Changes to Construction Law Regarding Latent Defects

The construction industry was just dealt a significant blow with respect to its efforts over the years to limit risk of and exposure to claims for latent construction defects (those that are hidden and cannot be discovered until much time has passed since completion of construction). The strongest legislative mechanism providing such protection, through an absolute cut-off of claims after a certain period of time, is Arizona’s statute of repose, found at Arizona Revised Statutes (A.R.S.) § 12-552(A).

That statute of repose has been undermined by the recent Arizona Supreme Court’s decision in Sullivan v. Pulte Home Corporation. This decision allows non-contracting parties, such as subsequent purchasers, to pursue tort claims for latent defects, even if those defects are discovered after expiration of Arizona’s statute of repose, and to recover all corresponding damages, including those for purely economic loss, such as decreased value or repair or replacement of the defect or construction work itself. As such, at least with respect to non-contracting parties such as subsequent purchasers, Arizona’s construction industry has just lost the protection and certainty provided by Arizona’s statute of repose.