“In Maryland Condominium and HOA Construction Defect Cases, the 10-year statute of repose comes into play whenever damage or injury from a latent common area construction defect first occurs more than 10-years after the community was completed. If the statute applies, it bars a condominium association or HOA from bringing a construction defect claim against a contractor that would otherwise be permissible under Maryland’s “discovery rule.” However, the statute does not bar a construction defect claim against a condominium or HOA developer whose ongoing involvement with a community take it outside the definition of a typical “contractor.”
Nicholas D. Cowie, Maryland and Washington DC Condominium and HOA Lawyer and Construction Defect Attorney
Introduction
This article explores how Maryland’s 10-year Contractor statute of repose (Courts and Judicial Proceedings Article (“CJ”) §5-108(b) works and whether its protections for “contractors” extend to condominium and HOA developers. While developers often argue that they qualify for protection because their roles overlap with contractors, the better view is that condominium and HOA developers should not benefit due to their ongoing control over the property post-construction and their broader obligation to homeowners. This distinguishes them from typical “contractors” who perform discreet construction tasks and have little or no further involvement with the community.
For clarity, this article refers to CJ §5-108(b) as the “10-year Contractor Statute of Repose” to distinguish it from Maryland’s broader 20-year statute of repose applicable to all construction defect claims.
How the 10-Year Contractor Statue of Repose Works in Relation to Maryland Condominium HOA Construction Defects Claims
The 10-Year Contractor Statute of Repose bars condominium and HOA construction defect legal claims (“causes of action”) against contractors, architects, and engineers, when the resulting injury to property or person for which damage is sought occurred more than 10 years after the completion of an “improvement to real property.”
The “completion” date is defined as “the date the entire improvement first became available for its intended use.” CJ §5-108(b).
An “improvement to real property” generally refers to buildings, such as a condominium building or clubhouse, but may also include any permanent structure that is constructed on or added to real property, such as a stormwater management pond or retaining wall. See, Craven v. Hickman, 135 Md. App. 645, 658 (2000).
If the resulting property damage or injury occurs within the 10-year period, a cause of action can “accrue” under Maryland’s general 3-year statue limitations (CJ §5-101). If the resulting damage or injury occurs after the 10-Year Period, the cause of action does not accrue, and the claim is barred.
Example: If a condominium roof collapses 15 years after the building’s completion due to defects in the original construction, a claim against the roofing contractor would likely be barred. If the roof collapse occurred within 10 years, the association would typically have 3 years from the collapse to file a lawsuit.
The 20-Year Statue of Repose
Maryland also has a broader 20-year statute of repose (CJ §5-108(a)) that applies to construction defect claims asserted against any person or entity, including developers. It applies to legal claims where the resulting property damage or personal injury occurs more than 20 years after construction is completed. This article, however, focuses on the narrower 10-year contractor-specific statute of repose (CJ §5-108(b)).
“Accrual of a Cause of Action” and the Discovery Rule
To understand how the 10-year Contractor Statute of Repose applies to any given condominium or HOA construction defect claim, it is essential to understand the concept of “accrual” of a cause of action under Maryland’s general 3-year statute of limitations (CJ §5–101). Maryland follows the “discovery rule” first adopted in the case of Poffenberger v. Risser, 290 Md. 631 (1981), under which a cause of action “accrues,” when plaintiff knew or should reasonably have known it has suffered an injury and its likely cause (“discovery”). Once accrual occurs, a plaintiff has three (3) years to bring a lawsuit under the general statute of limitations (CJ §5–101) and the Statute of Repose CJ §5–108(c).
In construction defect cases, delayed discovery of a defect is common. As such, a cause of action for construction defects may not accrue under the “discovery rule” for many years after construction is completed. Maryland’s 10-year Contractor Statue of Repose (CJ §5–108(b)) is designed to protect contractors, architects, and engineers from extended liability by placing an outside limit on how long a cause of action against them is permitted to “accrue.” Namely, there can be no accrual of a cause of action for damages against a contractor, architect or engineer when the property damage or personal injury caused by the construction defect occurs more than 10-years after completion of the buildings or other “improvement to real property” they design or construct.
