Put in Writing When the Clock Starts Ticking

The Oregon Revised Statutes (“ORS”) contain a number of significant time limits, known as statutes of limitations and statutes of repose, for filing construction claims on private projects.  Significantly, failing to file a lawsuit within the applicable statute of limitations or repose can result in the complete waiver of your claim. 

A statute of limitations restricts the maximum time after damage or an event that legal proceedings may be initiated, typically running from either the occurrence of the event or the discovery of the damage.  For example, ORS 12.080 provides that an action upon a written contract must be commenced within six years, and has been interpreted to apply to construction contracts running from the time of breach.  Other statutes governing damages to persons and property not arising on contract apply two-year and six-year limits to claims, and typically run from discovery of the damage. 

In contrast, a statute of repose limits the time within which a lawsuit may be filed regardless of when the injury occurred or was discovered, running instead typically from when a particular event occurred, such as the construction of a building.  ORS 12.135 identifies these periods of ultimate repose on construction claims, the most oft-cited of which provides for a ten-year statute of repose for claims after substantial completion or abandonment of construction, alteration, or repair of a residence or small commercial structure or certain large commercial structures.

As one might imagine, interpreting these time limitation rules is far from easy.  Knowing which rules to apply and when to apply them is not always clear and can be a difficult task even for the courts.  Last month’s decision in Riverview Condominium Association v. Cypress Ventures, Inc. (“Riverview”) is only the latest example of the seemingly constant evolution of Oregon law regarding construction claims.

In Riverview, the Court of Appeals considered a case involving water intrusion at the Riverview Condominium Complex in Multnomah County.  Construction of the condominiums completed with certificate of occupancy in May 2000, although a notice of completion was not filed until December 2000.  In subsequent years, the individual unit owners experienced varying but increasing stages of water intrusion from allegedly leaking windows.   In November 2008 an inspection service report for the owners concluded that the siding assembly was not performing, that water was entering wall cavities with no place to escape, and that parts of the substrate were rotting.  The report recommended extensive siding repairs and in July 2010 the Association filed suit against various involved parties. 

Up on appeal from summary judgment rulings, the Court of Appeals chiefly wrestled with the question of which statute of limitations applied to the Association’s construction defect claims – i.e., claims based on defendants’ negligence during construction.  The Association argued the claims were subject to a six-year statute of limitations set forth in ORS 12.080(3) “for interference with or injury to any interest of another in real property,” running from discovery of the injury (the “discovery rule”).  The builder countered that the claims were subject to the two-year statute of limitations in ORS 12.110(1) that provides “any injury to the person or rights of another, not arising on contract (or otherwise enumerated) shall be commenced within two years,” and alternatively if the longer statute applied, that there was no discovery rule. 

The Riverview Court of Appeals engaged in considerable discussion of precedential case decisions, including a much-debated footnote in a 2011 Supreme Court case, before concluding that construction defect claims alleging damage to real property are governed by ORS 12.080(3)’s six-year statute of limitations.  The Court further debated when such claims “accrued” for purposes of starting the time period to run, and whether a discovery rule applied.  Citing to an earlier 2014 Supreme Court decision earlier in Rice v. Rabb, the Court of Appeals confirmed that the Association’s construction defect claims that were characterized as tort actions under ORS 12.080 were in fact subject to a discovery rule.  Given conflicting testimony whether the Association knew or should have known of the harm, causation, and tortious nature of the conduct within six years prior to filing suit in July 2010, the Court reversed the lower court’s summary judgment ruling on that issue and remanded the case for further proceedings. 

In light of this evolving law governing claims periods in Oregon, the best advice is also the oldest – if you want something done right, do it yourself.  Notwithstanding the slew of aforementioned legal rules, parties to a construction contract may designate a limitation period for claims.  In 2007, the court in Reedsport Sch. Dist. No. 105 v. Gulf Ins. Co. held that a statutory limitations period in the Oregon Revised Statutes “is not exclusive, but is, instead, effectively a ‘default’ provision – that is, the statutory limitation period governs ‘[a]n action upon a contract’ unless the contracting parties have specified a different limitation period.” 

Accordingly, at the outset of any private construction project, you should consider adding your own time limits on construction claims and causes of action.  Include a provision in your contracts that defines the applicable period of limitations for claims, be it six years, ten years, or some other period.  Be sure to specify too the triggering event under which the period of limitations will start to run.   While this can be a point of negotiation for what may be “fair” in each situation, the party making the claim may want to ensure the time does not begin to run until it is fully aware of some or all of the following:  (1) the identity of the party(ies) responsible, (2) the magnitude of the damage or injury, and (3) the cause(s) of the damage or injury.  Setting your own time limits on claims in a construction contract can help manage risk and promote collaboration rather than adversity amongst the contracting parties.  Conversely, leaving claims up to the “default” statutory rules of limitation and repose all too often results in a procedural waiver of rights and other unintended consequences.  Protect your rights, and practice specifying time limits on claims at the time of contracting for construction.

"Put in Writing When the Clock Starts Ticking" was originally published on November 21, 2014 by the Daily Journal of Commerce.