Homeowners associations and condominiums frequently hire contractors to perform work within their communities. Although some work is obviously poor, it is not always apparent that a contractor’s work was defective. Where defective work is not discovered until some time later, most boards of directors want to know whether the time has passed for the association to bring suit against the contractor.
When we talk about time limitations to bring suit, there are two types of statutes involved. The first is called the statute of limitations—this is the one most people are familiar with.
Generally speaking, the statute of limitations is the time within which suit must be commenced. If the statute of limitations passes and no suit was filed, then a party may be unable to bring suit successfully. For construction-related claims, the statute of limitations in both North Carolina and South Carolina is going to be three years. That applies for things like construction defects, breach of contract, and breach of warranty. The start date for a claim only begins when the association knows or should have known about the breach or defect. So, it is possible that a community that has work done in 2019 could still bring a claim in 2023 if the defect was not discovered until some time after the work was done.
The second type of statute that is relevant is called a statute of repose. This statutory period is designed to cut off all claims if they are not brought within a certain period of time, regardless of whether they are discovered or not (the idea being that at some point the contractor or builder should not be liable any longer).
In North Carolina, the statue of repose is six years, with the period usually beginning to run upon “substantial completion” of the work. To avoid having its case dismissed, a homeowners association would have to bring its claims sooner than the end of the sixth year after substantial completion, regardless of the three-year statute of limitations. In other words, the statute of repose may cut off the statute of limitation.
In South Carolina, there is an eight-year statute of repose. But, it is important to remember that South Carolina has other laws at play that don’t allow the statute of repose as a defense where a contractor is guilty of fraud, gross negligence, or recklessness. Because of this additional requirement, closing the window for bringing suit may be more difficult in South Carolina in some cases. Defendants in South Carolina still have all available defenses at their disposal, in addition to the statute of limitations.
If your association has questions about whether a statute of limitations or repose may stop them from filing suit, contact an experienced community association attorney in one of our offices.