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A few years back I wrote a 91视频 article advising parties contracting for construction to contractually specify their own particular statute of limitation and/or repose periods on claims in response to Oregon鈥檚 ever-evolving and multi-tiered law on the subject. Recently, the Oregon Supreme Court issued a ruling in Shell v. The Schollander Companies Inc. that served up another instance of differing time limits on construction defect claims of which both buyers and builders must be aware.

The Oregon Revised Statutes (ORS) contain a number of significant time limits, known as statutes of limitations and statutes of repose, that govern the filing of construction claims on private projects. A statute of limitations sets the time limit that legal proceedings may be initiated after damage or an event, usually running from either event occurrence or damage discovery. A statute of repose restricts the time within which a lawsuit may be filed regardless of when the injury occurred or was discovered, running instead typically from occurrence of a particular event, such as construction of a building. Significantly, as the plaintiff homeowner discovered in the Schollander case, failing to file a lawsuit within the applicable statute of limitations or repose can result in the complete waiver of one鈥檚 claim.

The Schollander case took up the issue of which of two statutes of repose applied to claims of negligent construction stemming from the purchase and sale agreement for an existing 鈥渟pec鈥� home, one built in anticipation of sale to the public but typically without the eventual owner鈥檚 input. While both of the statutes at issue provided for a 10-year repose period, each contained a different accrual period to start that 10-year clock.

ORS 12.115(1), governing actions for negligent injury to property, starts its clock on 鈥渢he date of the act or omission complained of.鈥� ORS 12.135(1)(b), entitled 鈥淎ction for damages from construction, alteration or repair of improvement to real property,鈥� does not commence its 10-year clock on claims until the date of a project鈥檚 鈥渟ubstantial completion.鈥� The problem among the competing statutes is that the act complained of (e.g., negligently installed windows) typically occurs months before substantial completion of the overall project. In such instances, which 10-year period applies?

In Schollander, the plaintiff homeowner contracted with the defendant spec builder in May 2000 to purchase the home. The contract also called for some changes to the home鈥檚 interior systems. Once the builder completed the additional work, the sale closed on July 12, 2000.

In July 2010, fewer than 10 years after the sale closed but more than 10 years after the homeowner entered into the purchase and sale agreement, the homeowner filed a claim against the builder for defective construction of exterior house elements, including the windows, siding, water resistant barrier and flashing (importantly, the interior work done under the parties鈥� contract was not at issue).

The builder sought summary judgment from the court that the 10-year statute of repose in ORS 12.115(1) barred the homeowner鈥檚 lawsuit because the acts or omissions complained of (i.e., the construction of the windows and other envelope systems) occurred more than 10 years prior to filing suit. The homeowner responded that the builder was relying on the wrong statute and that ORS 12.135(1)(b) applied to allow claims within 10 years of 鈥渟ubstantial completion鈥� of construction, which she contended occurred once the builder completed all work and the sale closed.

The Oregon Supreme Court upheld the lower rulings dismissing the homeowner鈥檚 claims as waived under ORS 12.115. The court keyed on the definition of 鈥渟ubstantial completion鈥� in ORS 12.135(4)(b) to determine that statute鈥檚 later accrual period did not apply to a spec home sale because the homeowner was not a 鈥渃ontractee鈥� party to a construction agreement capable of accepting the construction and starting the limitations period to run. The court reasoned: 鈥淚f there is no contract to construct, alter or repair an improvement to real property and thus no 鈥榗ontractee鈥� whose acceptance will trigger the period of repose, ORS 12.135(1)(b) does not apply鈥� and 鈥渢he more general period of repose set out in ORS 12.115 will govern.鈥� The court further offered that since a spec home theoretically might not be sold for years, starting the time limitations period on the ultimate sale, rather than the act complained of, could unacceptably broaden the applicable period.

So where does this decision leave us in a time of expanding development? It may be prudent for builders to track when each trade completes its individual work. And buyers or owners of spec homes should be aware that the time clock(s) on claims could be running from substantially earlier than their purchase date, and even then on multiple tracks depending on when each trade completes its work. Finally, if this decision is found to apply to all purchases of real property wherein the buyer is not a 鈥渃ontractee鈥� under ORS 12.135, its reach could be significant and extensive.

The best advice remains the oldest 鈥� if you want something done right, do it yourself. Consider adding your own time limits on claims to any contract for greater certainty. Setting time limits on claims can help manage risk and promote collaboration rather than adversity among the contracting parties. Conversely, leaving claims up to the 鈥渄efault鈥� statutory rules of limitation and repose risks a procedural waiver of rights and subjects one to the law of unintended consequences. Protect your rights, and consider specifying time limits on claims at the time of contracting.

C. Andrew Gibson is an attorney in the construction and design practice group of Stoel Rives LLP. Contact him at 503-294-9878 or [email protected].