Warranty Tolling and Homeowner Protection

Warranty tolling is a complex topic, but at its core, it's about protecting homeowners from defective building materials and construction practices. In many states, builders are required to provide a warranty that covers major defects for a certain period.

This warranty period can be tolled, or extended, if the builder is delayed in completing the work or if the homeowner is unable to occupy the home due to defects. For example, in California, the warranty period can be tolled if the builder is delayed in completing the work for more than 24 months.

Homeowners who are dealing with defective construction or building materials should be aware of their rights and the tolling provisions in their state's law. By understanding these provisions, homeowners can better protect themselves from costly repairs and litigation.

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Claimants must first exhaust all reasonable remedies under any applicable warranty before bringing a lawsuit.

The statute of limitations is six years from substantial completion if the defect was discovered, or should have been, within the warranty period for non-designer builders.

For architects and engineers, the same six-year limitation applies if their work met the professional standard of care.

The statute of limitations is tolled during the warranty remedy process, which can last up to one year or until the process is completed.

Tolling also applies for 60 days following the required notice-of-claim process.

Tolling is capped at one year for mitigation efforts.

Before filing a lawsuit, you must give builders written notice of the defect at least 75 days (90 for commercial properties) before filing suit.

Builders then have 90 days from the end of their inspection period to issue a formal response, which may include a settlement offer, a denial with explanation, or a scope-of-work report detailing planned repairs.

To get a fair shot, all offers must be made within 210 days of the initial notice. If an extension is needed and not agreed upon, the parties must select a neutral third party to evaluate the reasonableness of the request.

Claimants who unreasonably reject a good faith offer may be required to pay the builder's attorneys' fees and costs. Conversely, a builder who fails to make a reasonable offer may be liable for the claimant's fees and costs.

The statute of limitations is tolled during the warranty remedy process, which can last up to one year or until completed.

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The distinction between repair and improvement is crucial in determining which statute of limitations applies to a claim. In Highline Village Associates v. Hersh Companies, the Colorado Court of Appeals held that repainting an existing structure as part of a renovation constituted the construction of an improvement to real property.

Some repairs may be considered improvements if the result of the repair is integral and essential to the property's use or function. This is supported by the Colorado Supreme Court's decision in Smith v. Executive Custom Homes, Inc., which noted with approval the definition of an improvement as something that is essential and integral to the construction project.

The Highline Village decision suggests that if a repair meets this definition, it can commence a new limitations period from the date the defective repair was first noticed or should have been noticed. However, the Court declined to address whether the defendant's gutter repair constituted construction of an improvement to real property.

Courts have held that statutes of limitations that apply to defective real property improvements do not govern ordinary repair work. To be governed by real property improvement statutes of limitations, the repairs must be substantial enough to constitute improvements themselves.

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Statutory and Equitable Tolling is a crucial concept in construction defect litigation. Statutory tolling, as seen in CDARA, can significantly augment the limitations and repose periods. The statute's broad language suggests that tolling applies not just to CDARA claims but also to non-CDARA claims against a construction professional.

A notice of claim process (NCP) must be completed before a claimant can commence a construction defect action against a construction professional. If a claimant sends a notice of claim (NOC) to a construction professional, the statute is tolled until 60 days after completion of the NCP. This means the time prescribed for filing an action is paused.

The parties may also extend the NCP by mutual agreement, for example, while promised repairs are being arranged and made. Alternatively, extensions may result from delays caused by forces outside the construction professional's control or submission of multiple or amended NOCs.

Related reading: Redhibitory Defect

Design Flaws can be a major issue in construction projects. A design professional's work is considered a part of the construction of an improvement to real property, but the repose period may not begin to run until the design is put to its intended use.

For example, if a design professional only created a proposed geotechnical, structural, or architectural design, the repose period might not begin to run for years after the design services were performed.

Design professionals may argue that the repose period begins to run upon completion of their plans, regardless of when the plans were put to use. This is because the design may not be implemented and tested until long after the design services were performed.

Courts may also consider the language of the mechanics' lien statute, which specifies that the lien's attachment is triggered when the plans are completed for "work done or to be done." If the legislature intended for the repose period to begin in a similar way, it would have specified that as the trigger.

