Is It Too Late to Sue My Home Builder for Construction Defects I Found Years Later?

The effect of statutes of limitations and statutes of repose on construction-defect lawsuits.

By , Attorney Benjamin N. Cardozo School of Law
Updated 8/15/2023

One of the attractive features of purchasing a newly built home from a development company is that it will be fresh, clean, up to date, and customized to your tastes and interests. A downside, however, is that construction defects can take years to manifest. Can you sue a developer for faulty construction of that took place many years ago? Or has too much time gone by for a court to accept your case? We'll address that here, including:

  • checking for a builder's warranty
  • defining the legal basis for a lawsuit
  • understanding how statutes of limitations or of repose can cut off your right to sue after a certain period of time, and
  • considering whether winning a lawsuit will actually gain you any money from a developer in financial trouble.

Before Suing: Check for Builder's Warranty

Most home builders give new owners a warranty of their work, though time limits are an issue here, too. You'll need to read your sales contract or dig up whatever separate document the builder gave you.

Expect to see a combination of maximum terms for different types of issues. It will likely be broken up, for example, two years' protection for plumbing and electrical defects, ten years for structural defects, and so on.

If You Need to Sue Over Construction Defects, What's the Legal Basis?

In many construction defect cases, the most likely remedy is to sue the developer for breach of contract. Let's say, for example, that the issue is a rotted deck. The developer had promised you a house with a deck, thus implying that the deck would be constructed with proper materials in a workmanlike manner.

Your lawsuit would allege, through expert witnesses with a specialty in engineering, that the developer used shoddy materials and/or constructed the deck improperly.

Statute of Limitations Might Place a Time Limit on Your Construction Defect Lawsuit

As a potential plaintiff, you need to worry about two types of laws that might exist in your state:

  • the statute of limitations, and
  • the statute of repose.

A statute of limitations limits the amount of time during which someone may file suit, based on the basis of the legal claim and when the problem occurred or was discovered. The statute of limitations for a breach of contract tends to range from three years to ten years. (States' laws differ on this.) You would need to assert that the breach (the construction of the faulty deck) occurred within that time period.

In construction law, however, there is a concept known as a latent defect. This is a construction defect that you could not have reasonably known about within the statutory period.

Using the deck example, you might argue that the deck did not noticeably sink into the ground until a year after the breach of contract limitation period had already expired. This is sometimes known as the "discovery rule," and courts can use it to allow a plaintiff to extend a statute of limitations period.

Statute of Repose Might Block Claims Beyond a Certain Time Period

Whether your state's law contains a statute of repose is the second legal issue to check into. Not all states have a statute of repose. But a statute of repose acts as an absolute block on claims for construction defects beyond a certain number of years. These periods cannot be elongated by the discovery rule, if you find a latent defect. The purpose of these laws is to give legal certainty to contractors and developers.

Will Your Builder Actually Pay?

Another important concern is whether your builder's company is still operating, and in a financial condition to make good if you successfully bring a claim. Remember, successful litigation can only result in a financial judgment from a court; essentially, a piece of paper that says the contractor owes you money.

Established businesses will typically pay their judgments, because they have assets and need to be able to continue to do business in the community. If the contractor has no money, however, or has its assets protected in bankruptcy, then your judgment might not be worth the paper it's printed on.

Enforcing a judgment isn't easy, and it costs money. This is true even if the entity has money in its bank account, but is unwilling to pay; it is far more difficult if the entity is going through bankruptcy.

For more information, check out Can You Collect Your Judgment? Consider the size of your claim. If you are suing your contractor for only a few thousand dollars' worth of faulty work, it might not make economic sense to proceed with an expensive lawsuit, not to mention the judgment enforcement process.

Going After Individual Assets of the Builder

If the business really is going into bankruptcy, your goal should probably be to get a settlement as quickly as possible. Bankruptcy litigation can take years to unfold, and unless your claim is large, you'd likely be better off with a smaller, but faster, cash payment.

Trying to sue an individual business owner is one way to bring them to the negotiating table. It isn't uncommon for small contracting company to be owned and operated by a single individual; the same person who negotiated with you on the original contract and handled most of the work. Even if the builder is part of a larger company, you can often discover the name(s) of the individual officer(s) or owner(s).

If solely the company, and not the individual, plans to file for bankruptcy, it might be smart to sue both the company and an individual officer of that company. While LLCs and corporations are common legal constructs meant to protect the individual business owners from liability, courts will sometimes ignore this corporate shell. This is known as "piercing the corporate veil."

Though this remedy is rare, courts will consider it, particularly in cases where the LLC or shell company was undercapitalized, or where the individual business owner perpetrated a fraud. (An undercapitalized LLC might be a construction company with only $100 in its accounts, which suggests that it's a shell corporation; a business owner perpetrating a fraud might include a builder that promised to fix your structural foundation with steel support beams, but installed cheap wooden beams, instead).

By naming the individual in your lawsuit, and/or asking the court to pierce the corporate veil, you are attacking not just the company but that person's own bank accounts and property. This alone can sometimes scare a person into a settlement. Remember, for your purposes, it doesn't matter whether the money comes from the defunct company's account or the owner's personal account; you just want to get paid a settlement before the bankruptcy proceedings begin.

Bankruptcy Proceedings Can Stop Enforcement

One of the primary reasons that businesses file for bankruptcy is to avoid creditors. In this situation, you are a creditor of your contractor; you are claiming that the contractor owes you money for defective work.

Most commonly, Chapter 7 bankruptcy filings can save both individuals, and the businesses they run, from certain types of liability. It involves liquidating all business assets; that is, selling the contractor's equipment, vehicles, and office furniture. That provides cash to pay debtors and wind up the affairs of the business.

However, don't get too excited. Chances are, you are not the only creditor. There will be a long line of others looking to pick at the company's remaining flesh.

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