A statute of repose defines the date by which a particular type of claim must be asserted before it becomes untimely, or “stale,” and can no longer be pursued. This provides designers and builders of construction projects some security that, after a certain date, they cannot be hauled into court to answer for their alleged breaches of contract, negligence, or breaches of warranty. What if the claim involves the construction of a condominium project? Would the statute of repose be calculated based on the completion of each condominium unit, each separate building of the complex or to the entire complex? The Minnesota Supreme Court recently provided much-needed clarity regarding the application to condominiums of the statutory repose periods for breach of warranty and other claims in Village Lofts v. Housing Partners III Lofts, LLC.
Statutory Residential Warranties and the Statute of Repose
Minnesota Statutes Ch. 327A provides certain statutory warranties with respect to the construction of new homes and the renovation or remodeling of existing homes, including condominiums. Village Lofts involved the assertion by a condominium homeowners association of claims against the developer and builder for, among other things, breaching the 10-year statutory warranty against major construction defects. The project involved the construction of two separate condominium buildings, each of which was completed and occupied on different dates.
In Minnesota, claims for breach of the statutory warranties are barred by the statute of repose if they “accrue” more than 10 years after the “warranty date.” This analysis involves answering two important questions: (1) On what date does a statutory warranty claim accrue? and (2) What is the applicable “warranty date” that starts the 10-year statute of repose running?
When Does a Warranty Claim Accrue?
The Supreme Court cited a case from 2004, Vlahos v. R&I Constr. of Bloomington, in stating that a breach of warranty claim accrues “ . . . when the homeowner discovers, or should have discovered, the builder’s refusal or inability to ensure the home is free from major construction defects.” In Village Lofts, the Court concluded that the claims for breach of warranty accrued in May, 2015, at the earliest, when the Association notified the developer and builder of the alleged problems and the developer and builder did nothing. Therefore, the Court reasoned, if the “warranty date” for the statutory warranty claims is prior to May, 2005, then the claims are barred by the 10-year statute of repose.
What is the Applicable Warranty Date?
Chapter 327A defines “warranty date” as “the earliest of: (a) the date of the initial vendee’s first occupancy of the dwelling; or (b) the date upon which the initial vendee takes legal or equitable title in the dwelling.” This definition works well with single-family homes, but it does not work well for condominiums. In Village Lofts, the Association argued (and the Court of Appeals agreed) that the warranty date is to be determined for each individual condominium unit. The developer and the builder argued that the warranty date has to be determined for each of the separate buildings based on when the first occupant (in each respective building) occupied or took title to that unit.
The Court determined that the statute was ambiguous, which enabled it to go through a detailed exercise to interpret the Legislature’s intent and allowed it to look beyond the words of the statute. The Court concluded after much discussion that “ . . . the Legislature intended that there be a single warranty date for a condominium building rather than different warranty dates for each unit.” This conclusion saves us from the absurd and impractical result of having to determine warranty dates for each individual unit and permits the calculation of the statute of repose using the first unit in a building that is occupied or to which title has transferred.
The Court also considered the statute of repose for Village Loft’s non-warranty claims. Claims for defective and unsafe improvements to real property are governed by Minn. Stat. § 541.051, Subd. 1(a), which provides a statute of repose of 10 years “ . . . after the date of substantial completion of the construction.” The issue in Village Lofts was whether the two condominium buildings, Buildings A and B, were considered one “improvement” or two. The Court concluded they were two separate improvements because, among other things, (a) each was given a separate Certificate of Occupancy on different dates, (b) each building independently meets the Court’s definition of an improvement, and (c) the Legislature intended the trigger, substantial completion, to be determined when the contractor can turn the building over to the person that hired the contractor to be used for its intended purposes. Because each building was its own improvement, the Association’s non-warranty claims were barred by the statute of repose.
Conclusions and Take-Aways
- The “Warranty Date” for the statute of repose applicable to claims of breach of statutory warranties for condominium projects is determined on a “per building” basis, and not on a “per unit” basis.
- When a condominium development involves multiple buildings, each of which is deemed its own improvement, the determination of substantial completion for purposes of the application of the statute of repose for defective and unsafe improvements to real property is determined on an improvement (building) by improvement (building) basis.