Construction Defect Claims

Defect claims arrive in two ways. Either an owner discovers a problem, water intrusion, a failing facade, a cracked slab, settlement, a roof that never worked, and looks for someone to pay for it. Or a contractor asks to be paid and the owner responds with a list of defects that had not been mentioned before. The second version is more common than the first.

The Law Offices of Albert Goodwin handles construction defect matters in New York City, for owners and boards pursuing claims and for contractors and design professionals defending them.

The Deadline Question Comes First

In New York, the limitations period is frequently the entire case, because of when the clock starts.

• Breach of contract against a contractor is subject to a six year period, and it generally accrues on completion of the work, not on discovery of the defect. This is the rule that surprises owners. A latent defect discovered in year eight, in work completed in year one, is time barred on the contract claim even though the owner could not reasonably have known of it earlier. New York does not apply a general discovery rule to these claims.
• Professional malpractice against an architect or engineer is subject to a three year period, which likewise accrues on completion of the professional services, subject to continuous representation principles in some circumstances.
• Property damage claims sounding in negligence are subject to a three year period running from the date of injury to the property.
• Indemnity and contribution claims accrue when the party seeking them has paid, which can extend exposure well beyond the primary periods and is how contractors are drawn into cases years after their limitations period expired.
• Express warranty obligations run for the period the contract states, and a warranty claim within that period is a contract claim on its own terms.

Because accrual runs from completion, determining the completion date precisely, and distinguishing it from punch list work or later remedial work, is frequently the first battleground. Remedial work performed later does not necessarily restart the period, but it can complicate the analysis.

New Home Warranties

New York's housing merchant implied warranty applies to the sale of a new home by a builder, providing warranties of workmanship, of installation of plumbing, electrical, heating, cooling, and ventilation systems, and against material defects, each for a different stated duration. The statute permits limited modification of the warranty only through a compliant express written warranty, and it imposes notice requirements on the homeowner that must be satisfied before suit. Buyers of newly constructed homes and builders selling them should both understand what the statute provides and how it may and may not be limited.

Who Gets Sued, and On What Theory

Defect litigation typically names everyone: the general contractor, the trade subcontractors whose work is implicated, the architect and engineers, the developer or sponsor, and sometimes product manufacturers. Theories include breach of contract, breach of express and implied warranty, professional negligence against the design professionals, negligence, and, in condominium and cooperative contexts, claims by a board against a sponsor based on the offering plan.

Two doctrines shape the analysis:

Privity. A subsequent purchaser or a board frequently has no contract with the contractor who performed the work. Contract claims require privity, which is why claims against remote parties are framed in tort or through the sponsor, and why the chain of contracts on a project determines who can sue whom.

The economic loss rule. New York generally does not permit recovery in tort for purely economic loss, meaning the cost to repair defective work itself, where the relationship is governed by contract. A negligence claim seeking the cost of replacing defective work usually fails on this ground. Where the defect has caused damage to other property, or personal injury, the analysis differs. This rule is the primary defense to defect claims brought outside a contractual relationship, and it does substantial work in these cases.

Condominium and Cooperative Claims

Boards pursuing defect claims against a sponsor face a specific framework. The offering plan and its representations about construction are the operative promises, and claims are typically framed as breach of those representations rather than as generic defect claims. There are also disclosure obligations, and in some cases claims involving the Attorney General's oversight of offering plans. Boards should be attentive to the limitations periods, which begin running earlier than most boards realize, and to the transition from sponsor control, which is when the clock is often quietly running while nobody is investigating.

Defending a Defect Claim

For contractors, the defenses that work:

• The limitations period has run, which as noted often disposes of the case entirely.
• The condition is not a defect but the result of a design the contractor built exactly as specified. A contractor who builds according to the plans and specifications is generally not liable for the design's inadequacy, absent obvious defects it should have recognized. Establishing that requires the submittals, the requests for information, and the approved shop drawings.
• Causation lies elsewhere: maintenance failures, alterations by others, unusual weather, misuse, or another trade's work.
• The economic loss rule bars the tort claims.
• Failure to give notice and to allow the contractor an opportunity to inspect and cure, where the contract requires it. This is a real defense and it is frequently available, because owners routinely retain a replacement contractor and then sue for the cost.
• Failure to mitigate, where a small problem was allowed to become a large one.
• Acceptance and waiver, and releases signed at closeout.
• The damages model is wrong. The measure is typically the cost of repair, and where repair cost would be unreasonably disproportionate, the diminution in value. Owners frequently claim betterment, seeking a better building than they contracted for.

Insurance is central to the defense. Commercial general liability policies contain business risk exclusions, and whether defective workmanship constitutes an occurrence, and whether damage to the contractor's own work is covered as opposed to damage to other property, are recurring coverage questions. Notice should go to every carrier on every policy period potentially implicated, since progressive damage can trigger multiple years of coverage. Tenders should also go to subcontractors under indemnity and additional insured provisions. See construction contracts.

Pursuing a Defect Claim

For owners and boards, the sequence that produces results:

1. Investigate early and properly. Retain a qualified engineer to determine the cause, not merely to describe the symptom. Claims fail because the owner proved a leak but not why it leaked.
2. Preserve the evidence. Do not perform remedial work that destroys the defective condition before the contractor and its experts have had an opportunity to inspect. Destructive testing should be coordinated and documented, and spoliation is a genuine risk to an otherwise good claim.
3. Give the contractual notice and the opportunity to cure, in writing, even where the relationship has broken down.
4. Identify every responsible party and the contract chain, before the limitations periods expire on any of them.
5. Document the damages with a repair scope and competitive pricing, distinguishing repair of the defect from improvements.

Related Pages

See breach of construction contract, payment disputes, where defect allegations usually surface, breach of warranty, and contractor licensing, which can be dispositive in residential matters.

You can contact us by phone at 212-233-1233 or by email at [email protected].