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Minnesota Court provides clarification as to faulty construction claims


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Murray

By Laura Murray

Background

The defendants built a home which was later purchased by the plaintiffs.  The parties entered into a purchase agreement on November 16, 1995 and agreed, at that time, the home was in “move-in condition.”  However, a certificate of occupancy was not issued until January of 1996, just one day before the closing of the home took place.  On November 20, 2005, the plaintiffs discovered water damage in their house, and they requested that the defendants fix the problem.  The parties were unable to resolve the issue and a lawsuit was filed.  

In Minnesota, a cause of action concerning defective conditions arising from improvement to property must be commenced within ten years after substantial completion of the construction.  The Minnesota statute explains that the date of substantial completion is to be determined by the date when the construction is sufficiently completed so an owner can occupy or use the improvement for its intended purpose.   The lower court found that the home was “substantially completed” on the date the plaintiffs agreed the home was in “move-in condition,” and, therefore, the water damage issue was discovered more than ten years later.  The plaintiffs appealed and argued that because a certificate of occupancy is legally required for them to occupy the home, the home was not “substantially completed” until that time.

Plain language of the statute

Relying on the language of the statute, the appellate court disagreed with the plaintiffs’ position.  Specifically, the court relied upon the fact that the statute said the date of completion is the date when the construction is sufficiently completed.  Based on this language, the court found that the statute specifically contemplated the extent of the structure’s physical condition, and made no mention of the legality of the owner’s occupancy or use of the structure.  

The plaintiffs argued that such an interpretation of the relevant statute would allow a home to be physically occupied before it could be legally occupied and such an interpretation would undermine the public policy served by requiring a certificate of occupancy.  The court did not disagree, and in fact, the court acknowledged that its holding may create critical factual questions as to the degree to which a structure is substantially completed.  Nonetheless, the court explained its holding is based on the plain language of the statute and any factual questions would be within the legislature’s purview to address.

Practice points

In Minnesota, a plaintiff may not rely upon the issuance of a certificate of occupancy in determining the date a cause of action begins to accrue under the statute of repose.  Rather, substantial completion of the construction will be the triggering event.  As a result, this decision effectively shortens the period of time home owners may bring claims for defective construction.

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