years ago.Since then the customer had a crack that appeared in the deck about a year after we did the job.We went back out and fixed it , the same crack reappeared a year later.I told the customer that the warranty was up that that crack was due to ground settlement which our contract limited warranty stated.I feel the crack came from large concrete columns that the customer installed after we built the pool.We have now been served a letter by these customers lawyers claiming that what we did was neglient.Do you think we can successfully fight this?

    • Evan:

      Thanks for your comment. Obviously, it is hard to state with any certainty the liklihood of success without knowing all of the details. (And even then, anything that goes to a jury is a wild card!). While your warranty may have expired, you may be looking at a negligligence claim, which would still fall within the 3 year SOL. However, if the customers’ work on the site caused the damage, and you can prove that (usually through expert investigation), then you should have a good defense to a claim. Give me a call (919-881-2214) if you want to discuss further. Good luck.

  5. Matt Blackburn permalink

    I purchased a new construction home in 2008. Had issues with water pooling around the foundation of the house. Builder was notified and installed a french drain. Problems did not go away. Several months later found a massive leak under concrete slab foundation. Builder came out and fixed leak but was negligent to the damages done to hardwood floors due to water leaking through concrete. Only when the insurance company got involved did he agree to repair floors. Had floors repaired and three weeks later had water damage reappear through the hard wood floors. Had thermal camera take images and found a signicant amount of water coming through floors. I am exhausted with this problem and really could use some advice on how to proceed. Any advice would be greatly appreciated.

    • Matt:

      Sorry to hear of your water issues. Give me a ring to discuss. 919-881-2214. Sounds like you have vialbe claims.

  6. Marlena Smith permalink

    I did a loan closing on my first homn in February 2010. I purchased a manufactured modular home where over 80% was done with the manufacturer and about 20% done on site. The home had a one-year builers warranty that expire roughly February/March 2011. Due to the loss of my fiance, I did not begin occupancy until April 11, 2011. In April 2011 I started experincing shingles sliding on the roof. I thought it was due to high winds. This caused some water leakage on the ceiling. I have experienced this twice with no high winds. I noticed a pattern where the shingles were sliding along the front-side of the home. I had never been able to get in the attic due to no stairs. I borrowed a ladder and began to research the water leaks and missing shingles. I discovered a gap between the plywood and this was the source of my leaking problem. The leaks wasnt massive, but steady. The gap was not visible or noticeably discoverable. A small piece of boarding was placed to try to conceal the gap. Am I stuck with handling this problem since the one-year warranty expired or do I have a general case possibly with the manufacturer?

  7. Marlena Smith permalink

    I apoligize, occupany began on April 11, 2010

    • Marlena:

      In part, it depends on what the Builder’s Warranty language says, specifically. However, in general you have three years (in NC) from substantial completion to bring a breach of contract claim. It is definitely worth fighting over.

  8. kishore Naik permalink

    We as new shareholders in a company based in NC in Feb 2009 only to discover that the previous President of the comapny was invovled in stealing of customer checks and depositing into a phoney bank account which he opened with a bank in NC . The stealing commenced in July 2003 but the mattter came to light in Feb 2009 when we took over the operations of the company

    Obviously the bank is liable for wronfully conversion of checks .In its defence the bank is claiming Statutory of limitation as a defence . As mentioned we only came to know of the theft in Feb 2009 . We would not have known about the fruad prior to Feb 2009

    Your advice please

    • Kishore: I am sorry to hear of your troubles. As a general rule, however, if the fraud was concealed, then the statute should not start running until after its discovery. I cannot answer more than that based on the facts you’ve given me. If you would like to make an appointment to discuss the matter further, give me a call at 919-881-2214.

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