March 5, 2020
By Hugh D. Brown
Hugh Brown is a member of the firm’s Construction Law Department. He can be reached at 612.359.7663 or firstname.lastname@example.org.
In May 2019, this firm published an update discussing the Minnesota Court of Appeals’ opinion in Village Lofts at Ste. Anthony Falls Association v. Housing Partners III-Lofts LLC et al. that contained two important decisions about how Minnesota’s statutory repose period applied to multi-building, multi-unit condominium construction projects. Most significantly, the Court of Appeals held that each unit in a condominium building triggered its own warranty date under the home warranty statute. Our update pointed out that this decision made it much more difficult to determine the date by which construction defects were to be brought. The construction industry shared this concern, and the Minnesota Supreme Court decided to review the case. It issued a decision on January 15, 2020 reversing the Court of Appeals and establishing a single warranty date for each new condominium building.
The Village Lofts case involved two multi-unit condo buildings in northeast Minneapolis. The first, Building A, received partial certificates of occupancy covering common areas and one condo unit in September 2002. It received certificates of occupancy for other units later in 2002, more in 2003, and another in July 2006. Building B received a single certificate of occupancy in October 2004. Problems arose almost precisely ten years later when a resident saw evidence of water intrusion in her unit on January 30, 2014. The homeowners’ association investigated both buildings and found problems with water pipes associated with the HVAC system in each unit. It sued the developer, the general contractor, the architect, and three subcontractors on August 5, 2015, for the common law claims of breach of contract and negligence, and claims for breach of statutory warranties under Minnesota Statutes Chapter 327A. The contractor moved for summary judgment, and the district court dismissed the association’s claims because the claims were barred by the 10-year statute of repose of Minnesota Statutes Section 541.051.
The Court of Appeals reviewed the case and made two significant holdings for purposes of Minnesota’s statute of repose. First, it addressed whether two buildings in the single development constituted two independent improvements to real property, and held that the two buildings were, in fact, two separate improvements to real property, and, for that reason, the 10 year statute of repose on each building would expire at a different time. Second, it addressed the meaning of the term “warranty date” on which the time limits of Minnesota’s home warranty statute would begin to run for multi-unit buildings, and held that each condo unit had a different “warranty date.”
The Supreme Court Decision
In its decision, the Supreme Court first addressed the meaning of the term “warranty date” on which the time limits of Minnesota’s home warranty statute would begin to run for multi-unit buildings. The Court of Appeals had held that each condo unit had a different “warranty date,” and, therefore, the warranty would begin to run for each unit on the date each unit was occupied or title was transferred. The Supreme Court reversed this decision. It held that a primary goal of the warranty statute was to establish predictable and meaningful time limits on contractor liability, and that this goal was better served by establishing a single warranty date for the entire condominium building, rather than different warranty dates for each unit. Hence, the Court decided, the warranty date would henceforth be the date that the first buyer occupies or takes legal or equitable title to any unit in the building in question.
Takeaway: In our May 2017 update, we pointed out that the Court of Appeals’ ruling allowed the warranty statute of repose to extend well beyond ten years after the date of substantial completion of the building. The Supreme Court’s decision reverses this anomaly by holding that a condominium building has a single warranty date, which applies to all units within that building. That holding gives certainty and predictability to contractors by establishing a single, easily-determined date on which all defect claims must be brought.
Second, the court reviewed the Court of Appeals’ holding that the two buildings in the single development constituted two independent improvements to real property on which the 10-year statute of repose would expire at a different times. Our May 2019 update noted that this analysis was surprising as there are many cases finding that separate buildings constructed at different times are still part of one overall improvement in the context of determining the last date of work for purposes of filing mechanics liens. However, the Supreme Court agreed with the Court of Appeals, and held that two buildings constructed as part of a common development are separate improvements for purposes of the statute of repose.
Takeaway: The Court of Appeals’ holding that two buildings in the single development constituted two independent improvements to real property has been affirmed and, unless it is changed by legislation, is the law in Minnesota for the foreseeable future. In evaluating ongoing risk, therefore, contractors can confidently measure their risk on the basis of each individual building in a multi-building development, which will shorten their time at risk for defects on buildings completed before the development is completed. For owners and their counsel, however, this decision requires caution. Owners should make sure that they look carefully at each building in a development (rather than the development as a whole) to make sure that any defect claims are brought in the time that the law allows.
This article is a general discussion only and does not constitute legal advice or representation.
On Friday, March 13, 2020, Jesse Orman and Dean Thomson will be giving a presentation to the Minnesota State Bar Association Section on Construction Law entitled “Inside the Black Box – Survey Results Revealing the Preferences and Practices of Construction Arbitrators”.
The program starts at noon at the MSBA offices in City Center, Minneapolis, and visitors are welcome. The presenters conducted a survey of construction arbitrators across the nation and received approximately 230 replies. The survey responses reveal the practices of construction arbitrators in allowing discovery and dispositive motions and conducting hearings. The respondents also described what they thought were persuasive and unpersuasive advocacy techniques. For more information, please visit the MSBA website here.
Fabyanske, Westra, Hart & Thomson, P.A. welcomes its newest shareholder, Robert Smith. Robert, a graduate of Concordia College (Moorhead, MN) and the University of Minnesota Law School, has over 20 years of experience as an attorney, almost all of which has been exclusively devoted to construction law. He comes to the firm after spending the past seven years at PCL Construction Enterprises, where he oversaw all legal matters involving PCL’s commercial buildings operations in the U.S. Robert is a former chair of the MSBA Construction Section, was previously a shareholder at Leonard, Street and Deinard, P.A., and also served as Associate General Counsel at Life Time Fitness.
Fabyanske, Westra, Hart & Thomson, P.A. is pleased to announce the election of its new President and Executive Committee. The following six attorneys now comprise the Fabyanske Executive Committee: Rory Duggan (President), Matthew Collins, Richard Jensen, Mark Becker, Thomas Tucci, and Jeffrey Jones.
This discussion is generalized in nature and should not be considered a substitute for professional advice. © 2020 FWH&T