Maryland’s 10- Year Contractor Statue of Repose Applies to Causes of Action Subject to Delayed Accrual Under the Discovery Rule
Maryland’s 10-Year Contractor Statute of Repose applies to causes of action that are governed by Maryland’s general 3-year statute of limitations (CJ §5–101) under which there can be delayed accrual of a cause of action under the discovery rule. This encompasses all civil causes of action which do not have a specified statutory time period within which a cause of action must be filed in court. For example, in a construction defect case, a claim for negligent construction would be governed by the general 3-year statute of limitations under CJ §5–101 because there is no other statute that specifies a time within which a claim for negligent construction can be brought. On the other hand, statutory warranty claims under the Maryland Condominium Act, Section 11–131, the Maryland Homeowners Association Act, Section 11B–110 are not governed by Maryland’s general 3-year statute of limitations (CJ §5–101) because they have their own specified statutory time period within which a claim must be pursued. As such, the concept of “accrual” and the discovery rule does not apply. For a discussion of statutory warranties that apply to condominiums and HOA, see, Condominium Construction Defect Warranties in Maryland and The Maryland HOA Common Area Warranty.
Delayed Accrual is Typical in Construction Defect Cases, Especially in Condominium and HOA Communities Where Developers Retain Control Over the Association Following Completion of Construction
In a traffic accident case, accrual typically occurs at the moment of impact. The injured person immediately knows they have a cause of action for negligent driving because the crash is obvious. However, in construction defect case, homeowners may not discover negligent construction of a building for many years, thus delaying accrual of a construction defect cause of action. Building defects that occur during construction are often hidden behind exterior walls or beneath floors or are just not apparent to the average layperson. Homeowners are not present during construction nor are they familiar with proper construction techniques. It is not until the defect manifest itself to the homeowner in the form of visible property damage or personal injury that underlying defects are discovered. Examples of defects manifesting themselves might be the sudden appearance of a structural failure (e.g., cracking walls, uneven floors, balcony collapse, bricks falling from exterior walls) or interior water intrusion at windows or roof leaks. Under the “discovery rule,” if a building contractor’s negligent construction is hidden, accrual of the cause of action and the commencement of the 3-year general statute of limitations does not occur until the legal claim is or reasonably should have been discovered, rather than the date on which the builder’s negligence occurred.
Developer control of the condominium association or HOA can also delay accrual of a construction defect cause of action. In newly constructed condominium and HOA communities, the developer controls the association by appointing its own representatives and employees to the association’s board of directors. As such, the developer effectively controlls maintenance, repair and monitoring of the community common elements and common area facilities. This is known as the “period of developer control.” See, Developer Transition for Maryland Condominiums and Declarant Transition for Maryland Homeowners Associations. It is not until the resident homeowners take control of the Association that it can first independently assess the construction of the common elements and common areas of the community, typically by hiring an engineer to perform a transition deficiency report identifying construction defects. See, Multi-Million Dollar Construction Defect Jury Verdict for Condo Demonstrates Importance of Timely Transition Study Identification of Construction Defects.
A developer-controlled board may not be motivated to fully investigate and address an underlying defect, and may, instead, perform inexpensive “cosmetic” repairs. As a result, even when defects manifest themselves in the form of damage to the building, the underlying defect causing that damage may go undiscovered. Homeowners will be told that the issue has been resolved, even though the defect remains hidden, further delaying the discovery of the construction defect cause of action. The type of conflict of interest inherent in a developer-controlled association board of directors, has led to the adoption of the “Adverse Domination Doctrine” in Maryland which can prevent claims from accruing while a developer controls the board of directors. See, Adverse Domination Doctrine Tolls Statue of Limitations on Maryland Condo Association Legal Claims During Period of Developer Control.
The Critical Cutoff Date for Accrual of a Construction Defect Cause of Action is the Date on which the Resulting Damage or Injury Occurs
Under the Maryland’s 10-Year Contractor Statute of Repose, a construction defect cause of action against “architects, engineers, and contractors” cannot accrue if the resulting injury to property or person for which damages are sought occur more than 10 years after the completion of construction:
“… a cause of action for damages does not accrue [against an] … architect, professional engineer, or contractor … when … injury to real or personal property, resulting from the defective … condition of an improvement to real property… occurs more than 10 years after the date the entire improvement first became available for its intended use [emphasis added].”
CJ 5-108(b). Thus, the crucial date determining whether a construction defect cause of action can accrue under the discovery rule is the date the resulting property damage or injury occurs. If damage caused by a construction defect first occurs after the 10-year period, there can be no delayed accrual under the discovery rule.
