Daily Development for Monday, October 17, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
CONSTRUCTION; CONTRACTOR LIABILITY; STATUTE OF LIMITATIONS; STUCCO: In an action alleging breach of contract and negligent installation of synthetic stucco, the six-year statute of limitations on a breach of contract claim begins to run on the date the homeowners purchase a house, even if the house is substantially completed before title is conveyed to them have knowledge.
Skully v. First Magnolia Homes, 614 SE 2d 43 (Ga. 2005).
The Court of Appeals had held that damage to property arising out of faulty construction is considered to occur on the date of the project’s “substantial completion, i.e. when the certificate of occupancy is issued.” Because the house at issue here had already been substantially completed when the Plaintiffs entered into the purchase and sale agreement, the Court of Appeals held that the statute of limitations began running when the agreement was executed.
The Supreme Court of Georgia reversed. It noted that the ordinary rule for breach of contract damages against a contract related to work done on a building is the date of substantial completion, because it is assumed that at that time the owner is in a position to identify defects. But it noted that Georgia courts have noted an exception when the work is not done to property already owned by the plaintiff, but rather when the property is still in title to the contractor. In such cases, the court stated, the date of completion is not a relevant date for ascertaining whether it is reasonable for the owner to identify the defects.
But rather than follow the Court of Appeals conclusion that the date of contract of sale to the buyer should apply, the court held held that if a new house is defectively constructed by an owner/builder for the purpose of sale, the applicable period of limitations for damage to realty begins to run at the time of the closing of the initial sale of the improved property, regardless of the date of ‘substantial completion." In light of that formulation, the plaintiffs filed their lawsuit two days prior to the running of the statute.
At to the action for negligence, however, the court agreed with the Court of Appeals that the action begins to run at the time that the plaintiff reasonably should have become aware of th potential claim (presumably when it discovered the defect.) Note that the statute of limitations on negligence is shorter - four years vs. six years on the contract claim. The result was in this case the plaintiffs were out of look on their negligence claim, but made their contract claim by two days.
Comment 1: Is the court reaching too far to protect the home buyer? If the principle is to establish a time when the homebuyer should become aware of defects in the property, wouldn't it be appropriate to assume that the homebuyer has examined the property before agreeing to buy it, rather than to assume that it won't make such an inspection until after closing?
Of course, in many real estate contracts there is a "due diligence" period following contract, and the conclusion of that period probably is the time that the contract truly becomes binding and that is likely the best time to use. The court's use of the closing date is meaningless in terms of the stated purpose of the choice for the date the statute begins to run.
Comment 2: In this case, the buyers in fact did not identify problems until well after they had closed on the home. They learned of potential defects in the products used from talking to friends and neighbors who owned similar houses. But a neighbor, who was a real estate broker, told them that the problems were exaggerated. Consequently, they waited a bit longer to get a full inspection, and the statute of limitations on negligence ran in the meantime. Hmmmm. Good Samaritan or "officious intermeddler?"
Items reported here and in the ABA publications
are for general information purposes only and
should not be relied upon in the course of
representation or in the forming of decisions in
legal matters. The same is true of all
commentary provided by contributors to the DIRT
list. Accuracy of data and opinions expressed
are the sole responsibility of the DIRT editor
and are in no sense the publication of the ABA.
Parties posting messages to DIRT are posting to
source that is readily accessible by members of
the general public, and should take that fact
into account in evaluating confidentiality
DIRT is an internet discussion group for serious
real estate professionals. Message volume varies,
but commonly runs 5 15 messages per work day.
Daily Developments are posted every work day.
subscribe, send the message
subscribe Dirt [your name]
To cancel your subscription, send the message
signoff DIRT to the address:
for information on other commands, send the
Help to the listserv address.
DIRT has an alternate, more extensive coverage that includes
commercial and general real estate matters but also focuses specifically upon
residential real estate matters. Because real estate brokers generally find
this service more valuable, it is named “BrokerDIRT.” But residential
specialist attorneys, title insurers, lenders and others interested in the
residential market will want to subscribe to this alternative list. If you
subscribe to BrokerDIRT, it is not necessary also to subscribe to DIRT, as
BrokerDIRT carries all DIRT traffic in addition to the residential discussions.
To subscribe to BrokerDIRT, send the message
subscribe BrokerDIRT [your name]
To cancel your subscription to BrokerDIRT, send the
signoff BrokerDIRT to the address:
DIRT is a service of the American Bar
Section on Real Property, Probate & Trust Law and
the University of Missouri, Kansas City, School
of Law. Daily Developments are copyrighted by
Patrick A. Randolph, Jr., Professor of Law, UMKC
School of Law, but Professor Randolph grants
permission for copying or distribution of Daily
Developments for educational purposes, including
professional continuing education, provided that
no charge is imposed for such distribution and
that appropriate credit is given to Professor
Randolph, DIRT, and its sponsors.
DIRT has a WebPage at:
Your e-mail address will only be used within the ABA and its entities. We do not sell or rent e-mail addresses to anyone outside the ABA.
To change your e-mail address or remove your name from any future general distribution e-mails you can call us at 1-800-285-2221, or write to: American Bar Association, Service Center, 321 N Clark Street, Floor 16, Chicago, IL 60610
If you are an ABA member, log in to the ABA Web site at https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=http://www.abanet.org/abanet/common/MyABA/home.cfm to edit your member profile. Otherwise, complete the form located at https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=https://www.abanet.org/members/join/coa2.html
To review our privacy statement, go to https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=http://www.abanet.org/privacy_statement.html.
If you have any problems, please contact the list owner