Paul T. Fader Article in UTCA Magazine Outlines New Jersey’s Statute of Repose


Paul T. FaderNew Jersey’s Statute of Repose (“Statute”), which was enacted in 1967, provides construction industry participants with a powerful defense to long-term liability. The Statute bars claims against an entity involved in a construction project filed more than 10 years after substantial completion of its work.  This Statute was enacted in order to curtail indefinite exposure to liability by private entities and is not limited by the date of claim accrual or the date of claim discovery.  Rather, it is triggered by the mere passage of time.

In order for a construction industry participant to gain protection under the Statute, there must exist the following conditions: (1) a deficiency in the design, planning, surveying, supervision, or construction of an improvement to real property; (2) more than 10 years must have lapsed since substantial completion of the services upon which liability is predicated; and (3) the alleged injury or damage must have arisen out of a defective and unsafe condition in an improvement to real property.

Although the Statute applies to Government claims, it is applied differently from private claims.  It does not apply to a governmental action where (1) a warranty, guaranty or other contract expressly provides for a longer effective period, (2) there was willful misconduct, gross negligence or fraudulent concealment in connection with the performance of the improvement to real property, or (3) the construction industry participant has entered into a contract to provide environmental or asbestos remediation services.

In 1999, the New Jersey Supreme Court broadly interpreted an “improvement to real property” to include an alteration, modification or addition that (1) enhances the use of the property; (2) involves an expenditure of labor or money; (3) is more than a mere repair; (4) adds value to the property; and (5) is permanent in nature. The term “improvement to real property,” incorporates structural improvements, which are required for the structure to actually function as intended.

In Daidone v. Buterick Bulkheading, 191 N.J. 577, 560 (2007), the New Jersey Supreme Court held that the Statute’s clock begins to run as of the date each potential beneficiary of the Statute completes its portion of services on the project, even if the whole of the project is not then complete. This “multiple triggers” ruling is problematic. For example, the Statute’s 10-year period may have lapsed for a general contractor’s subcontractors, but the general contractor may remain exposed, with the result that the general contractor is barred from pursuing a claim for indemnification against its subcontractors.

In light of the multiple trigger dates, it is important that all beneficiaries of the Statute endeavor document the date of substantial completion of their services. The general contractor ought to press for timely issuance of a certificate of substantial completion and, where it disagrees with such certificate, it ought to document such disagreement. Where the date of substantial completion is obscure, the Court will likely use the issue date of the certificate of occupancy.  

Needless to say, the Statute’s beneficiaries need to retain such project records as it will allow them to establish a timeline to bar long-term liability.

 

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