On the other hand, if damage caused by the construction defect first occurs within the 10-year period, a condominium association or HOA’s cause of action for the damages against the responsible contractor can “accrue” under the discovery rule. In such a case, Maryland’s Statute of Repose specifies that the plaintiff has three (3) years to file suit from the date of accrual:
“Upon accrual of a cause of action referred to in subsections (a) and (b) of this section, an action shall be filed within 3 years.”
CJ §5-108(c). This statutory language confirms that claims for damage or injury occurring within the 10-year period, is subject general 3-year statute of limitations (CJ §5-101), which also provides 3 years to file suit from the date of accrual.
Filing Suit More Than After 10 Years After Completion of Construction
There is a common misconception that the 10-Year Contractor Statue of Repose prevents the filing of a construction defect lawsuit against a contractor more than 10 years after completion of a building. However, the date a suit is filed is not determinative. If resulting damage or injury occurs within the 10-year period, a Condominium Association or HOA, under CJ § 5-108(c), has 3-Years from accrual to file suit against a contractor for construction defects, even if that suit is filed more than 10 years after the completion of the improvement.
Example: A retaining wall collapses on the last day of the 10-year period following completion of construction. On that date the condominium association is advised that the retaining wall was negligently constructed and the cause of action against the contractor accrues. At this point, the condominium association has three years to file suit against the contractor, meaning that suit could be filed up to 13 years after construction of the retaining wall was completed (i.e., the 10-year statute of repose + 3-year statute of limitations = 13 years).
Maryland’s 10-Year Statute of Repose Should Not Shield Condominium and HOA Developers from Liability for Condominium and HOA Construction Defect Claims
Although no Maryland appellate court has ruled directly on the issue, the U.S. District Court for the District of Maryland has ruled that the Maryland’s 10-Year Statute of Repose (CJ§ 5-108(b)) does not shield condominium developers from liability for condominium construction defect claims unless they act solely as contractors performing the construction work. See Council of Unit Owners of Milestone Townhouse Condos. v. Beazer Homes, LLC, No. GJH-18-1572, 2019 U.S. Dist. LEXIS 45914 (D. Md. Mar. 20, 2019) (the “Milestone”). Milestone is unreported and non-binding on Maryland courts; however, it may foreshadow how Maryland courts would rule on the issue.
In Milestone, the Court addressed whether a condominium developer, Beazer Homes, LLC, was protected from liability under Maryland’s statute of repose. The case stemmed from allegations that Beazer failed to install weather-resistant barriers on the condominium buildings, leading to significant water intrusion and structural damage. The plaintiff, a condominium association, argued that Beazer, the condominium Developer, concealed these defects, preventing timely repairs and legal recourse.
Beazer Homes moved to dismiss the lawsuit, asserting that the claims against it were time-barred by the Maryland’s 10-Year contractor statute of repose, which shields contractors, architects, and engineers from liability for property damage occurring more than ten years after a project’s completion. However, the court ruled that the 10-year statute of repose applies only to those who act strictly in the capacity of a contractor or design professional and does not necessarily apply to developers in all cases.
A. Circumstances under which Developers are Not Protected from Maryland Condominium and HOA Construction Defect Claims by the 10- Year “Contractor” Statute of Repose
The court in Milestone reasoned that a developer is not automatically entitled to the protection of the 10-year contractor statute of repose unless it can establish that its role was solely that of a contractor. In distinguishing between a contractor and a developer, the court pointed to the following factors:
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Direct Involvement in Construction vs. Oversight
– A contractor is defined as one who directly procures labor and materials and is responsible for executing a construction project. By contrast, a developer typically oversees construction but does not necessarily engage in the hands-on work of building improvements. In this case, Beazer hired and supervised third-party contractors, architects, and engineers, which suggested it was acting in a broader capacity than a contractor.
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Continued Role of Developer as Seller with Disclosure Obligations
– The court noted that Beazer not only supervised the construction of the condominium but also marketed and sold units to purchasers. Unlike a general contractor whose obligations typically end when construction is complete, a developer’s involvement often extends into post-construction sales and disclosures. The plaintiff alleged that Beazer knowingly sold defective units without disclosing material defects, which raised claims beyond mere construction issues.
