Understanding Statute of Limitations on Construction Defects: South Dakota’s Statute of Repose and Statute of Limitations Explained

When it comes to construction contracts, the true quality of the work may not be immediately apparent, and construction defects may go undetected long after the completion of a project. In some cases, defects may not manifest until well beyond the statute of limitations, complicating the legal process further. Consequently, knowing when a lawsuit can be brought in relation to a construction defect is important for both property owners and those involved in the construction industry. In South Dakota, there is both a statute of limitations and a statute of repose that govern the period for pursuing construction defect claims relating to construction defects. This article provides an overview of these statutes and how they relate to each other. 

SDCL § 15-2A-3 – The Statute of Repose

SDCL § 15-2A-3 is a "statute of repose." A statute of repose bars a claim as a matter of law based on the occurrence of an event—the substantial completion of construction—and not when the actual injury or damage occurred. Under SDCL § 15-2A-3, no claims relating to deficiencies in the design, planning, supervision, inspection, or construction of an improvement to a property can be brought against the construction professionals involved more than ten years after the substantial completion of such construction. "Substantial completion" refers to the point when construction is sufficiently completed to the extent that the property owner or their representative can occupy or use the property for its intended purpose. 

SDCL § 15-2A-3 serves as a protection for construction professionals, as it limits their liability exposure after ten years following the substantial completion of the project. The statute of repose provides construction professionals with a degree of certainty and protection against old claims that may arise long after they have completed their work on a project. It acknowledges that as buildings age, they may experience structural issues or other problems that could potentially be attributed to the construction process. However, it sets a clear cutoff point, after which construction professionals cannot be held liable for such issues, as they cannot be expected to remain exposed to legal claims indefinitely.

SDCL § 15-2-13 – The Statute of Limitations

The term “statute of limitations” may sound more familiar than “statute of repose,” but that does not mean it is any less complicated. Unlike a statute of repose, a statute of limitations sets a timeframe for initiating a lawsuit based on when the claimant knew or should have known about the injury. 

Lawsuits relating to construction defects are typically based on contracts, agreements, and other obligations between those responsible for the construction project and the owner of the property. As such, SDCL § 15-2-13 provides the statute of limitations for these types of actions. This statute establishes that civil actions based on contracts, obligations, or liabilities, whether explicitly stated or implied, must be brought within six years after the cause of action has accrued. A cause of action has accrued when the claimant first becomes aware of the injury or harm (actual notice) or when the claimant is aware of facts that would have prompted a reasonable person to inquire further, eventually leading to the discovery of the injury (constructive notice). In other words, once a property owner knows or should have known about a construction defect, they must initiate a lawsuit against the responsible party within six years.

Determining whether a person “should have known” about a construction defect can be complex and often depends on the specific circumstances of each case. Once evidence of damage is visible, a property owner is usually prompted to investigate further to find the source of the damage. However, identifying the precise root cause of the damage can be a complex and time-consuming process requiring investigations by construction experts, engineers, or other professionals. The time required to conduct these investigations and identify the responsible party can sometimes extend beyond the six-year statute of limitations leaving a property owner without legal recourse. 

The Statute of Repose and The Statute of Limitations

The critical distinction between these two statutes lies in the triggering event for the time limit:

• The statute of repose (SDCL § 15-2A-3) starts the clock running from the substantial completion of the construction, regardless of when the claim actually accrued or when the injury became apparent.

• The statute of limitations (SDCL § 15-2-13) starts the clock running from the moment you, as the claimant, discover the injury or harm related to the construction defect, or when you should have reasonably known about it.

It is important to note that although SDCL 15-2-13 and SDCL 15-2A-3 operate independently, they both can apply to a single case. Critically, the ten-year statute of repose will not extend the six-year statute of limitations. Thus, even if a claim falls within the ten-year period under the statute of repose, it must still fall within the six-year window dictated by the statute of limitations.

In practical terms, this means that once the substantial completion of the construction project has occurred (triggering the statute of repose), and the property owner notices leaking in the basement that same year (triggering the statute of limitations), the property owner cannot bring a claim against the individual who poured the concrete in the basement eight years later. Even though the property owner brought a lawsuit within the ten-year period under the statute of repose, the six-year statute of limitations set a strict deadline for bringing the claim the moment the property owner knew or should have known about the injury.  

The statute of repose and the statute of limitations attempt to balance the rights of property owners to pursue damages for their losses with the need for the timely and efficient resolution of disputes. It is important to note that while these laws provide specific timeframes, their application can vary with each case's specific circumstances. As such, navigating the legal complexities surrounding construction defects statute of limitations can be a challenging endeavor. Therefore, it is important to seek professional legal counsel whenever a construction defect comes to light.