A condo association will be allowed to proceed with a lawsuit against the original developers filed 15 years after completion of the project, and despite a 10-year statute of repose. A divided Illinois Supreme Court has applied a “fraud-based” exception to the statute of repose, to allow the condo association to move forward with those causes of action alleging fraudulent concealment on the part of the developer. Interpreting Illinois Statute § 13-214, the case is Henderson Square Condo. Assoc'n v. LAB Townhomes, LLC, 2015 Ill. LEXIS 1267 (Nov. 4, 2015).
The developer’s marketing materials stated that it was the “largest and most respected developer” in the Chicago area, based on the “commitment to rigid quality standards” of its own construction company. After occupancy, and after various water leaks arose, the condo association brought in consultants and a contractor who did a detailed investigation. The consultant found that “overall quality of construction detailing and workmanship . . . was very poor.” And the contractor reported that “the coping leaked, the masonry lacked mortar, there was no flashing or drainage system, the lintels and joints were not sealed, and the roofing systems were defective.” Not exactly evidence of “commitment to rigid quality standards.”
The Illinois statute includes an exception to both the statute of limitations and statute of repose: “The limitations of this Section shall not apply to causes of action arising out of fraudulent misrepresentations or to fraudulent concealment of causes of action.”
Based on (a) the developer’s marketing materials, (b) the knowledge attributable to the developer since construction was performed by its common-ownership contractor, and (c) the developer’s control of the condo board for several years after construction, the Illinois high court found that the plaintiffs had sufficiently alleged facts that if proven could demonstrate fraudulent concealment of design and construction issues. Thus, the lawsuit started some 15 years after project completion will be allowed to proceed, at least relative to the fraud-based claims.
The dissent argued that the brochures, touting high-quality work, did not represent “concealment,” and thus the plaintiffs could not show that the defendants had taken steps to hide the poor quality work. Thus, the dissent concluded, the majority’s decision has effectively opened the door to any plaintiff who relies on marketing materials to argue “concealment” of facts to the contrary. There is significant merit in the dissent, in this writer’s view, but the majority has held otherwise. Unless there is legislative change, the Illinois statute of repose now has a gaping hole.
© 2019 Commonsense Construction Law