Page 28 - October 5-18, 2022 Law & Accounting A s Colorado’s construc- tion industry continues to boom, so does the potential for lawsuits, including those involving alleged design and construction defects and defi- ciencies. In any construction project, it is common for dis- putes and claims to surface, no matter the size or location of the project, which causes developers, design profession- als, contractors and subcon- tractors (collectively “construc- tion professionals”) to face numerous challenges. Those same parties tend to face these defect and deficiency lawsuits years after the project is com- pleted. Understanding the time limitations applicable to such claims is paramount to a suc- cessful project, which includes identifying and managing risk. There are two important time limitations to understand in Colorado – the statute of limita- tions and the statute of repose. The statute of limitations takes effect when a claim arises, while the statute of repose bars the bringing of a suit after a set period of time, regardless of whether an injury has occurred or a claim has arisen. These time limitations are set forth in C.R.S. § 1 3 - 8 0 - 1 0 4 . This statute governs the time periods by which all claims against con- s t r u c t i o n p ro f e s s i o n - als related to defects and deficiencies within the state of Colo- rado must be filed. The statute provides that all actions against construction professionals performing or furnishing services related to the construction of an improve- ment to real property, shall be brought within two years of when the claimant discovers, or in the exercise of reasonable diligence should have discov- ered, the physical manifesta- tions of a defect in the improve- ment that ultimately causes injury, but in no case shall such an action be brought more than six years after the substantial completion of the improve- ment. See C.R.S. § 13-80-104(1) (a), (b)(I). It is important to note that the aforementioned sub- section has a two-year exten- sion if physical manifestations of a defect are discovered or should have been discovered in the fifth or sixth year after substantial completion of the improvement. See id., (2). There are a couple of impor- tant nuances provided for within the statute. For instance, neither the statute of limita- tions nor the statute of repose can bar third-party claims if the claims were brought within 90 days after the third per- son’s claim against the claim is settled or at the time final judgment is entered on the third person’s claim against claimant, whichever comes first. See id., (1)(b)(II); Good- man v. Heritage Builders, Inc., 390 P.3d 398 (Colo. 2017). This benefits general contractors by allowing them to assert third-party claims against their subcontractors within 90 days after settling with the owner or judgment being entered, even if said claims are asserted after the expiration of the statute of limitations and statute of repose. While this means sub- contractors can no longer rely on the statute of repose (i.e., six up to eight years after sub- stantial completion) as a com- plete bar, this may help reduce the number of suits asserted against said subcontractors, as it removes the incentive for general contractors to file suit early on, when the alleged defects and deficiencies may not be clearly defined. In addition, there is a statu- tory exception for the accrual of the limitation periods when the construction professional is in actual possession and/or control of the improvement. See id., (3). Although no appel- late court has construed this subparagraph yet, the intent of this section seems self-evident – while the General Assem- bly sought to limit the amount of time a construction profes- sional may be liable for defects and deficiencies, the construc- tion professional cannot sit on a defective improvement with the effect of shortening the amount of time a buyer has to make a claim. Defending against alleged defect and deficiency claims can happen years after comple- tion of a project. As such, under- standing the applicable time limitations is key to ensuring that risk is properly managed, including document manage- ment and securing completed operations coverage for a suffi- cient time after completion. To ensure proper navigation as to the time limitations, as well as risk management, consult with an attorney for further guid- ance as to Colorado law. s Navigate construction defect statutes of limitation, repose BDO Denver 303 E. 17th Avenue, Suite 600 Denver, CO 80203 303-830-1120 Accountants and Advisors © 2021 BDO USA, LLP. All rights reserved. What’s Next? Business resilience is being tested daily. At BDO, our team of experienced professionals provides the knowledge and proactive guidance necessary to overcome the evolving challenges construction facing companies of every size. From ever-changing tax and reporting regulations, unstable surety and banking markets, to labor issues and unrelenting competition, we’re here to help the clients we serve, wherever they do business. Kate McDonald Shareholder, McConaughy & Sarkissian P.C. The statute of limitations takes effect when a claim arises, while the statute of repose bars the bringing of a suit after a set period of time.