As we have discussed before, knowing your deadline to file a mechanics lien requires knowing when the clock starts. This date is often referred to as the substantial completion date or project completion date. Depending on the state, this date can vary between the date when the entire project has been completed or when your work on a project has come to an end. Even within those categories, there are plenty of variables. Unfortunately, clarity on coming up with a trigger date can be hard to come by.
Trigger dates aren’t unique to liens, however. Recently, a Colorado appellate court clarified what constitutes substantial completion in an action arising out of construction defects. The decision comes as a result of litigation over defective work in Sierra Pacific Industries v. Bradbury Construction. According to the appellate court, substantial completion is on the date when the particular contractor, sub, or laborer concluded their work on the project. This does not affect calculation of substantial completion in actions not arising out of construction defects. The date of substantial completion for lien actions remains the last date that materials and/or labor were furnished.
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In 2002, Sierra Pacific Industries hired Bradbury Construction to install windows pursuant to its contract with the prime contractor. The windows were installed on the condominium project, and Bradbury’s work was completed later on in 2002. Two years later in 2004, the project was completed and residents moved in to the condominiums. Shortly thereafter, complaints began pouring in (pun very much intended) over water intrusion and subsequent damage. If that sounds familiar, it might be because we have recently covered Florida and New Jersey lien cases with similar situations.
As a result of the defects, the general contractor began completing repair work on the leaks. Bradbury was brought back in 2004 to help with repairs. After 2004, Bradbury was not asked to work on repairs. However, the task continued until 2011.
Due to the seven year repair process, the property owner sued the general contractor for defective work in 2011. The contractor in turn brought Sierra Pacific into the action. These claims were eventually settled in 2014. Shortly after the settlement, Sierra Pacific sued the subcontractor Bradbury for indemnification and damages pursuant to breach of contract claims.
Case and Appeal
Bradbury moved for summary judgment, arguing that the claims were barred by Colorado’s 6 year statute of repose. Under the statute of repose in Colorado’s Construction Defect Action Reform Act. The act bars claims pursuant to construction defects after 6 years have passed. Sierra countered, arguing that the claims did not arise until the settlement of the case with the owner and contractor in 2014. Sierra also argued that the statute of repose had been tolled until 2011 when the repair work was substantially completed. Ultimately, the district court found that the statute of repose was not tolled. The court found that Sierra Pacific would have needed to notify Bradbury of the claims during the six year period following Bradbury’s completion in 2004. Because no party notified Bradbury of claims during this period, the statute of repose came into effect and any claims brought pursuant to the defective work were barred.
Sierra Pacific appealed the ruling. On appeal, Sierra argued that substantial completion on the project did not occur before 2011 because necessary repairs were being made. As the clock on the statute of repose does not begin until substantial completion occurs, this would start the clock in 2011 rather than 2002 or 2004, resulting in a timely claim by Sierra Pacific.
Bradbury stayed the course, arguing their work was completed in 2002, and certainly not later than 2004.
In its analysis, the court needed to determine what constituted substantial completion under the statute. Because the term substantial completion date was not clearly defined in the statute, the court looked to the Texas Court of Appeals for help. Citing Gordon v. Western Steel Co., the court determined the purpose of the statute was “best served by commencing the period of repose when a party completed its own work.” Because Bradbury completed its work on the project either in 2002 or 2004 (when they made repairs), the suit filed in 2014 was beyond the statute of repose. Sierra Pacific’s claim was barred.
For subcontractors and suppliers in Colorado, substantial completion will be determined on a case by case basis. Regardless of the other parties on the project, the date of substantial completion will refer to the party at hand. While this may make it a clumsier process, at least it is now clear when a project has been substantially completed in regard to construction defects.