In a recent published opinion, State v. Perini Corporation, et al., the New Jersey Appellate Division addressed the ten-year Statute of Repose, N.J.S.A. 2A:14-1.1, which bars claims for damages for any “…deficiency in the design, planning, surveying, supervision or construction of an improvement to real property … arising out of the defective and unsafe condition of an improvement to real property … more than 10 years after the furnishing of such services and construction.” The Statue of Repose has essentially acted as a roadblock to recovery for Plaintiffs seeking damages for faulty work that did not become evident until years after the construction took place. This issue often arises in common interest communities (i.e. town homes or condominiums) where construction defects often do not reveal themselves until many years after construction is completed. The Statue of Repose can render developers and their contractors immune from suit, leaving the unit owners and/or Association with no recourse.
The Perini opinion offers a glimmer of hope to individuals and/or entities who otherwise may have thought all was lost due to the harsh realities of the State of Repose. In Perini, the State asserted claims against four contractors who built a state prison in multiple phases. The suit was filed more than ten-years after most of the prison facilities were completed and more than ten-years after prisoners were housed in the facility.
The Court held that the State was permitted to pursue claims against three of the four contractors because their work was not “substantially completed” until actual certificates of substantial completion were issued for the phase of the project on which they were still involved. The State’s case was filed more than ten-years after most of the prison facilities were put to use, but not more than ten-years after the issuance of the certificates of substantial completion for the final phase of the project still under construction, which included the hot water system that was connected to all phases of the project.
The defective condition involved the hot water system, which the Court found was not a separate “improvement” but rather a component of the overall “improvement” being constructed. Regardless of the fact that the hot water system had been put to use in two of the phases of the project, it was connected to and ran throughout all phases. Since it was not delineated as being part of any one phase in particular, the Court found that the use of the system in the other phases and the occupancy of a majority of the buildings was irrelevant.
This case is significant because it allows for claims to be pursued against contractors whose work is not yet substantially completed on a multi-phase project, despite the fact that the project itself is mostly completed. Further, in the context of a common interest community, the case implies that the fact that owners may be residing in units during multi-phase construction has little bearing on whether “substantial completion” of a component of the project has occurred. Although the Court did not completely overhaul the Statute of Repose through this opinion, the refinement of this issue provides ammunition for attorneys representing common interest associations, seeking the broadest recovery sources.