A Section 558.004 Pre-Suit Notice of Defect Tolls Florida’s Ten-Year Statute of Repose for Filing Construction Defect Claims

By on November 7, 2018
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In prior coverage of Florida’s latest construction law developments, Gordon & Rees provided insight on Florida’s detailed update to its ten-year statute of repose for construction defect claims enacted on June 14, 2017. In the recently decided case of Gindel v. Centex Homes, No. 4D17-2149, 2018 WL 4362058, (Fla. 4th DCA, Sept. 12, 2018), a case of first impression, Florida’s Fourth District Court of Appeal held that serving a contractor with a Section 558 pre-suit notice of construction defect constitutes an “action” under Section 95.11(3)(c) and therefore tolls the statute of repose.

In Gindel, a putative class of individuals purchased townhomes (“Homeowners”) from the defendants, a homebuilder and its subcontractor (“Contractors”) alleging damages due to defective construction of the townhomes. Homeowners closed on and took physical possession of their respective properties on March 31, 2004, thereby triggering the statute of repose under Section 95.11(3)(c), Florida Statutes (the “statute of repose”). After discovering alleged construction defects, Homeowners served the Contractors with a pre-suit notice of defect on February 6, 2014, pursuant to Section 558, Florida Statutes. Contractors rejected the Homeowners’ request to cure the alleged defects. Consequently, Homeowners filed suit against Contractors on May 2, 2014 – 59 days after the statute of repose had expired.

Contractors moved for summary judgment, contending that the statute of repose barred Homeowners’ claims because the action was commenced not at the time the notice of defect was served, but when Homeowners actually filed their lawsuit. The trial court agreed with Contractors and ruled that service of the notice of defect did not commence the action under the statute of repose, filing a lawsuit did, and Homeowners lawsuit had been filed too late. The trial court entered summary judgment in Contractors’ favor. Homeowners appealed the trial court’s judgment.

The issue on appeal was “whether the pre-suit notice required by Chapter 558 qualifies as ‘an action,’ as the term is defined in the statute of repose, sections 95.011 and 95.11(3)(c).”

In answering this question, the court began its analysis with the plain language of Section 95.011 and Section 558 because each of them have their own definition of what constitutes an “action.” Section 95.011 defines an “action” as a “civil action or a proceeding”; Section 558.002(1) defines an “action” as a “civil action or arbitration proceeding.” Thus, as a textual matter, a homeowner’s service of a pre-suit notice of defect does not constitute an “action” within the express definition of either Section 95.011 or Section 558.002(1). Add to that, Section 558.004(1)(a) further makes clear that a pre-suit notice of defect is not an “action” under that Section 558 because it makes a distinction an “action” and a “written notice of claim,” and directs that the latter must be served on a contractor before the former can be filed in court. Importantly, however, as the Gindel Court noted, Section 95.011 and Section 558 are not textually intertwined such that the definition of an “action” under Section 558 must be read into Section 95.011(3)(c). Accordingly, the Court held that the term “action” in Section 95.011 and Section 558 are two separate and distinct terms that do not rely on one another.

The trial court, however, had construed the term “action” in Section 95.011 to mean only a civil action. By ruling that a pre-suit notice of defect is not an “action” under Section 95.011, the trial court effectively struck out the term “proceeding,” which is designed to encompass dispute resolution processes other than a civil action. The trial court’s construction of the statute conflicted with the canon of statutory interpretation that “a statutory provision should not be construed in such a way that it renders the statute meaningless.” Warner v. City of Boca Raton, 887 So. 2d 1023, 1033 n.9 (Fla. 2004).

Next, the Court looked to the Supreme Court’s decision in Raymond James Financial Services, Inc. v. Phillips, 126 So. 3d 186 (Fla. 2013), for guidance. In Raymond James, the Supreme Court had to decide whether an arbitration proceeding constituted an “action” under Section 95.011. The Court resorted to Black’s Law Dictionary for the definition of the word “proceeding,” which means “[a]ny procedural means for seeking redress from a tribunal or agency.” The Court further reasoned that because an arbitration involves a legal process for seeking redress from an “adjudicatory body,” arbitration meets the definition of a “proceeding” under Section 95.011. But in the context of a Section 558 pre-suit notice defect, a homeowner is not commencing an action before a tribunal, but rather, is complying with a require prerequisite to do so. Accordingly, Raymond James can be distinguished from Gindel on those grounds. The proposition that Raymond James stands best for is that the Supreme Court has recognized that a “proceeding” under Section 95.011 may be a process besides a civil action. The holdings in Raymond James and now Gindel leave open the possibility that parties who agree to engage in pre-suit mediation in a non-construction cases before the statute of limitations expires could use pre-suit mediation as a means of tolling the time period to file suit.

