In Oregon, there is a time limit for a school district, or any property owner, to raise concerns with its contractors about potentially faulty construction workmanship. Pursuant to Oregon Revised Statutes 12.135(2), a school district as a public body has 10 years from “substantial completion” of a construction project to file a claim against a contractor for faulty construction workmanship. This is an absolute outlier date, called a statute of repose. No claims may be brought beyond that date, unless a contractor or product manufacturer agrees to an extended warranty.
Within those 10 years, other deadlines apply. Recently, the Oregon Supreme Court made important decisions which affect those other deadlines, called statutes of limitations. In Goodwin v. Kingsmen Plastering, Inc., 359 Or 694 (2016), the Supreme Court ruled that a school district has just two years to file a claim against a contractor for negligent or faulty construction workmanship, measured from when it “knew or should have known” of “the injuries or damage that form the basis of their claims.” In the complicated field of building performance, two years is not a lot of time for facilities professionals to recognize and diagnose performance issues. Compounding the difficulty, the Supreme Court’s decision may start the clock from when the District’s facilities professionals first start noticing problems, for example problems with a buoyant gymnasium floor, an underperforming HVAC system, or leaking windows. Even with outside assistance, it can take a lot of investigation to determine who may be at fault for a problem, and therefore what contractor may be the subject of a claim. In the meantime, potentially, the clock may be ticking under Goodwin while investigations are underway.
An unfortunate side effect of the Goodwin decision is that it increases the pressure on school districts to investigate and make claims against contractors. To protect themselves, school districts should advise their facilities professionals to be diligent in reporting concerns. If a concern is reported, school districts should reach out to contractors who may potentially be involved and ideally sign “tolling agreements,” stopping the clock on claims while investigations continue. If contractors are not amendable to this, they may put themselves in the position of forcing a claim process with the school district.
This issue of “discovering” a claim may also come up with respect to claims for breach of contract. Currently, the safe bet is that a school district has six years from the date a contract obligation is breached to raise a claim. That is typically understood to be the date of performance, i.e. the date of faulty work itself, not the date any damage or fault is discovered (when the district discovers symptoms of a problem). In the months ahead, the Oregon Supreme Court may consider expanding the concept of “discovery” to contract claims, which may provide some relief to school districts already under increasing pressure to investigate problems and pursue contractors who may be at fault.