Introduction.
In the past, contractors and developers could feel secure that certain claims arising out of construction contracts would be barred after six years from completion of the project. A recent line of Oregon appellate court decisions issued in 2014 cast doubt on that long-standing assumption.
Statute of Limitations (ORS 12.080(3)).
ORS 12.080(3) establishes a six-year statute of limitations for claims involving injury to any interest in real property. Until this year, it was widely assumed that the six-year period began to run at the time the alleged “injury” or defective construction occurred. So, for example, in construction of a home, if the windows were installed improperly, the six-year period would begin to run at the time the windows were installed. At a minimum, contractors and developers could rely on ORS 12.080(3) to bar certain claims brought after six years from completion of the project—because all potentially defective construction would be completed by that point.
Recently, however, the Oregon Court of Appeals held that the six-year period under ORS 12.080(3) does not begin to run until the owner knew, or should have known, of the injury. The court held that the reasoning in Rice v. Rabb, 354 Or 721, 320 P3d 554 (2014), governed the analysis of ORS 12.080(3). In Rice, the Oregon Supreme Court held that ORS 12.080(4), which applies to claims for the improper taking of personal property, such as conversion, incorporates a “discovery rule,” meaning that the statute of limitations does not begin to run until the injured party knew or should have known of the injury. ORS 12.080(4) does not set forth when the six-year period begins to run, and as a result, the court looked to ORS 12.010 to determine when the limitations period begins. ORS 12.010 states that unless a different limitation is prescribed by statute, actions may be commenced only “after the cause of action shall have accrued.” “Accrued,” according to the court, by definition incorporates a discovery rule because for a cause of action to be maintained by a person, that individual must have knowledge of the injury. The court further reasoned that when the legislature did not intend for a discovery rule to apply to a statute of limitations it used terms other than “accrue,” such as “occurs.”
Therefore, in our homeowner example, the homeowner’s claim for the defective installation of the windows against the contractor will not begin to accrue until the homeowner learns of the defective condition, which may not occur until several years after construction.