New Jersey Palisades at Fort Lee Condominium Association v. 100 Old Palisade (2017): Defect Claim Timing

Quick Answer

In Palisades at Fort Lee Condominium Association v. 100 Old Palisade, LLC, decided September 14, 2017, the New Jersey Supreme Court held that a construction-defect claim under the six-year statute N.J.S.A. 2A:14-1 accrues when someone in the building's chain of ownership first knew, or through reasonable diligence should have known, of a basis for a claim against an identifiable defendant. A condominium association gets no special exemption, and a later owner takes no better position than an earlier one.

The Court sent the case back for a hearing to fix the accrual dates. The Legislature later addressed association claims against developers by statute; see the related page on P.L.2021, c.379.

At a Glance

The Dispute

The Palisades is a Fort Lee complex with a 41-story tower, mid-rise apartments and townhomes. An architect certified it substantially complete on May 1, 2002. The developer rented units for two years, then sold the property in June 2004 to a buyer that converted it to condominiums. A conversion engineering report dated October 1, 2004 said the structure appeared generally in good condition but noted some concrete spalling and cracking in the parking deck. The report was attached to the public offering statement.

The developer-controlled association gave control to unit owners in July 2006, when 75 percent of units had been sold. The owner-controlled association then hired an engineering firm, whose report dated June 13, 2007 described defects in the exterior walls, roofing, concrete flooring, plumbing and other areas. The association sued the general contractor and three subcontractors between March 2009 and September 2010 for breach of warranty and negligence.

The trial court held the six years began at substantial completion, so the claims were due by May 2008, and dismissed them. The Appellate Division held the claims did not accrue until June 13, 2007, when the unit-owner board received its report. The Supreme Court granted review.

What the Court Held

The holding

The Court's summary reads: "A construction-defect cause of action accrues at the time that the building's original or subsequent owners first knew or, through the exercise of reasonable diligence, should have known of the basis for a claim. From that point, the plaintiff has six years to file a claim."

Why both lower courts were wrong

• Trial court. It had said a plaintiff who discovers a claim with time left on the six-year clock must file within the remaining time. The Supreme Court rejected that and said the plaintiff gets the full six years from accrual, calling the contrary approach one that "yields an absurd result."
• Appellate Division. It had said the clock could not run before unit owners took control of the association. The Supreme Court rejected that too: "The statute-of-limitations clock is not reset every time property changes hands." A subsequent owner "will stand in the shoes of a prior owner" for limitations purposes, and "a condominium association does not enjoy a preferred status exempting it from this long-standing rule."

The accrual rule

Substantial completion often is when a claim accrues, because some defects are apparent. But where defects are not obvious, accrual waits until someone in the chain of ownership knew or should have known of a claim against an identifiable defendant. If an earlier owner knew or should have known, the clock started then, and a purchaser cannot revive a lapsed claim.

Procedure on remand

The Court could not calculate accrual on the record because it needed findings on when the original developer, the converting owner or the association first knew or should have known of a claim against each defendant. It ordered a Lopez hearing. At that hearing, the plaintiff bears the burden of proving the claim accrued after substantial completion, and the court decides on objective evidence.

Statute of repose

The Court also explained the ten-year statute of repose in N.J.S.A. 2A:14-1.1(a), which begins at substantial completion and sets an outer limit. All complaints here were filed within ten years of May 1, 2002, so the repose statute did not bar them. The Court noted the repose statute speaks of "defective and unsafe" conditions and said any complaint about that wording belongs with the Legislature.

Why It Matters for Associations

• Do not wait. Our reading: under Palisades, time may start running on an association's claim because of what the developer or an earlier owner knew or should have known, even before owners control the board.
• Early reports matter. The Court treated the engineering report attached to the offering statement as part of the inquiry into what was known and when.
• Legislative response. P.L.2021, c.379, approved January 18, 2022, added subsection c. to N.J.S.A. 2A:14-1 for claims by associations against a developer. Because the statute now addresses those claims directly, the exact reach of Palisades for them is a question for counsel. Our existing page on that act sets out its terms.
• Repose is separate. Even where accrual is delayed, a ten-year repose period measured from substantial completion can act as an outer limit for certain claims.
• Limits of the case. The Court did not decide when these claims accrued or whether they were timely. It set the test and sent the case back.

Related New Jersey Law

• P.L.2021, c.379: tolling for association defect claims against developers
• Siller v. Hartz Mountain Associates (1983): association standing for common-element claims
• P.L.2023, c.214: structural integrity and reserves
• New Jersey HOA laws and regulations

Board Checklist

• Gather the developer's engineering reports, public offering statement attachments and turnover documents.
• Ask counsel to calculate possible accrual and repose dates for any suspected defect as soon as one is found.
• Commission an independent inspection promptly after turnover and keep the report.
• Log when each defect was first observed, reported or discussed at a meeting.
• Send defect concerns to association counsel in writing before deadlines are close.
• Confirm with counsel how the 2022 statute on developer claims affects your timeline.

Frequently Asked Questions

When does a construction-defect claim start the six-year clock?

When someone in the chain of ownership first knew or reasonably should have known of a claim against an identifiable defendant, which may be at substantial completion or later.

Does the clock restart when owners take over the board?

The Court said no. The clock is not reset every time property changes hands, and the association is not exempt from that rule.

Did the association win?

Not yet. The Court reversed the Appellate Division and remanded for a hearing to decide when claims accrued against each defendant.

What is a Lopez hearing?

A hearing, named for Lopez v. Swyer (1973), where the court decides on objective evidence when a claim accrued. The plaintiff bears the burden of showing accrual after substantial completion.

Is there an outer limit on defect claims?

The ten-year statute of repose in N.J.S.A. 2A:14-1.1(a) runs from substantial completion. Its application to a particular defect is a question for counsel.

Does the 2022 law overturn Palisades?

We do not read the 2022 act that way. It adds a tolling rule for association claims against developers. How it interacts with Palisades is a question for counsel.

Where This Comes From

We read the full opinion of the Supreme Court of New Jersey, including the Clerk's syllabus, as published by the New Jersey Judiciary. We did not verify the N.J. Reports citation or run a citator check, and we omit pinpoint cites. For P.L.2021, c.379 we rely on our existing page about that act.

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Legal disclaimer: This article is general information, not legal advice. Laws change and associations differ. Confirm the current statute text and how it applies to your governing documents with a licensed New Jersey attorney before acting.