Colorado Real Estate Journal recently published an article written by shareholder Kate McDonald on how to navigate construction defect statutes of limitation and repose in Colorado. Read the full article here and below.
As Colorado’s construction industry continues to boom, so does the potential for lawsuits, including those involving alleged design and construction defects and deficiencies. In any construction project, it is common for disputes and claims to surface, no matter the size or location of the project, which causes developers, design professionals, contractors and subcontractors (collectively “construction professionals”) to face numerous challenges. Those same parties tend to face these defect and deficiency lawsuits years after the project is completed. Understanding the time limitations applicable to such claims is paramount to a successful project, which includes identifying and managing risk.
There are two important time limitations to understand in Colorado – the statute of limitations and the statue of repose. The statute of limitations takes effect when a claim arises, while the statute of repose bars the brining of a suit after a set period of time, regardless whether an injury has occurred or a claim has arisen. These time limitations are set forth in C.R.S. § 13-80-104. This statute governs the time periods by which all claims against construction professionals related to defects and deficiencies within the State of Colorado must be filed.
The statute provides that all actions against construction professionals performing or furnishing services related to the construction of an improvement to real property, shall be brought within two-years of when the claimant discovers or in the exercise of reasonable diligence should have discovered the physical manifestations of a defect in the improvement that ultimately causes injury, but in no case shall such an action be brought more than six years after the substantial completion of the improvement. See C.R.S. § 13-80-104(1)(a), (b)(I). It is important to note that the aforementioned subsection, has a two-year extension if physical manifestations of a defect are discovered or should have been discovered in the fifth or sixth year after substantial completion of the improvement. See id., ⁋ (2).
There are a couple of important nuances provided for within the statute. For instance, neither the statute of limitations nor the statute of repose can bar third-party claims if the claims were brought within 90 days after the third person’s claim against the claim is settled or at the time final judgment is entered on the third person’s claim against claimant, whichever comes first. See id., ⁋ (1)(b)(II); Goodman v. Heritage Builders, Inc., 390 P.3d 398 (Colo. 2017). This benefits general contractors by allowing it to assert third party claims against its subcontractors within 90 days after settling with the owner or judgment being entered, even if said claims are asserted after the expiration of the statute of limitations and statute of repose. While this means subcontractors can no longer rely on the statute of repose (i.e., six up to eight years after substantial completion) as a complete bar, this may help reduce the number of suits asserted against said subcontractors, as it removes the incentive for general contractors to file suit early on, when the alleged defects and deficiencies may not be clearly defined.
In addition, there is a statutory exception for the accrual of the limitation periods when the construction professional is in actual possession and/or control of the improvement. See id., ⁋ (3). Although no appellate court has construed this subparagraph yet, the intent of this section seems self-evident – while the General Assembly sought to limit the amount of time a construction professional may be liable for defects and deficiencies, the construction professional cannot sit on a defective improvement with the effect of shortening the amount of time a buyer has to make a claim.
Defending against alleged defect and deficiency claims can happen years after completion of a project. As such, understanding the applicable time limitations is key to ensuring that risk is properly managed, including document management and securing completed operations coverage for a sufficient time after completion. To ensure proper navigation as to the time limitations, as well as risk management, consult with an attorney for further guidance as to Colorado law.