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Cyktor v. Aspen Manor Condominium Association

OAL Docket No. CAF 4525-98 (Department of Community Affairs 1999)

CONTRACTORS; STATUTE OF LIMITATION—The ten year statute of repose for construction defects bars an enforcement action by the Department of Community Affairs.

The Department of Community Affairs (DCA) inspected service buildings at a condominium project and determined that the exit enclosure walls (i.e., fire separation walls) did not extend to the underside of the roof deck, creating an open attic, which is a violation of the Building Code. It sought to hold the original corporate builder and some of its principals responsible for the violation. The Administrative Law Judge (ALJ) focused solely on the issue of whether the statute of repose, N.J.S. 2A:14-1.1, barred an enforcement action against the original builder. The violation in question was issued on March 14, 1997, twelve years after the last certificate of occupancy had been issued. The ten year statute of repose for contractors refers expressly to actions “in contract, in tort, or otherwise to recover damages.” It does not refer to enforcement actions. By virtue of this omission, the DCA contended that its enforcement action could be taken against the original builder. The ALJ found it necessary to analyze the statute of repose and to determine its purpose. In interpreting such a statute, the overriding goal is to determine the Legislature’s intent. The ALJ determined that the statute was adopted in response to three developments in the law which had been increasing the construction industry’s exposure to liability. The first was the advent of the discovery rule. The second was the elimination of the completed-and-accepted rule, which relieved architects and contractors from liability once their work was completed and accepted by the owner or employer. The third was the expansion of strict liability for tort to builders and sellers of new homes for personal injuries caused by defects in the homes. Courts have been fairly consistent in interpreting the statute of repose to achieve its legislative purpose. By example, in a suit against a building contractor that was commenced thirteen years after a building was completed and four years after the statute of repose was enacted, the plaintiff argued that the last sentence of the statute, “[t]his limitation shall not apply to any person in actual possession and control as owner, tenant, or otherwise,” preserved causes of action by owners. The Superior Court held inter alia that the statute only preserved actions against, not by, owners. On appeal, the owner argued that the statute did not apply because the law suit was grounded in part on breach of warranty and strict liability, not contract or tort. The Appellate Division rejected that argument, ruling that the statute of repose limited any action encompassed within it, regardless of its genesis or label. In another case, a governmental entity contracted for construction of an administration building. Fifteen years after the construction was completed, the ceramic tiles began to bulge and separate from the cinder block walls, creating a hazardous condition. When the tiles were removed, it was discovered that their installation had been defective. The governmental entity sought recovery from the builder, arguing that because the defective condition was latent and involved fraud-like deception and purposeful concealment, the statute of repose should be tolled. In that case, the Appellate Division rejected the argument, noting that virtually all latent defects in construction would probably be subject to the allegation that they were purposefully concealed. “Such an exception would quickly engulf the statute and render it worthless.” In a third case, a home buyer sued its contractor seventeen years after construction, alleging that after the foundation collapsed during the initial construction, the contractor assured it that the wall was properly repaired and would in no way undermine the structure. The Appellate Division held that this allegation of a fraudulent misrepresentation was without merit and reiterated the position that the statute of repose “prevents a pertinent cause of action from ever arising after a ten-year period.” The ALJ also noted that, in two other cases, the Appellate Division applied the common law doctrine of nullum tempus (“time does not run against the State or any of its agencies”). These decisions were held to have probably prompted the Legislature to amend the statute of repose and modify that doctrine. As a result, the amended statute of repose bars both private and governmental claims for damages, unless otherwise excepted. Even with that history as background, the DCA apparently argued that it stood to reason that if the Legislature intended to except governmental enforcement actions from the statute of repose, the exception would have been written into the amendment. The ALJ, however, looked to the Legislative history and found that the statute of repose concerning certain “civil actions for damages” was to clarify that the provisions of that particular section of law were applicable to “all actions, including those brought by State and local public agencies.” To the ALJ, if the DCA’s position was correct, the phrase, “for damages,” would have followed and qualified the words, “all actions,” so that the amendment’s purpose would have been to clarify the statute of repose’s applicability to “all actions for damages.” According to the ALJ, such a limiting qualification was clearly not the Legislature’s intent. In the Judge’s mind, the words “all actions” were unequivocal and encompassed enforcement actions, equitable actions, and actions for damages. The ALJ also pointed out that the ten-year time period of the statute of repose begins upon the “substantial completion” of the building, and therefore the period had elapsed and the original builder had the right of repose. In conclusion, the ALJ concluded that the statute of repose grants immunity against “all actions” (except those enumerated by the statute itself), including the proposed enforcement action by the DCA.


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