Substantial Completion is in the Eyes of the Beholder: Judge Denies Dismissal of Claim Under Oregon’s Statute of Repose for Construction Defect Related Claims2020-04-23T00:25:21+00:00
12.19.2013 // CONSTRUCTION LAW WATCH
Substantial Completion is in the Eyes of the Beholder: Judge Denies Dismissal of Claim Under Oregon’s Statute of Repose for Construction Defect Related Claims

In Oregon, the ultimate repose period for residential construction (that is the absolute deadline to file a claim arising out of residential construction) is 10 years from “substantial completion.” ORS 12.135. This ultimate repose period provides certainty for contractors and developers that their potential liability for residential construction will come to an end after 10 years from substantial completion. Substantial completion is the date when the contracting parties in writing have agreed that the project may be used for its intended purpose or, in the event there is no written acceptance, the date the contracting parties accept the project as complete. ORS 12.135(4)(b).

In PIH Beaverton, LLC v. Super One, Inc., 254 Or App 486 (2013), rev. accepted, the Court of Appeals observed that the definition of “substantial completion” has two parts: The first part provides that “substantial completion” occurs on the date when the owner accepts in writing that the construction has reached the state of completion when it may be used or occupied for its intended purpose; the second part of the definition provides that, if there is no written acceptance, then “substantial completion” occurs on the date when the owner accepts the completed construction. Thus, a project may be “substantially completed” before it is finally completed, but only if the owner accepts the construction in writing as being ready for use or occupancy.

Trial courts are now applying this two-pronged definition of substantial completion for ultimate repose purposes. For example, in one of the first trial court decisions since the PIH Beaverton decision, Multnomah County Senior Judge (and former Oregon Supreme Court Justice), Robert Durham, held that a notice of completion, along with final inspection dates issued by the City of Portland, were insufficient evidence to conclusively show the date of substantial completion for the purposes of the statute of ultimate repose. According to Judge Durham, to satisfy the definition of substantial completion, defendants must either provide evidence of written acceptance by an owner that the project is ready for use or occupancy, or, where no such evidence exists, evidence of the date when “the contractee accepts the completed construction, alteration or repair of the improvement.”  According to Judge Durham, neither the notice of completion nor the City of Portland’s final inspection dates satisfied these definitions. Thus, he denied the defendants’ motion.

The Oregon Supreme Court has accepted review of the PIH Beaverton decision. While the legal contours of substantial completion for ultimate repose purposes are being worked out, residential owners and developers should be vigilant in closing out their construction contracts and, if you think you may have a claim, you should consult an experienced attorney to dig into the construction documents to determine how close you are to the end of the ultimate repose period.

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Adele J. Ridenour
Portland, Oregon
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