Ohio’s Construction Statute of Repose
A recent court decision regarding Ohio’s construction statute of repose, deserves the attention of construction professionals. Ohio’s construction statute of repose, Ohio Revised Code 2305.131, limits the time a person may seek to recover damages arising out of a defective or unsafe condition of an improvement to real property against the architect or builder that furnished the design, planning, supervision of construction, or construction of that improvement. The current version of ORC 2305.131(A)(1) states:
"Notwithstanding an otherwise applicable period of limitations specified in this chapter or in section 2125.02 of the Revised Code and except as otherwise provided in divisions (A)(2), (A)(3), (C), and (D) of this section, no cause of action to recover damages for bodily injury, an injury to real or personal property, or wrongful death that arises out of a defective and unsafe condition of an improvement to real property . . . shall accrue against a person who performed services for the improvement to real property or a person who furnished the design, planning, supervision of construction, or construction of the improvement to real property later than ten years from the date of substantial completion of such improvement."
Different than a statute of limitations which generally begins to run when a cause of action has accrued, the repose period begins to run from “the date of substantial completion” regardless of whether a cause of action has accrued or whether any injury has resulted. ORC 2305.131(G) defines “substantial completion” as, "the date the improvement to real property is first used by the owner or tenant of the real property or when the real property is first available for use after having the improvement completed in accordance with the contract or agreement covering the improvement, including any agreed changes to the contract or agreement, whichever occurs first." Until recently, however, it has been unclear as to whether ORC 2305.131 applies only to tort claims, or whether it applies to contract claims as well.
In New Riegel Local School Dist. Bd. of Ed. v. Buehrer Group Architecture & Engineering, Inc., the Buehrer Group Architecture & Engineering (“Buehrer Group”) contracted with the New Riegel Local School District Board of Education (“New Riegel”) to provide design services for the construction of a new school building. Pursuant to contracts with the State of Ohio, two contractors, Studer-Obringer, Inc. and Charles Construction, Inc., also worked on the project. Specifically, Studer-Obringer served as the general-trades contractor, and Charles Construction served as the roofing contractor. In December 2002 the project was substantially completed and approved for occupancy.
In April 2015, New Riegel filed a complaint asserting claims against Buehrer Group, Studer-Obringer, and Charles Construction for breach of contract; a claim for breach of express warranty against Charles Construction; and against Ohio Farmers Insurance Company, the surety for Studer-Obringer and Charles Construction, on its surety bonds. New Riegel maintained that, as a result of as a result of improper design and construction, condensation, moisture intrusion and other deficiencies existed in various areas of the project.
The defendants filed motions for judgment on the pleadings, arguing the statute of repose in ORC 2305.131 barred New Riegel’s claims because substantial completion of the project occurred more than ten years before New Riegel filed its claims. The trial court granted the motion and dismissed New Riegel’s claims as time-barred. In reversing, the Third District Court of Appeals held New Riegel’s claims were not barred because ORC 2305.131 only applies to tort claims, not claims for breach of contract.
The Ohio Supreme Court reversed the appellate court’s judgment and held that “Ohio’s construction statute of repose is not limited to tort actions but also applies to contract actions that meet the requirements of the statute.” The Court noted Ohio courts recently have recognized that a “plaintiff in appropriate circumstances, may seek damages for injury to property in an action for breach of contract.” In addition, “the General Assembly explicitly tied the commencement of the repose period to contractual performance.” The Court also stated that holding ORC 2305.131 applies to contract claims is consistent with the General Assembly’s stated intention to protect defendants from having to defend against stale claims, “the perils of which are the same whether the underlying claims is based in contract or tort.”
In addition to its other arguments, New Riegel also argued “the 15-year statute of limitations for contract actions begins to run once a cause of action accrues within the repose period and ORC 2305.131(A)(1) does not shorten the time to file an action on an accrued claim.” The Court declined to resolve this issue, however, because neither the trial court nor the court of appeals had addressed it. This issue appears to be moot for the most part since, in 2012, the Ohio legislature shortened the statute of limitations for claims asserting a breach of a written contract from fifteen to eight years, less than the ten year time period of ORC 2305.131.
The New Riegel decision highlights an issue meriting the attention of owners, contractors, and design professionals. Notwithstanding applicable statutes of limitations, ORC 2305.131 may bar claims if not raised within its ten year time period. Hence, owners need to promptly act on known claims. Likewise, contractors and design professionals should consider ORC 2305.131’s applicability when they receive notice of claims that may be beyond its ten year time period.
Note that ORC 2305.131’s ten year time bar does not apply if a party “expressly warranted or guaranteed an improvement to real property for a period longer” than ten years. Put simply, a valid warranty or guarantee trumps ORC 2305.131(A)(1).
Finally, note that ORC 2305.131 provides a claimant with additional time to bring a claim discovered less than two years before the end of the ten year time period. ORC 2305.131(A)(2) states:
Notwithstanding an otherwise applicable period of limitations specified in this chapter or in section 2125.02 of the Revised Code, a claimant who discovers a defective and unsafe condition of an improvement to real property during the ten-year period specified in division (A)(1) of this section but less than two years prior to the expiration of that period may commence a civil action to recover damages as described in that division within two years from the date of the discovery of that defective and unsafe condition.
In that scenario, the claimant has an additional two years from the date of discovery to bring a claim.
Disclaimer: The article in this publication has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.