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UPDATE: Supreme Judicial Court Holds That Each Building in Phased-Development Projects Constitutes Distinct “Improvement” for Purposes of Statute of Repose

UPDATE: Supreme Judicial Court Holds That Each Building in Phased-Development Projects Constitutes Distinct “Improvement” for Purposes of Statute of Repose by Christopher K. Sweeney

Imagine the following. A developer consults with an architect in 2020 about a six-building condominium project. The architect promptly produces a set of plans, which are stamped by an engineer. Over the next three years, the developer secures the necessary permitting from a notoriously stingy local planning board. The developer finally breaks ground in 2024. He completes buildings 1-3 in 2026. Then a recession hits and the developer suspends construction for three years. When the market recovers, the developer resumes construction and completes buildings 4-6 in 2031. Four years later, in 2035, the owner of building 2 – the son of an oil baron – sues the developer, the architect, and the engineer alleging that a defective flooring tile caused his Pomeranian to slip and break a nail. May the owner recover for Fido’s mishap? Or are his claims barred by the six-year Statute of Repose?1 It depends on whether the Statute began to run when building 2 was completed in 2026, or alternatively, when the entire project was completed in 2031.

We first reported on the D’Allessandro v. Lennar Hingham Holdings, LLC matter last February. There, the trustees of a condominium trust sued the condo’s developer seeking damages for design and construction defects in the condo’s common areas. The developer moved for partial summary judgment, arguing that the Statute of Repose barred the trustees’ claims as to condo buildings that were substantially completed more than six years earlier. The trustees countered that where a single developer completes a multi-building project in phases, the Statute of Repose is triggered only when the project is finished, not separately on the completion of each building. Recognizing a lack of relevant authority, the federal district court sought guidance from the Supreme Judicial Court on the following question:

Where the factual record supports the conclusion that a builder or developer was engaged in the continuous construction of a single condominium development comprising multiple buildings or phases, when does the six-year period for an action of tort relating to the construction of the condominium’s common or limited common elements start running?

Answering the question, the SJC concluded that in phased development projects like the one at issue, the Statute of Repose is triggered each time an individual building opens for use or is deemed substantially complete. That is, for purposes of the Statute of Repose, each building must be considered as a standalone unit. Potential plaintiffs must bring all design and construction defect claims within six of years of that particular building being completed, regardless of whether construction remains ongoing on other buildings.

The Court’s ruling is a win for developers and construction professionals. In our hypothetical, the developer, architect, and engineer can breathe easy knowing that the owner cannot recover on design or construction-related tort claims more than six years after the owner’s building was completed. In many ways, this result makes good sense. Why should an architect answer for a design he created 15 years ago? By now, he may be retired. The original plans may be lost. He may hardly remember working on the project. Further, our petulant unit owner, or his predecessor, had six years to assess the property for defects. The unit owner should not be granted extra time simply because his building happens to have been constructed early in a phased development project.

On the other hand, it is not difficult to imagine the SJC’s ruling having harsh consequences for even the most diligent condo owners. In many phased development projects, the developer retains ownership and control of early-phase buildings while construction continues – sometimes for years – on later-phase buildings. Under those circumstances, subsequent purchasers may have little or no time to recognize defects, particularly latent ones, before the Statute of Repose bars their claims.

Regardless, the Court properly interpreted the plain language of the Statute to achieve its intended effect. To the extent that public policy favors an exception to the Statute of Repose for original owners who take possession only after the Statute has run, it is legislature’s prerogative, not the courts’, to make such a rule.

1The Massachusetts Statute of Repose bars tort claims arising out of the design or construction of improvements to real estate unless the claim is asserted within 6 years of the earlier of the opening of the improvement to use or substantial completion.

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