There is an old saying that “bad facts make bad law”. When you practice long enough you realize that the word “bad” is relative. This is certainly true when reviewing the New Jersey Supreme Court’s decision in The Palisades At Fort Lee Condo. Ass'n, Inc. v. 100 Old Palisade, LLC. There, the Court held that the six-year statute of limitations for a condominium association’s construction defect claims against their developer accrue when the association discovers a cause of action may exist. Although this holding appears straight forward, the Court found that the six-year period may begin when the developer is still in control of the association and identifies a possible defect and does not strictly apply to the unit owners’ period of control.
For unit owners that just assumed control of its board of directors from its developer, this decision is troubling. Not only must they learn their new roles in leading the association, they must decide whether they should file suit against the developer so that their claims are not time-barred. For a developer, this ruling incentivizes maintaining a good relationship with its unit owners, addressing concerns and establishing trust that the association has been turned over in a good place so as to avoid immediate litigation. For the developer’s subcontractors that often completed their work several years before the unit owners assumed control of the association, this provides additional finality to their potential exposure to liability and allows their insurance carriers to properly underwrite their policies.
Recently, an unpublished appellate decision came down in a condominium association construction defect case that reaffirmed the Palisades holding, leaving little doubt as to New Jersey’s jurisprudence regarding these types of claims. Riva Pointe at Lincoln Harbor Condominium Association, Inc. v. Tishman Construction Corp, et al dealt with an Association that had an engineering report in 2008 that addressed certain deficiencies in the building. Despite the fact that unit owners were not in control of the building until 2011 and thus could not bring suit until that time, the Court ultimately held that the association was time-barred from bringing suit in 2015 as their six-year statute of limitations expired in 2014.
The Palisades ruling has been and will understandably continue to be challenged by the community association industry until either the courts reverse the decision, create limited exceptions or legislation is passed that specifically addresses the holding. Until that time it is imperative for the developer and community association to continue to work amicably to resolve their issues to ensure there is a smooth transition.