Construction defects are common, though most defects are minor and fairly inconsequential. However, the most dangerous defects could risk damage to either people or the property itself.
Regardless of whether a defect is major or minor in nature, a problem remains: defects typically aren’t discovered until long after completion of the work, and defending against defect claims is a tall (and expensive) task.
What Is a Construction Defect?
Generally, construction defects refer to a deficiency in the construction process – be that in design, materials, or workmanship – which leads to a failure in some aspect of the structure being built, and that causes damage to a person or property (financial or otherwise). To put it another way, a construction defect must include all 3 of the following:
- a deficiency in the construction process itself (resulting from poor design, materials, or workmanship);
- the deficiency must lead to a failure in the structure (that’s being built during the project);
- that failure must cause damage to a person or property (financial damages or otherwise.
Sometimes, a defect might be as simple as falling short of an owner’s expectations. Other times, it could be as serious as a structural defect in the property. Obviously, construction defects and the resulting fallout will vary greatly based on the source and severity of the issue at hand.
What are the Main Types of Construction Defects?
After distinguishing the type of construction defect, they’re commonly classified as being either a patent or latent. Patent defects are those that are known or readily obvious upon inspection. They’re the ones that a contractor, sub, or other trade should find during normal inspections. Latent defects, on the other hand, are those that are concealed or otherwise not readily observable. Latent defects probably won’t be found even by someone who inspects the work pretty thoroughly.
Patent defects are obvious – and often, that means there’s an easy fix. These defects are surface-level, and often merely aesthetic, so accessing and repairing the issue is typically not that invasive. On the other hand, since latent defects aren’t obvious, that usually means they’re below the surface or even a defective system in the guts of a project. As a result, latent defects tend to be a little more problematic.
Let’s break down the big three construction defect types a bit more:
These defects result from a design professional’s failure to produce accurate and well-organized construction documents. Design defects occur by error or omission. Errors usually require some sort of redesign and replacement of a component part, while omission can be remedied by adding to a contractor’s scope of work through change orders.
Defects that arise due to damaged or inadequate building material are called “material defects”. When these defects come from the manufacturer, the parties using these materials usually won’t become aware of the defect until after they’ve already been incorporated into the project. This makes material defects particularly expensive because they may require additional labor and new materials.
When people think of construction defects, typically, workmanship defects are what come to mind. These defects occur when a contractor fails to build a structure or component part in accordance with the construction documents. Workmanship defects can range from simple aesthetic issues to structural integrity problems. Allocating liability and determining how (and even who) failed to abide by the property standard of care can be extremely complex.
What Is “Standard of Care?”
Every project participant needs to perform their contractual obligations up to a designated “standard of care”. This means their work should be done in accordance with all of the contract and design documents. For example, the AIA general conditions require a contractor to:
- visit the site to become familiar with the local conditions;
- review the contract documents to facilitate coordination onsite;
- to perform work in accordance with the acceptable standards of workmanship.
How Does Construction Defects Litigation Work?
The biggest problem with construction defects is the amount of litigation involved. Construction defect litigation is a long, complex, and costly process – not unlike other types of construction litigation. Depending on the defect, a lawsuit can include numerous defendants, varying insurance policy coverages, anti-indemnity statutes, and fact-intensive discovery procedures. Basically, construction defects litigation is great… for the bottom lines of construction lawyers, but it can be a nightmare for the construction businesses themselves.
If you’re sued based on an alleged construction defect, not only do you have to pay to defend yourself, but you might also be on the hook for any number of damages. Determining the scope of damages is particularly challenging, because of the number of factors that can affect the award. For instance: what was the extent of the damage? The court can include the cost of repairs, the decline in property value, loss of use, court costs, and, in some cases, even punitive damages (if gross negligence or recklessness was present). If there are multiple defendants, then the court will need to determine how to spread liability amongst everyone.
Timeline to File Suit
The other challenge with construction defect litigation is time. Most defects are discovered long after the completion of a project. Whether a lawsuit can be filed once the defect is discovered will be determined by the state’s statute of repose. It’s similar to a statute of limitations, which limits the amount of time someone has to file a lawsuit. However, a statute of repose works a little differently.
Instead of starting the clock when the “harm” occurred, it starts at a particular event (typically the project completion date). Depending on your state, this timeline can be as short as 4 years or as long as 20 years! Construction businesses could find themselves defending a lawsuit from a project that’s been long since closed in their books. Gathering all the documentation required to prove your case could prove tricky.
How to Minimize Construction Defects – and Their Impact
Everyone on a project is responsible for minimizing construction defects. There are proactive measures everyone can take to decrease the chance of encountering one.
Review the Contract Terms and Policy Coverage
With so many people involved on a project, there are a lot of places where blame could land. For all project stakeholders (designers, contractors, subs, and suppliers, etc.), the contract should clearly assign accountability and confirm that everyone is responsible for their own work. Also keep an eye out for provisions concerning responsibilities, liabilities, and any risk-shifting language. A clear understanding of your liability coverage will also help minimize your exposure to defect claims. Plus, it’s a good idea to confirm that everyone else on the project has sufficient coverage as well.
Implement Quality Control Programs
Involve all the project participants early on and form some sort of quality assurance group. Everyone is ultimately responsible for avoiding defects, so this should be a collaborative effort. This group should meet regularly, review plans and make occasional site assessments. Speaking of site assessments, another helpful tool to avoid defects is a solid daily report system in place. Conducting daily inspections of the work and materials can help detect issues early on. Furthermore, keeping these well documented and organized can assist you later on when an old project presents a defect claim.
If a defect is discovered, perform a walk-through. Determine what the issue is and present it to the owner, contractor, or management team as soon as possible. Then you can decide how to proceed in the most cost-effective way. Having a quality control program provides an opportunity to repair the defective work prior to completion, which can reduce monetary damages and prevent future litigation.
Construction defects can quickly turn a project upside down, and, with so many parties working on the job, they’re not always easy to identify or manage. Everyone involved with a project – from both the design team and the construction team – must do their part to avoid defects. Quality control programs, communication, and documentation are an easy, yet effective way to minimize defective work which can help both your bottom line and your reputation.