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Construction Defects Law

Our law firm represents property owners, both residential homeowners and commercial business owners, who have discovered substantial deficiencies in work performed by a General Contractor they hired. There are several common issues that typically arise in litigation involving construction defects. The following is a brief summary of certain legal issues that a property owner may face when he or she discovers defects in construction.

Statute of Limitations:  In most construction defect cases, the defects are not obvious or readily apparent at the time the construction is completed. It may be months or even years before the property owner becomes aware of the defect(s). Regardless, the property owner may be forever barred from seeking redress against the General Contractor unless he or she files a cause of action against the General Contractor within six years from the later of the specific last act or omission of the defendant giving rise to the cause of action or substantial completion of the improvement.

Doctrine of “substantial performance”:   This doctrine will play a major role in the damages that a property owner is allowed to recover from the General Contractor. A General Contractor’s breach under the construction contract must be “material.” “Substantial completion” means the work has been completed in accordance with the contract and the property owner can use the property for the purpose for which it was intended. If the General Contractor failed to substantially complete the contract, the property owner is entitled to recover the cost of repairing or replacing the defects. If a contract has been “substantially completed” but there are deficiencies in the construction, the property owner is not entitled to the cost of repair or replacement; rather, the owner is entitled to receive the difference between the value of the building contracted for and the value of the building as built. If the General Contractor is determined to have substantially performed under the construction contract, a property owner may still seek redress against the General Contractor for defects that were not readily apparent to the property owner upon completion of the work.

Construction ContractProperty owners should make sure the construction contract is clear and unambiguous and describes in detail the scope of work to be performed. The property owner may want to consider defining the term “substantial completion” in the contract itself.  

Insurance Coverage:  General Contractors typically are insured under a General Liability Insurance Policy. Some General Contractors are also insured under a Builder’s Risk Insurance Policy. These types of insurance policies typically exclude coverage for damage caused as a result of the General Contractor’s breach of contract or the General Contractor’s negligence. Over the years, our courts have been asked to interpret various insurance provisions to determine whether coverage applies or not. Insurance policies have been revised over the years whereby it has been determined that these types of insurance policies exclude most typical claims brought by property owners.

Surety BondThe property owner may want to insist that the General Contractor obtain a surety bond for an amount over and above the cost of construction. A surety bond is the best mechanism to protect the property owner if defects are discovered after the General Contractor obtains an occupancy permit. However, this may be a difficult undertaking as a lot of reputable General Contractors may not be able to qualify for a surety bond.