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

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.