Last, the Court looked at the practical purposes behind the Section 558 pre-suit notice of defect requirement. A pre-suit notice of defect is designed to enable the parties to work towards curing any alleged defective construction without first filing a civil action. The only reason the Homeowners in Gindel server a pre-suit notice of defect instead of immediately filing suit is because Section 558.003 expressly prohibits from filing a civil action “without first” “serv[ing] written notice of claim on the” (Section 558.004(1)(a)) defendant. Thus, it would undermine the purpose of Section 558.003 to provide claimants incentive to circumvent the pre-suit claim procedures put in place thereby. But even with that legislative intent in the backdrop, in granting Contractors summary judgment, the trial nonetheless court ruled that Homeowners should have ignored Section 558.003 by commencing their lawsuit and seeking a stay until compliance with Section 558.003 had been effect. The Gindel Court, however, rejected the notion that the Homeowner’s should have had to resort to violating rather than “rightly complying” with Section 558 pre-suit notice of defect requirement.

Thus—and although Gindel likely laid to rest any question as to whether a Section 558 notice of defect tolls the statute of repose—the Homeowners there could have ensured the viability of their claims by filing their lawsuit and contemporaneously serving the notice of defect on the defendant, then moving to stay the action until pursuant to Section 558.003 until the applicable timeframe set forth in Section 558.004(1)(a) expires. Notably, the Court did not disavow this procedure, but held that construction defect claimants are not required to resort to this procedure to comply with the statute of repose if they timely served their notice of defect, and that claimants should not be penalized for adhering to the statutory procedure.

The court ultimately held that the trial court’s summary judgment order was erroneous because Homeowners’ timely service of a pre-suit notice of defect under Section 558 constituted an “action” under Section 95.011, and reversed and remanded the case to the trial court to reinstate the complaint.

Conclusion

Claimants wishing to bring construction defect claims now have clarity from the Gindel decision that service of a Section 558 pre-suit notice of defect, even right up against the expiration of the statute of repose, tolls the time to file suit.

Filed under Construction Defect, Contractor

Governor Scott Paves the Way for Greater Clarification as to when a Contract for the Design, Planning, or Construction of Real Property is “Completed” Under Florida’s Statute of Limitations for Construction Defect Litigation

By , and on July 21, 2017
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On June 14, 2017, Governor Rick Scott signed off on House Bill 377, which modifies § 95.11(3)(c) and brings clarification to condominium associations, developers, contractors, and design professionals by specifying the date of “completion” of a contract for the designing, planning, or construction of an improvement to real property.

Section 95.11(3)(c), Florida Statutes, requires that the following actions be brought within four years:

An action founded on the design, planning, or construction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest; except that, when the action involves a latent defect, the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence. In any event, the action must be commenced within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.

95.11(3)(c), Fla. Stat. (2016). In Cypress Fairway Condo. v. Bergeron Constr. Co., 164 So.3d 706 (Fla. 5th DCA 2015), the Florida Fifth District Court of Appeal was presented with the issue of whether, for purposes of § 95.11(3)(c), the date of “completion . . . of the contract” for the the design, planning, or construction of an improvement to real property is the date upon which construction is completed, or, if it is when the contract is completed, which, in Cypress, was the date on which final payment was made. The Court held that a contract governed by the § 95.11(3)(c) ten-year statute of repose is completed when “final payment is made under the terms of the contract.”

In so ruling the Court explained: “Completion of the contract means completion of performance by both sides of the contract, not merely performance by the contractor. Had the legislature intended the statute to run from the time the contractor completed performance, it could have simply so stated.”

The Court’s interpretation that term “completion” in § 95.11(3)(c) means the date upon which final payment is made under the contract is that, even if construction has long been completed, so long as the required final payment has not been made, the statute of repose continues to be tolled. The practical consequence of such an interpretation may stretch so as to toll § 95.11(3)(c) long after construction is completed and enlarges the window of potential liability for a contract.

Of course, parties to a contract for the design, planning, or construction of an improvement to real property are free to expressly declare in the governing documents a completion date that will utilized to determine the time period within which a plaintiff bring an action for a construction defect. Notwithstanding that clear option, the Legislature obliged the Cypress court and has taken affirmative action to correct that problem by introduction of House Bill 377, which introduces the following tag-along clause to § 95.11(3)(c): “Completion of the contract means the later of the date of final performance of all the contracted services or the date that final payment for such services becomes due without regard to the date final payment is made.” Chapter 2017-101, House Bill No. 377.

Accordingly, contrary to the conclusion reached in Cyrpess, under § 95.11(3)(c), and unless contractually stated otherwise, the date of “completion” is the date upon which construction is completed. Although House Bill 377 provides greater clarity to contractors, it remains advisable to expressly indicate in the governing documents the final date of completion so as to avoid the possibility that a dispute will arise over when that precise date is. Indeed, in Cypress, the competing dates—one of which two dates would have foreclosed the plaintiff’s claim—for “completion” were a mere three days apart, demonstrating the importance of definitively establishing such parameters.

GRSM counsels clients in the areas of construction, design, and planning for public and private projects in various capacities in Florida and across the entire Country. Please contact us with any questions you might have concerning the manner in which this legislative change could impact your business.

Filed under Construction Defect Litigation, Contracts, Real Property