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In Colorado, a mandatory notice of claim process (NCP) must be completed before a claimant can commence a construction defect action against a construction professional. This process involves sending a notice of claim (NOC) to the construction professional within a certain time frame.

CDARA's broad language suggests that tolling applies not just to CDARA claims but also to non-CDARA claims against a construction professional that may be the subject of the NOC. This means that the statute of limitations can be tolled for a longer period.

If a claimant sends a NOC to a construction professional, the statute is tolled until 60 days after completion of the NCP. This can significantly augment the limitations and repose periods.

The parties may also extend the NCP by mutual agreement, for example, while promised repairs are being arranged and made. Delays caused by forces outside the construction professional's control can also result in extensions.

In Shaw Construction, LLC v. United Builder Services, Inc., the Court held that the HOA's statutory NOC to the general contractor did not toll the repose period for the general contractor's indemnity claims against its subcontractors. This suggests that a claimant should not rely on transmittal of an NOC to toll the claimant's claims against the general contractor's subcontractors or other construction professionals.

Take a look at this: Construction Contract

Battery revenue models vary greatly, ranging from high-risk, high-reward fully merchant setups to variable floor pricing arrangements and reliable tolling agreements.

Tolling offers plannable revenue and complete downside protection, but lacks scalability.

The fully merchant model has unlimited revenue potential, but is mercilessly exposed to market volatility.

Floor prices exhibit a significantly lower revenue split, but provide a certain degree of revenue security with the added benefits of downside protection and upside potential.

Hybrid options cannot be generalized – they are highly individual and must be assessed on a case-by-case basis.

Bankable forecasts, backtests, battery index, and portfolio performance are the four most common metrics used for revenue assessment.

These metrics serve different purposes and give you an idea of a battery's earning potential, which is ultimately determined by your commercial strategy.

Your revenue model should be a sustainable compromise between your revenue expectations and risk appetite.

The Homeowner Protection Act (HPA) in Colorado provides that any express waiver of or limitation on the legal rights and remedies provided by CDARA are void as against public policy.

This means that homeowners have strong protections against attempts to limit their rights to file construction defect claims.

CDARA and local municipal ordinances can affect the RP-SOL and RP-SOR, and in some cases, they may toll the time to commence a construction defect action during efforts to resolve the claim or seek homeowners association approval to file suit.

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In Colorado, the construction of an improvement to real property can be a complex issue. Repainting an existing structure as part of a renovation can constitute construction of an improvement to real property.

The Highline Village Associates v. Hersh Companies case established this precedent, and the Colorado Supreme Court later indicated support for this approach in the Smith v. Executive Custom Homes, Inc. case. The Supreme Court noted with approval that Highline Village defined the phrase "construction of an improvement to real property" to mean "where the result of the construction is a product that is essential and integral to the function of the construction project."

A repair that involves a component not essential to the function of the construction project may not qualify as construction of an improvement to real property. This means the RP-SOL and RP-SOR would not apply to the work.

The Smith case suggested that if a repair meets the definition of construction of an improvement to real property, it may commence a new limitations period from the date the defective repair was first noticed or should have been noticed.

The Homeowner Protection Act (HPA) is a crucial piece of legislation in Colorado that protects the rights of residential property owners. It voids any express waiver or limitation on the legal rights and remedies provided by the Colorado Construction Defect Action Reform Act (CDARA) or the Colorado Consumer Protection Act.

The HPA applies to any property used as a dwelling or for living purposes, as defined by consistent dictionary definitions, statutory definitions, case law, and zoning regulations. This means that if you own a senior living facility, for example, the HPA would still apply to your property.

A contract provision that purports to limit the time during which construction defect claims can accrue is rendered void by the HPA. This is a significant protection for homeowners, as it ensures that they can bring claims against construction professionals even if they don't experience immediate damage or injury.

The HPA's definition of "residential" property is broad and inclusive, covering not just individual homeowners but also entities like senior living facilities. This means that the HPA can provide significant protection for a wide range of property owners in Colorado.

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Sometimes, due to a statute or ordinance, or a party's conduct or statements, a warranty period may be held in abeyance and effectively extended or precluded from application.

This can happen when there's a statute or ordinance that specifically tolls or estops a warranty period, essentially putting it on hold.

Consider reading: Statute of Frauds