An Upper West Side co-op thought the nightmare with its construction contractor ended in 2011 when he left the jobsite. But 5 ½ years after leaving the jobsite, in October 2016, the contractor filed suit against the co-op trying to recover outrageous “penalties” and trumped-up fees under the contract, demanding a six-figure payday. The co-op and its president turned to Adam Leitman Bailey, P.C. (“ALBPC”) to finally end the dispute once and for all.
After studying all the evidence and correspondence, the ALBPC team determined that the contractor’s claims were time-barred under New York’s 6-year contract statute of limitations. The claim was time-barred because although the contractor was at the property in February 2011 and 5 1/2 years before he sued, his work was substantially completed 5 months prior, in September 2010. Therefore, the breach was more than 6 years before the action was commenced in October 2016.
The problem was that the contractor’s first complaint was intentionally vague and ambiguous, alleging simply a claim for “account stated.” To pin him down, the ALBPC team first moved to dismiss, explaining that the contractor had to sue under the contract. The court agreed and dismissed the first complaint. However, the court allowed the contractor to re-file a complaint for breach of contract. At that time, the Judge observed that she did not think the statute of limitations had expired for breach of contract since the contractor was at the property in February 2011 and had demanded payment in March 2011, all less than 6 years prior to the lawsuit. This played right into ALBPC’s hand.
For purposes of the New York contract statute of limitations, unlike a typical breach of contract claim, a breach of a construction contract claim accrues upon substantial completion of the construction work. Cases have generally held that “substantial completion” may occur when the parties exchange a punch list and only incidental work remains uncompleted. This often overlooked “substantial completion” rule can be easily missed by unknowledgeable counsel.
Upon receiving the amended complaint, the ALBPC team prepared a robust dismissal motion, knowing that the Judge already believed the statute of limitations was not an issue. To strengthen its argument, the ALBPC team devoted an entire section of the brief to discussing the policy underpinnings for the “substantial completion” rule. The ALBPC team then tirelessly combed through all the evidence and found instances of the contractor’s own written admissions that the work under the contract had been substantially completed in September 2010.
At oral argument, the Judge reversed her opinion and observed that she “was surprised to learn” about the “substantial completion” rule in construction contract cases. Adhering to the rule, the Judge then granted the co-op’s motion to dismiss in its entirety and with prejudice, ensuring that the contractor cannot try to sue to co-op again.
Israel Katz, Esq. and another attorney of the Real Estate Litigation Group at Adam Leitman Bailey P.C. secured the dismissal victory for the co-op.