Accrual of Action Against Contractor

A property owner’s claim against a contractor accrues on the date of the completion of the work. The statute of limitations in this type of action begins to run from that date regardless of whether the owner decides to bring the action as one in negligence, breach of contract, malpractice, etc. What constitutes the “completion of work” is often contracted to between the parties, as was the case in Ferrante Immobiliare, LLC v. Pace, 68 A.D.3d 463, 891 N.Y.S.2d 27 (1st Dept. 2009). In that case, the contractor and property owner agreed in their standard AIA agreement that substantial completion of the project would be defined as “the stage in the progress of the Work when the Work … is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use.” The contract further provided that final payment would be made by the owner after the architect issued a Certificate of Substantial Completion and a final Certificate for Payment in which it would have to state that it had determined to the best of its knowledge that the work had been completed in accordance with the terms and conditions of the contract.

With regard to a contractor’s claim against a property owner for unpaid work, “the determination of the date on which damages are ascertainable may vary based on the facts and circumstances of each particular case. It generally has been recognized that damages are ascertainable once the work is substantially completed or a detailed invoice of the work performed is submitted. New York City School Constr. Auth. v. Kallen & Lemelson, 290 A.D.2d 497, 736 N.Y.S.2d 259 [2d Dept.2002].

One of the circumstances that may affect a contractor’s accrual date for a claim to recover payment is the terms of the contract entered into between the parties. This was the case in Superb General Contracting Co. v. City of New York, 39 A.D.3d 204, 833 N.Y.S.2d 64 (1st Dept. 2009), where the property owner and contractor put a provision in the contract that explicitly defined what the accrual date of claims would be. The court found that the date of substantial completion of the work governed determination of when the contractor’s cause of action to recover money from the property owner based on the contract was to accrue, rather than final inspection and determination of completion by construction manager.

Regardless of which party is bringing suit, the contractor or the property owner, it is wise to know at the time of contract what the applicable time limits are to do so. Additionally, it is advisable to set a provision in the contract that defines what constitutes “completion of work” so as to not leave room for argument about when the project was actually completed.