In complex construction defect cases, when defendants move for summary judgment based on the statute of repose, the trial court will necessarily have to determine whether or not the subject real estate is in an unsafe and defective condition. Earlier this year, the New Jersey Appellate Division decided the case of Port Imperial Condo. Ass’n, Inc. v. K. Hovnanian Port Imperial Urban Renewal, Inc., 419 N.J. Super. 459 (App. Div. 2011), which explored this very issue. The Appellate Division upheld summary judgment in favor of defendant subcontractors under the statute of repose, finding that the improvements to real property posed a real threat to the safety and well-being of the residents, resulting in an unsafe and defective condition. The Appellate Division’s analysis and reasoning in reaching that conclusion is quite instructive and relevant for future litigants bringing construction defect claims.

Port Imperial involved 445-unit residential condominium community that was completed around 2002. None of the units in Port Imperial have basements, but rather were constructed on slab foundations. As a result of unsuitable soil conditions at the site, a ground improvement plan was designed and implemented, which consisted of deep dynamic compaction that included the dropping of a heavy weight from a crane onto loose soil, the drilling of holes in the soil and installation of wick drains to allow for removal of water from the soil, and surcharging – a process of piling rock and other debris onto the soil and monitoring the rate of settlement.

Once control of the common elements shifted to the homeowners, an engineering firm was hired to evaluate the development and to prepare a report identifying any construction defects. Numerous defects were uncovered, including cracked foundations and problems with several of the units’ roofs and windows, which led to filing a complaint against the developer and the design professionals alleging numerous claims, including negligence, breach of contract, breach of express and implied warranties, and fraud. During discovery, plaintiff hired a geotechnical expert who produced reports indicating that improper design and implementation of the ground improvement plan was causing settling of the soil under various units, resulting in damage to the buildings.

In deciding whether a safety hazard was present, the Appellate Division focused on whether or not the created condition prevented the improvement to real property from functioning as intended or fulfilling its intended purpose. See also, Horosz v. Alps Estates, Inc., 136 N.J. 124 (1994) (sinking house’s foundation constituted a defective and unsafe condition resulting in a safety hazard because without the appropriate underpinning repairs to prevent continued sinking of the house, the house could not function as intended). The Port Imperial court found that plaintiff’s allegations of “willful and wanton disregard for human safety” in the construction of the condominium development and contentions that the units were “unreasonably dangerous to unit owners and to personal property” coupled with expert opinions suggesting that the magnitude of the deficiencies “could be very significant” and “largely unpredictable” was sufficient to conclude an unsafe condition existed. See, e.g., Rosenberg v. North Bergen, 61 N.J. 190, 197-98 (N.J. 1972) (holding that a negligently paved road created an unsafe condition); Cnty. of Hudson v. Terminal Constr. Corp., 154 N.J. Super. 264, 267 (App. Div. 1977) (holding that negligently installed ceramic tiles that began to crumble and fall created a hazardous condition), certif. denied, 75 N.J. 605 (1978); Salesian Soc’y v. Formigli Corp., 120 N.J. Super. 493, 496 (Law Div. 1972) (holding that the leakage of water that damaged the building’s support structure created an unsafe condition), aff’d o.b., 124 N.J. Super. 270 (App. Div. 1973).

Therefore, Plaintiffs have to be very conscious of the allegations they include in their complaints as well as the contentions of their experts that may deal with safety issues. The trick is to make assertions that provide a basis for damages, but do not reach the threshold of being unsafe conditions having the potential to harm persons or property.