The Subrogation Strategist

In D’Allesandro v. Lennar Hingham Holdings, LLC, 486 Mass 150, 2020 Mass. LEXIS 721, the Supreme Judicial Court of Massachusetts answered a certified question regarding how to apply the Massachusetts statute of repose, Mass. Gen. Laws ch. 260, § 2B, in regards to phased construction projects. The court held that, in this context, the completion of each individual “improvement” to its intended use, or the substantial completion of the individual building and the taking of possession for occupancy by the owner or owners, triggers the statute of repose with respect to the common areas and limited common areas of that building. Additionally, the court held that where a particular improvement is integral to, and intended to serve, multiple buildings (or the development as a whole), the statute of repose is triggered when the discrete improvement is substantially complete and open to its intended use.

In D’Allesandro, the action arose out of the construction, marketing, sale and management of the Hewitts Landing Condominium (the Condominium) project. Ultimately, 150 units were constructed over 24 phases of construction, enclosed in 28 different buildings. Throughout construction, the project’s architect submitted declarations to the Town of Hingham swearing that the individual units were “substantially complete” and could be occupied for their intended use. The Town of Hingham then issued certificates of occupancy for the unit or building.

Lennar Northeast Properties, Inc. d/b/a Lennar Northeast Urban was the developer and Lennar Higanham Holdings, LLC was the contractor and construction manager. Hewitts Landing Trustee, LLC (Lennar Trustee) acted as the trustee for the Hewitt Landing Condominium Trust between 2010 and 2015. On June 25, 2010, the Master Deed of the Condominium was recorded with the Plymouth County Registry of Deeds. On the same date, defendant Lennar Trustee executed a Declaration of Trust, establishing the Condominium Trust. In December of 2015, the unit owners of the Condominium took control of the Condominium Trust. On November 3, 2017, the Trustees of the Condominium Trust brought this action, alleging that a number of deficiencies and code violations were discovered in the design and/or construction of the common areas of the buildings.

The Lennar-related entities moved for partial summary judgment, claiming that, with respect to six buildings, the plaintiffs’ claims were barred by the statute of repose. The statute of repose bars tort claims arising out of any deficiency or neglect in the designing, planning or construction of an improvement to real property commenced more than six years after the earlier of: 1) the opening of the improvement to use; or 2) substantial completion of the improvement and the taking of possession for occupancy by the owner. Mass. Gen. Laws ch. 260, § 2B. For the six buildings at issue, the architect signed affidavits of substantial completion more than six years before the plaintiffs filed their action. For five of these buildings, the Town of Hingham issued certificates of occupancy for the buildings and all of their units more than six years before the plaintiffs filed their action.

With respect to the plaintiffs’ negligence and breach of implied warranty claims, the defendants argued that because each building constituted an improvement to real property, the filing of the architect’s certificates of substantial completion for each building began the running of the statute of repose for that building. The plaintiffs contended that the development was not conceived as 150 different subplots for each unit or 28 different projects for each building, but rather that the project should be taken as a whole. Therefore, the plaintiffs argued, that the statute of repose did not begin to run until the entire construction project was completed.

In the underlying action in the United States District Court for the District of Massachusetts (District Court), a case we previously wrote about, the court sided with the plaintiffs, finding that the 150 units were conceived as the potential scope of the project from the onset, that the same general contractor and architect were used throughout, and that the project was legally defined as a single condominium with a single trust, maintaining exclusive control over the common and limited common elements of the entire condominium. Taking all of these factors together, the court found that the Condominium was not a series of improvements, but one improvement. Therefore, the repose period began to run upon completion of the entire improvement, not when the architect or township signed off on the individual buildings. Following this decision, upon the defendant’s motion, the United States District Court certified the question of how the statute should apply in this context to the Supreme Judicial Court of Massachusetts.

When it answered the certified question, the court rejected the District Court’s approach, focusing on the intent of the Legislature when passing the statute. The court found that the Legislature wanted to shift focus from who performed the work and when it was performed, to focus on: “(1) whether the improvement is open to use, or (2) whether the improvement is substantially complete and the owner has taken possession for occupancy.”

Focusing on the identified factors, the court found that interpreting the statute so that an individual statute of repose date was triggered on the issuance of a certificate of occupancy for each individual building—rather than one repose date encompassing the entire project—more closely adhered to the legislative intent behind the triggering event for the statute. Further, the court stated that “where a particular improvement is integral to and intended to serve multiple buildings in a single phase, or buildings across multiple phases, or even the condominium development as a whole, the statute of repose begins to run when that discrete improvement is substantially complete and open to its intended use.”

Based on the court’s interpretation of the statute of repose for improvements to real property, when faced with multi-phase projects, subrogation professionals practicing in Massachusetts must be aware of two factors to properly analyze statute of repose issues in Massachusetts. Those factors are: 1) whether the improvement is open to its intended use; and 2) whether the improvement is substantially complete and the owner has taken possession for occupancy.