From the Desk of Smith Freed Eberhard: In this case, the Washington Court of Appeals narrowed the scope of the six-year statute of repose that applies to construction defect claims.
Claims Pointer: In order for the statute of repose to be triggered, a construction project does not have to be completely finished, it just needs to be “substantially completed.” What constitutes “substantial completion” of a project is now based on when the project started to be used for its intended use.
Ledcor Industries, Inc. and Admiral Way, LLC v. SQI, Inc., et al., in the Court of Appeals of the State of Washington, Division I, No. 65833-6-I (July 2, 2012) (unpublished).
Ledcor Industries, Inc. (“Ledcor”), a general contractor, entered into a construction contract with Admiral Way, LLC (“Admiral”), an owner developer, to develop a mixed-use property. Ledcor hired several subcontractors to work on the project. The parties’ contract stated that the project’s lead architect, Carl Pirscher, would issue a certificate of substantial completion once he believed that the project was substantially complete. In April 2003, Admiral began moving new owners into condominiums located on the property. At that time, Pirscher refused to certify the property as “substantially complete,” believing that more work was needed. Pirscher was subsequently fired from the project. In February 2004, Ledcor and Admiral made an addendum to their contract, contractually agreeing that the project was substantially complete. None of the subcontractors were party to that agreement.
The project was eventually investigated and found to be improperly built. The condo owners’ association sued Admiral for defective construction. Admiral sued Ledcor, who then sued the subcontractors, claiming that it was the subcontractors, not Ledcor, who completed the faulty work. One of the subcontractors, Bordak Brothers, Inc. (“Bordak”), moved for summary judgment on the ground that Ledcor’s claims were barred by Washington’s six-year statute of repose, which requires that a plaintiff bring a construction claim within six years of either (1) “substantial completion” of construction or “termination of services,” whichever is later. RCW 4.16.310. Bordak claimed that the project was “substantially complete” by April 2003, when owners began moving into the condos.
The trial court agreed with Bordak and dismissed Ledcor’s complaint against the subcontractors. The Court of Appeals agreed, noting that the fact that the City of Seattle issued a certificate of occupancy for the project in March 2003, as well as the occupation of the units by April 2003, marked “substantial completion.” The Court noted that “the condominium units were actually being used and occupied for their intended use [in April 2003]. This was more than six years before July 28, 2009 [the date on which the condo owners’ association settled its case with Ledcor, triggering the accrual of the causes of action by Ledcor against the subcontractors].”
Finally, the Court rejected Ledcor’s argument that the statute of repose had been extended under the “termination of services” prong of RCW 4.16.310. Ledcor tried to argue that one of the subcontractors, SQI, had conducted roofing work on the project in May 2005, and that work extended the six-year limit. The Court disagreed, noting that there was no connection between SQI’s earlier work on the project, and the May 2005 work, which was to bring the existing roof into warranty compliance.
Because Ledcor failed to adequately dispute either the date of “substantial completion” or “termination of services,” Ledcor’s claims against the subcontractors were barred.
NOTE: This opinion has not been published. It is provided to demonstrate how the court approaches the issues involved in the case. It cannot be cited as authority to a court of law.
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