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Overlap Between Developer and Contractor Roles
– While a developer can also function as its own general contractor, the court held that this does not necessarily mean it is entitled to the statute of repose protections granted to contractors. Because Beazer allegedly functioned as both a developer and a seller while also overseeing the work of subcontractors, its liability exposure was broader.:
“ … a developer that serves as its own general contractor has more expansive exposure to liability than an entity serving solely in the contractor role. … The Complaint alleges that Defendant served both as the developer/seller of the Milestone condominium units … and that Defendant “hired and supervised contractors, architects, professional engineers, and others to make real property improvements to what became the Milestone common areas and condominium units.” … Thus, while Defendant may have also played the role of a general contractor—procuring the performance of works and services on a large scale and overseeing the completion of the construction project, the Defendant’s role as the general contractor does not shelter it from liability for its actions as the developer. If discovery demonstrates that Defendant’s only role was that of a contractor and some other entity operated as the developer, then the ten-year statute of repose may bar Plaintiff’s claim. However, based on the allegations in the Complaint, assumed to be true at this stage, the ten-year statute of repose is inapplicable to Defendant.”
Milestone, LLC, No. GJH-18-1572, 2019 U.S. Dist. LEXIS 45914, pp.7-8 (D. Md. Mar. 20, 2019).
The court denied Beazer’s motion to dismiss the condominium’s construction defect lawsuit under Maryland’s 10-Year Contractor Statue of Repose (CJ§ 5-108(b)), concluding that the allegations in the complaint suggested that Beazer was not merely a contractor but a developer with additional responsibilities, including selling and marketing the condominium units. Because the 10-Year Contractor Statute of Repose protects only contractors, architects, and engineers—and not developers who do more than just perform construction work—the court found that Beazer’s role did not qualify for the statute’s protection at this stage of the litigation.
This ruling serves as a crucial reminder that developers who take on multiple roles in a condominium project, including sales and oversight, may not benefit from the protections afforded contractors under Maryland’s 10-Year Contractor” Statue of Repose.
B. Other Reasons Why the 10-Year Contractor Statute of Repose Should Not Protect Developers from Maryland Condominium and HOA Construction Defect Claims.
The Milestone Court recognized that developers have ongoing obligations after construction, such as sales and disclosure duties. However, there are additional post-construction responsibilities of developers that further distinguished them from traditional contractors whose role typically ends once construction is complete.
First, developers often retain long-term control over a condominium or HOA during the developer control period. By reason of the governing documents they draft and their ownership of unit or lots, developers can appoint their employees and representatives to the association’s board of directors, allowing them to control the management of an association – often for many years. See, Developer Transition for Maryland Condominiums and Declarant Transition for Maryland Homeowners Associations.
Second, under Maryland law, developer-controlled condominium associations and HOA’s are now required conduct reserve studies prior to transferring control of the association to the resident homeowners. See, Reserve Studies in Maryland. These reserves studies estimate the future cost of replacing common area components and constitute ongoing representations about the condition of the property.
Third, condominium developers must update their Public Offering Statement filed with the State of Maryland to ensuring accurate disclosure regarding any material changes in the condition of the common elements.
Fourth, under Maryland Law, Condominium and HOA Developers have continuing warranty obligations to repair construction defects long after construction has been completed. See, Condominium Construction Defect Warranties in Maryland and The Maryland HOA Common Area Warranty. Condominiums and HOAs can enforce these warranties against developers regardless of whether they personally performed the construction work.
These ongoing statutory and contractual obligations reinforce the conclusion that developers are not similarly situated to traditional “contractors” and should not receive the same protections under the 10-year Contractor Statute of Repose.
Conclusion
Maryland’s 10-Year Contractor Statute of Repose was designed to protect contractors, architects, and engineers from extended liability for latent construction defects under the “discovery rule.” I was not intended to protect developers from Maryland condominium and HOA construction defect claims. These Developers retain control of, sell, and market residential Condo and HOA communities, and their ongoing responsibilities and unique role in managing associations and disclosing conditions to homeowners make them fundamentally different from contractors and design professionals hired to perform a specific task and whose relationship to the project ends upon completion of construction.
While Maryland appellate courts have not definitively ruled on this issue, the Milestone decision and the statutory language suggest that developers should not receive protection under the 10-year Contractor Statute of Repose unless they can show their role was purely that of a contractor. Until Maryland’s higher courts issue binding authority, associations should remain vigilant about construction defect claims and perform transition deficiency studies early, ensuring timely action long before the 10-year period expires.
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