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Fairview Heights Condominium Association, Inc. v. R.L. Investors

A-0225-10T3 (N.J. Super. App. Div. 2011) (Unpublished)

STATUTE OF REPOSE — The ten year construction statute of repose only applies to defects that render a building “unsafe,” and therefore if a construction defect does not render the building “unsafe,” the discovery rule may apply and some suits may be initiated beyond the ten year period following completion of construction.

Builders of a condominium project retained control over the condominium association until sixty days after 75% percent of the units had been sold. That took 14 years. During that time, a management company, owned by the principals of the developer, managed the building. After the transition, the condominium association hired two other management companies who managed the property another three years, before the original management company was rehired and worked two years. At some point, some unit owners began to notice serious water seepage. The original developer’s management company claimed it knew nothing of these leaks during its first tenure as property manager. The association sued the developer and its related management company for the property damage.

A unit owner testified at her deposition that the only issues observed during the management company’s first tenure were “nothing more than wear and tear,” and that she recalled no water intrusion issues during that time. A unit renter during the same period similarly indicated that she was not aware of any water leaks or other problems. The principal of the developer who was responsible for the management of the property during the first tenure testified that no repairs were undertaken, as there was nothing wrong with the building. He testified that he became aware of leaks after his company relinquished management of the building the first time.

After filing its complaint, the association retained an expert who opined that the building was flawed in its construction and the flaw had caused the water problem. The lower court dismissed the complaint, finding that it was time-barred because of the ten year construction statute of repose, as the claims were founded upon the construction of the building. The court also concluded the association had failed to prove causation and damages and had only assumed that the management company failed to remedy the defective condition once it assumed control a second time.

The association appealed, and the Appellate Division reversed the dismissal of the complaint against the developer because the lower court had neglected to address the statute of repose requirement that the alleged construction defect must have rendered the building “unsafe,” and therefore remanded for further findings on that issue. The Court said that while the New Jersey Legislature intended that the construction statute of repose limit, to ten years from the date construction was substantially completed, the time within which a cause of action could arise against an architect or builder the legislature limited the statute so that only improvements to real property that result in unsafe and defective conditions are covered. The lower court had made no findings as to whether the water seepage or the property damage caused by the seepage in any way rendered the building, or any of the units, unsafe.

The Court affirmed the lower court’s conclusion that an expert opinion was necessary as to the questions of causation and damages that were connected to the fiduciary/negligence claims made against the management company for its actions during its second tenure. If the construction was alleged to have been defective, a question remained whether any further action by the management company could have prevented the water damage. The lower court reasonably concluded the question was not addressed by the association’s expert.

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