Earlier this month, the appellate court in Brisbane Lodging v. Webcor (CA Ct. App, First District, June 5, 2013) held that sophisticated (i.e., commercial) parties can contractually waive the discovery rule for latent construction defects and restrict the statute of limitations for filing a lawsuit based upon such claims.

Generally, in both tort and contract actions, the statute of limitations begins to run upon the occurrence of the last element essential to the cause of action. Often, this period does not start until a party discovers it has been damaged. With construction defect claims, a property owner usually has ten (10) years after substantial completion of the project to file suit. In Brisbane Lodging, however, the parties’ contract eliminated the 10-year period and expressly stated that all claims shall be deemed to have accrued no later than the date of substantial completion. As a result, the project owner only had four (4) years to file suit for any construction defects, not the usual ten (10) years.