Nevada Supreme Court Clarifies Statute Of Limitations In Construction Defect Cases

Statutes of repose serve an important purpose in construction defect litigation.  In Nevada, the statutes identify the timeframe in which a homeowner may bring a Chapter 40 claim.  If a homeowner attempts to bring claims outside of the statute of repose, a developer or subcontractor can immediately seek summary judgment.  There are rarely absolutes, however, and the nuances of Nevada’s ever-developing statutes require a close analysis to determine the timeliness of a homeowner’s claim.

Prior to the recent changes to Chapter 40, there were three applicable statutes of repose: six years for a patent deficiency, eight years for a latent deficiency, or ten years for a known deficiency. Determining what statute applied depended upon the type of deficiency identified, but all statutes began running at the time of substantial completion.  The revised version of Chapter 40, often referred to as AB 125, provides for a six-year statute of repose.  Like the replaced statutes, the six-year statute of repose begins running at the time of substantial completion.

The critical question, then, is when does substantial completion occur?  Luckily, the Nevada legislature provided some guidance in NRS 11.2055.  Section 11.2055(1) deems the date of substantial completion to be the latest of the following:

(a) The final building inspection of the improvement is conducted;

(b) A notice of completion is issued for the improvement; or

(c) A certificate of occupancy is issued for the improvement.

Despite the statute outlining when substantial completion occurs, there remained questions regarding what the term “issued” means in connection with issuing a notice of completion.  Is a notice of completion issued on the date it is signed and notarized or does the notice have to first be recorded?  In the recent case of Dykema v. Del Webb Communities, Inc., the Nevada Supreme Court provided a clear answer proclaiming that the notice of completion is issued on the date it is recorded, regardless of when the notice was signed.

In Dykema, a notice of completion was signed and notarized on homeowner Dykema’s home on November 30, 2004, and a notice of completion was signed and notarized on homeowner Turner’s home on December 14, 2004.  The Dykema notice was recorded on December 8, 2004, and the Turner notice was recorded on December 23, 2004.  Homeowner Dykema served a Chapter 40 Notice on Del Webb on December 2, 2014, and homeowner Turner served a Chapter 40 Notice on Del Webb on December 22, 2014.  Both homes were being litigated under the old version of Chapter 40.  Del Webb brought a Motion to Dismiss, converted by the district court into a Motion for Summary Judgment, arguing that the Chapter 40 Notices for both homes were served after the ten-year statute of repose.  The district court granted Del Webb’s Motion.

On appeal, the Nevada Supreme Court reversed the lower court’s decision, finding that both homeowners served their Chapter 40 Notice within the ten-year statute of repose.  The Court reasoned that while the notices of completion were signed and notarized on one date, neither notice was “issued” until the notice was actually recorded.  In order to come to this conclusion, the Court first noted that both parties had put forth different interpretations of the term “issued” and because the statute provided no guidance, the term “issued” is ambiguous.

The Court went on to interpret the statute and found it persuasive that lien law require a lien to be perfected within ten days of a notice of completion being recorded.  As the legislative history showed that the purpose of NRS 11.2055 was to “give builders . . . a clear date on which the statutes of repose begin to run” and that the legislative history “further suggests that the Legislature knew that prudent builders would promptly secure their lien rights after a notice of completion is recorded,” then the term “issued” must mean recorded.

Unfortunately, the Court did not end its discussion after defining the term “issued.”  The Court also confirmed that the ten-year statute of repose is applicable in this instance because Plaintiffs’ Complaint “alleged that [Del Webb] knew or should have known” about the defects.  However, the Court commented that Del Webb did not specify which of the homeowners claims could be patent or latent defects.  Thus, it is possible that Plaintiffs’ allegations were only sufficient because Del Webb failed to present any evidence to support Del Webb’s contentions that the shorter statutes of repose should apply.

The Dykema case should serve as a lesson to prudent developers.  It is of the upmost importance to immediately record a Notice of Completion.  Not only does this begin the clock for when a lien can be perfected, but it also begins the running of the statute of repose, which could protect against future unwanted litigation.

For more information about the case or other construction defect issues, please contract Jennifer Delcarmen in LGC’s Las Vegas office.