New Jersey Supreme Court Clarifies That the Tolling For the Statute of Repose Begins When the Designer or Contractor Has Completed His or Her Portion of the Work

The Statute of Repose, N.J.S.A. 2A:14-1.1, was enacted after the advent of the "discovery" rule and the demise of the "completed and accepted rule" appreciably enlarged the potential liability of architects, building contractors, and others who contribute to improvements of real estate. Welch v. Engineers. Inc., 495 A.2d 160, 162 (App. Div. 1985) citing Rosenberg v. Town of North Bergen, 61 N.J. 190, 199 (1972). The Supreme Court of New Jersey has stated that:

The purpose of the statute of repose was to limit the expanding liability of contractors, builders, planners, and designers, see [Beth Israel Hosp. v. Gruzen, 124 N.J. 357] at 362, 590 A.2d 1171 (stating, "We have concluded that the Legislature enacted the statute in response to the expanding application of the 'discovery rule' . . . , the abandonment of the 'completed and accepted rule' . . ., and the expansion of strict liability in tort for personal injuries caused by defects in new homes to builder/sellers of those homes"); see also E.A. Williams, Inc. v. Russo Dev. Corp., 82 N.J. 160, 164-65, 411 A.2d 697 (1980) (discussing history and purpose of statute); O'Connor v. Altus, 67 N.J. 106, 117, 335 A.2d 545 (1975) (same); Rosenberg v. Town of N. Bergen, 61 N.J. 190, 195-98, 293 A.2d 662 (1972) (same). Based on that legislative purpose, we have tended to read the statute broadly. See, e.g., Newark Beth Israel Hosp., supra, 124 N.J. at 363, 590 A.2d 1171; Rosenberg, supra, 61 N.J. at 198, 293 A.2d 662.

Horosz v. Alps Estates, Inc., 136 N.J. 124, 128-129 (1994).

The Statute of Repose provides that an injury which occurs more than ten years after the completion of the allegedly negligent design forms no basis for recovery. N.J.S.A. 2A:14-1.1(a); Diadone v. Buterick Bulkheading, 191 N.J. 557 (2007); Rosenberg, 61 N.J. at 199. The Statute provides, in relevant part, that

[n]o action . . . to recover damages for any deficiency in the design, . . . or construction of an improvement to real property, . . . shall be brought against any person performing or furnishing the design, . . .or construction of such improvement to real property, more than 10 years after the performance or furnishing of such services and construction.

N.J.S.A. 2A:14-1.1(a).

Unlike a statute of limitations, the Statute of Repose does not bar a cause of action in the sense of providing a plaintiff a certain time to institute suit after the accrual of that cause of action; its effect, rather, is to prevent what might otherwise be a cause of action from ever arising. Diadone, supra, quoting Rosenberg, 61 N.J. at 199; Hein v. GM Constr. Co., 330 N.J.Super. 282, 286 (App. Div. 2000). An injury occurring more than ten years after the performance of the negligent act simply forms no basis for recovery. Hein, 330 N.J.Super. at 286; see Cyktor v. Aspen Manor Condo. Ass'n, 359 N.J.Super. 459, 470 (App. Div. 2003) (holding that "the substantive right created by the Statute of Repose is the right not to have to defend ancient claims or obligations.") The starkness of the statute's application is intended:

The injured party literally has no cause of action. The harm that has been done is damnum absque inuria - - a wrong for which the law affords no redress. The function of the statute is thus rather to define substantive rights than to alter or modify a remedy. The Legislature is entirely at liberty to create new rights or abolish old ones as long as no vested right is disturbed.

Rosenberg, 61 N.J. at 199-200.

The Supreme Court has held that the Statute of Repose is to be construed broadly. Horosz v. Alps Estates, Inc., 136 N.J. 124, 129 (1994).

In Daidone, the Supreme Court resolved the question of whether the start of the ten-year period under which the Statute of Repose should be delayed until the date that a certificate of occupancy is issued, even where the designer or engineer completed his or her work at an earlier date. The Court held, "If the design or construction services provided continue up to and including the date the certificate of occupancy is issued for the improvements made, then the start date for Statute of Repose purposes is the date of the certificate of occupancy. However, if the design or construction services are completed before a certificate of occupancy is issued and the designer or contractor has no further functions to perform in respect of that construction project, then the start date for the Statute of Repose purposes is the date on which the designer or contractor has completed his or her portion of the work."

In Diadone, the plaintiffs, who were acting as their own general contractor, hired Lepley to provide architectural design, including designing a piling system to support the structure, for their home. Lepley prepared and on February 19, 1993, certified its plans. Once the plans were approved, the Lepley's retention as an architect was completed and he had no further responsibilities with regard to the design or construction of the home. The plaintiffs contracted with Butterick Bulkheading to install the foundation pilings, which Butterick did in accordance with the specifications prepared by Lepley. On May 24, 1994, Butterick was paid for its work. Once Butterick had completed its piling services, it had no further responsibilities with regard to construction of the home. A certificate of occupancy was issued on June 14, 1994.

Beginning in 1999, the plaintiffs began experiencing problems with the foundation of the home. They claimed that the home settled as a result of improper design and installation of the pilings supporting the home. The plaintiffs did not seek expert assistance until 2001, and in 2002 they obtained a report from an expert who opined that the basement structure settled due to the underlying soft soils and organics present. The plaintiffs filed suit against Leply and Butterick on June 2, 2004, more than ten years after both Leply and Butterick had provided their services, but less than tens years from the issuance of the certificate of occupancy.

The Court noted that when interpreting a statute, its overarching duty is to construe and apply the statute as enacted. Where the language of the statute is clear and unambiguous, the court shall not resort to extrinsic interpretive aids. The statute states that no action for construction defects shall be brought against a designer or contractor more than ten years "after the performance or furnishing of such services and construction." Id. at 566 quoting N.J.S.A. 2A:14-1.1(a). The Court found the Legislature's words to be clear and deserving of enforcement as written. Therefore, if the designer's or contractor's services continue to the date of the issuance of the certificate of occupancy, then the start date for purposes of the statute is the date of issuance. However, if the design or construction services are completed before a certificate of occupancy is issued and the designer or contractor has no further functions to perform, then the start date for purposes of the statute is the date on which the designer or contractor completed his or her portion of the work.

The Court rejected the plaintiffs' arguments that the start date for purposes of the Statute of Repose should be tied to the Certificate of Occupancy. The Court observed that 35 years ago in Rosenberg, it noted the clear legislative statement of public policy for finality of construction-related claims and has since read the statute broadly to accomplish that purpose. The Court stated that there has been no intervening legislative action to lessen or alter that public policy purpose.

New Jersey courts will apply the Statute of Repose for the design, planning, supervision, or construction of an improvement to real property which is integrally a normal part of that improvement or required for the structure to actually function as intended. The question of when the ten-year period begins to run has been resolved by the Supreme Court. It begins on the date that the designer or contractor has no further functions to perform in respect to that construction project. The statute requires that a complaint be filed within ten years after the date on which the designer or contractor completed their portion of the work.