It’s About Time! Tolling the Statute of Limitations on Damage Claims for Construction Defects

It’s About Time! Tolling the Statute of Limitations on Damage Claims for Construction Defects

On January 11, 2022, New Jersey Governor Phil Murphy signed into law a statute that amends the Statute of Limitations (SOL) for the filing of a lawsuit against a developer. While it was commonly believed that an owner-controlled board had at least six years from the date owners had a majority of the seats on an association board of trustees, the New Jersey Supreme Court turned that understanding upside down in the 2017 case of The Palisades at Fort Lee Condo Ass’n, Inc. v. 100 Old Palisade, LLC, 230 N.J. 427 (2017). In that case, the court held that the six-year SOL period started to run when the developer-controlled board learned of a defect in the association’s common elements. Application of that ruling meant that, in some instances, by the time the owners took control of the board, the SOL could have already run, precluding the ability to file suit against the developer. Further, since the developer-appointees to the board would be unlikely to ever tell the owner members of the board when they learned of a defective condition, the owner-controlled board would not know when the six-year SOL had started to run.

Soon after the Palisades decision, David Ramsey brought the case to the attention of the CAI Legislative Action Committee and urged it to seek an amendment to the SOL law to toll the running of the SOL until the owners gained control of the board. The LAC has worked over three years to bring this amendment about.

The New Jersey legislature understood the plight of associations under developer control and overwhelmingly passed the bill late in 2021. With the legislative session ending on January 11, 2022, the process would have had to start anew, if Governor Murphy had not signed it. Fortunately, he did, despite fierce opposition to the law by the insurance and trades interest groups, making it the law of New Jersey.

This law also applies to claims associations filed prior to its passing, as long as such claims have not been subject to final judgment (meaning that there are no trial or appellate court proceedings pending). Only when a community association’s board is controlled by its owners does the period of time the association has to file a claim against a developer start to run.

It is important to note, however, that NJ’s 10-year Statute of Repose remains in effect. That law provides that no one may sue a developer, subcontractor, or design professional more than 10 years after “substantial completion” of an improvement. Hence, in a matter where the owners took control of the board seven years after substantial completion of at least some of the components of a community association project, the board would have only three years to file a claim concerning those components, not the full six years provided by the SOL.

If you have any questions about the Statutes of Limitations, the Statute of Repose or any other community association matter, please feel free to contact any of the attorneys in Becker’s New Jersey Community Association Practice Group.