Minnesota Court of Appeals provides guidance on Minnesota’s Construction Defect Statute of Limitations and MCIOA Six Year Repose Period

Minnesota’s Court of Appeals provides guidance on the interpretation of Minnesota’s Statute of Limitations for construction defect cases and on the Minnesota Common Interest Ownership Act’s (“MCIOA”) six-year statute of repose in the unpublished case Town Center Office Plaza Assoc. Inc. v. Carlson Real Estate Ventures, LLC et al., (Minn. Ct. App. April 17, 2017).  The appellate court made the following decisions germane to construction defect litigation:

  1. Affirmed the district court’s order dismissing the plaintiff’s negligence and breach of contract claims as they were barred by Minnesota’s two-year statute of limitations for actions that arise out of a defective condition to real property improvements as against any person that furnishes the design or materials or performs the supervision or construction of improvements to real property.
  2. Affirmed the district court’s dismissal of the association’s Minnesota Common Interest Ownership Act (“MCIOA”) breach of warranty claims because the claims were time barred by the six-year statute of repose found in Minn. Stat. § 515B.4-115(c).
  3. Reversed the district court’s dismissal of the association’s breach of express-warranty claims against the developer for failure to analyze the claim under the correct statutory subdivision in order to ascertain the date those causes of action accrued.

Background

On June 8, 2004, developer Defendant Carlson Real Estate Company, Inc. contracted with general contractor Defendant The Bainey Group, Inc. to construct building shells for six commercial buildings, each building was designed to house six units (“Project”).  Carlson also created the Town Center Office Plaza Association in 2004 and began to sell the Project’s separate units.

The Project’s unit owners began complaining of water intruding into their units in 2006.  Carlson retained AMBE, Ltd. to inspect the Project.  AMBE conducted water testing in late 2006 and reported that water was intruding into the units due in part to missing caulk in certain areas of the exterior insulation finishing system (EIFS). Bainey made repairs to the Project at AMBE’s and Carlson’s suggestion in May 2007, but the units continued to experience leaks.

The Association retained the engineering firm Encompass, Inc. in 2014 to investigate the cause of the continuing water leaks and Encompass issued a report that identified construction problems that included defects that had been first identified in 2006. The Association filed a Complaint against Carlson and Bainey on January 5, 2015.  The district court dismissed the Association’s claims against Carlson and Bainey on summary judgment and the Association appealed.

  1.         Plaintiff’s negligence and breach of contract claims were time barred by Minn. Stat. Minn. Stat. § 541.051, subd. 1(a)

The appellate court held that the Association first had notice of an actionable injury in 2006 when its units reported water leaks and AMBE investigated the intrusion events and notified it of the defects causing the water intrusion.  The court held that the Association could not rely on representations the water intrusion defects were fixed because at least one unit located in the building reported a leak every year between 2006 and 2014 and 20 of the 36 units that comprised the Association reported leaks between 2006 and 2014.

  1. MCIOA’s six-year statute of repose began to run on the date the last unit closed in 2006

The appellate court held that the evidence the developer introduced that showed that the last unit closed on November 28, 2006 irrefutably provided the last date to bring a claim under MNCIOA was November 28, 2012; thus the Association’s MCIOA claims were time barred.

  1. The Association’s breach of express-warranty claims against Carlson were not time barred

The appellate court held that the district court incorrectly held the breach of express warranty claims against Carlson were time barred pursuant to Minn. Stat. § 541.051, subd. 1(a).  Instead, the district court should have analyzed the claims pursuant to Minn. Stat. § 541.051, subd. 4.  As such, the court of appeals held there was a factual dispute that precluded summary judgment on the breach of the express-warranty claims and remanded the case to district court for trial on the issue of when 33 of the 36 units that comprised the Association had notice of Carlson’s breach of express warranty.

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