DEVELOPERS OF REAL PROPERTY SUFFER
SETBACK IN CLAIMS FOR CONSTRUCTION DEFECTS

For over fifteen years, California state law has imposed four-year statute of limitations for construction defect claims involving improvements to real property, which are “patent” in nature. By previous case law, the Courts have interpreted “patent” to mean those defects which a reasonable person would be aware of.

In a recent, and unfortunate, California Appellate level case, an Appellate Court has ruled that even though a property owner claimant was aware of a defect, the defect did not become “patent” until the owner “fully understood” the physical cause or nature of the deficiency. In the case of Nash v. MacDonald, Dorothy Nash and others purchased undeveloped lots in 1989 from a property owner. Prior to building homes on the lots in 1993, the Nash purchasers noticed inadequate drainage and subsurface support for an access road. In 1996, seven years after purchasing the property, the Nash purchasers filed suit for construction defects.

At the Trial Court level, the Nash purchasers’ claims were found to constitute patent defects and were barred under the four year statute of limitation period for patent defects. There is substantial, recent case law that would substantiate this ruling. However, the Nash purchasers appealed arguing they did not fully understand the physical cause or nature of the alleged deficiencies. The Appellate Court then reversed the Trial Court and ruled that, even actual observation of a deficiency or its immediate effects would not make the defect “patent” if the average consumer would not fully understand its physical cause or have known the damages which might be caused.

The four-year statute of limitations period for patent defects provides an important defense to developers of real property and the Nash v. MacDonald decision could well serve to severely weaken it. It is expected that the Nash decision will be appealed to the State Supreme Court. In the meantime, the Nash decision will certainly serve to muddy the waters for property developers who seek the protection of the four-year statute of limitations period for patent defects.