Nevada Common Law Meaning of the Term “Substantial Completion” in the Statute of Repose White and Williams LLP
The rest laws establish the determination by the legislature when the defendants should be released from all liability. As reported in Nevada Revised Statute (NRS) 11.202, the rest status for construction improvements in Nevada is six years after “substantial completion.” In Somersett Owners Ass’n v. Somersett Dev. Co., 492 P.3d 534 (Nev. 2021), the Nevada Supreme Court (Supreme Court) discussed when a construction improvement is substantially completed, as defined by common law, for the purposes of NRS 11.202. Because the plaintiff failed to establish that his complaint was filed within six years of when the rockery walls in issue were nearing completion, the Supreme Court upheld the lower court’s decision.
In this case, Q & D Construction, Inc. (Q & D) classified the property in 2006 and Parsons Bros. Rockeries, Inc. (Parsons) then built rock walls to support the terraced lots. This phase of construction was completed in December 2006, and Stantec Consulting Services, Inc. (Stantec) sent letters to Somersett Development Company, Ltd. (Somersett) indicating that the work had been inspected and approved. Although the expected lifespan of the rock walls was 50 years, some began to fail in 2011. In 2017, the Somerset Owners Association (SOA) sued Somersett, Parsons, Q&D and Stantec (collectively respondents) to recover the damage associated with the failing rock walls. The respondents, relying on NRS 11.202, brought a motion for summary judgment, which the lower court granted, and this appeal followed.
NRS 11.202 prohibits the initiation of actions more than six years after the substantial completion of the improvement of the property in question. NRS 11.2055 defines the term “substantial completion” and states that a property is to be considered substantially completed on the date that, among other things, a certificate of occupancy is issued for the improvement. Where, however, none of the applicable events (such as the issuance of a certificate of occupancy) occur, the date of substantial completion is determined by the rules of the common law. NRS 11.2055 (2). Addressing a question of first impression, the Supreme Court discussed when an improvement is substantially achieved under the common law. Adopting the definition of “substantial completion” offered by the American Institute of Architects (AIA), the court ruled that an improvement is essentially completed under common law at the “stage in the progress of the work when the work or designated part thereof is sufficiently complete in accordance with the contractual documents for the owner to occupy or use the work for the purpose for which it is intended. “
As the Supreme Court noted, the question of when an improvement is substantially complete is a factual inquiry, based on the circumstances of each case. In that case, given that the letters indicating that the rockery walls were nearly completed in 2006 were supported by the fact that Parsons had ceased construction at around the same time, the walls were virtually completed by December 2006 at the latest. Thus, the court ruled that the pursuit of SOA was prohibited by the statute of rest. Finding that SOA’s action was time-barred, the court rejected the opinions of SOA experts that the walls were essentially not complete until they were fit for use. that hadn’t happened yet. As the court noted, accepting this twist on the definition of AIA, in practice, would run counter to the rest statute. In addition, the deviations found in the construction standards were related to the quality of the construction, and not to the substantial completion of construction.
The Supreme Court also rejected the plaintiff’s argument that rest status should be paid to avoid injustice, as Somerset controlled the board of directors of the homeowners association until 2013. As noted by the court, most rest statutes can not be paid. Although the court did not resolve whether a toll exception applied, it ruled that in the absence of evidence of intentional fraud, the rest period was not subject to a fair toll. .
This case reminds us that rest laws are more definitive than prescriptions and, in general, cannot be paid. When faced with a rest status, subrogation practitioners should consider the statutory language of the applicable jurisdiction and when, as here, the rest period runs from “substantial completion”, determine the meaning of this term.