Construction Defect Statute of Repose: Post-Closing Punch-List Work ay Delay its Start
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Florida’s Fifth District Court of Appeals is shaking up the construction defect statute of repose once again.[1] A recent 5th DCA opinion implies that the 10-year construction defect statute of repose does not start to run at the closing of a purchase of a newly-constructed home if there remains punch-list work to complete after closing. In essence, the statute of repose would not start to run until the post-closing punch-list work was complete. See Busch v. Lennar Homes, LLC, 5D16-1626, 2017 WL 1372085, at *2 (Fla. 5th DCA Apr. 13, 2017). The Busch opinion opens the door for a host of problems for contractors and creates more questions than answers.
In Busch, the trial court dismissed a construction defect complaint that was filed more than 10 years after the homeowner closed on the purchase of the new home. In Florida, there is a 10-year statute of repose to sue for construction defects, which is provided in Section 95.11(3)(c), Florida Statutes. In short, the 10-year statute of repose means that an owner can’t sue for construction defects more than 10 years after the completion of the construction contract.
The trial court found that the construction contract was completed at closing; the contractor turned the completed home over to the buyer, and the buyer made payment in full. According to the trial court, the 10-year statute of repose started to run on the closing date. Since the complaint was filed more than 10 years after the closing date, the complaint had to be dismissed under the statute of repose. The 5th DCA did not agree and reversed the trial court’s ruling.
The 5th DCA relied upon the inspection and punch-list clause of the contract, which provided in relevant part: “Any remaining items that Seller has agreed to correct will be corrected by Seller at Seller’s sole cost and expense prior to closing or at Seller’s option within a reasonable time after closing.” The Court went on to reason that “ because the contract expressly contemplated that closing could occur even if work required by the contract remained incomplete, and the complaint did not allege that no work was completed after closing, the allegations of the complaint do not conclusively establish that the contract was completed upon closing. Accordingly, the trial court erred in dismissing the complaint.”
The Busch opinion implies that the statute of repose clock doesn’t start to run until the punch list is complete. The contract clause the Court relied upon addressed work that the contractor “agreed to correct.” In other words—punch-list work. That is not fair to contractors.
The Busch opinion could be used to argue the statute of repose doesn’t start to run until after the post-closing punch list is complete. In construction reality, the punch list often lingers well past the closing date. It would be wise for contractors to tightly seal off this gap by not letting punch-list work linger, and getting written confirmation from the buyer that all punch-list work is complete (and the contract performance is complete).
In a recent blog we discussed HB 377 and the upcoming changes to the statute of repose. The upcoming changes will not close the gap created by the Busch opinion. Looks like another amendment will be needed next year.
[1] Florida’s 5th District Court of Appeals sent shockwaves through the construction industry in 2015 when it rendered its opinion in Cypress Fairway Condo. v. Bergeron Constr. Co., 164 So. 3d 706 (Fla. 5th DCA 2015). In that opinion, the 5th DCA opened the door for owners to withhold final payment and drag out the 10-year statute of repose. However, the Florida Legislature appears to be fixing that leak in the statute. See House Bill 377 Clarifies Date of Completion of the Contract for Statute of Repose—a Legislative Win for Contractors.