Plaintiffs Face Challenges in Construction Defect Cases After Recent Rulings

The firm’s latest Miami Herald “Real Estate Counselor” column was authored by shareholder Georg Ketelhohn. The article, which is titled “Plaintiffs Face Challenges in Construction Defect Cases After Recent Rulings,” focuses on three recent Florida appellate court decisions that have underscored an important point for property owners in construct defect cases and anyone involved in breach of contract disputes: Damages must be calculated based on costs at the time of the breach, not years later when a case goes to trial. The appellate opinions highlight how critical it is to get the timing right, and they serve notice that these decisions can significantly affect homeowners, condo associations, and other plaintiffs in disputes with developers, builders, or contractors. Georg’s article reads:

. . . In January, the Third District Court of Appeal reversed a Miami-Dade ruling that had awarded nearly $436,000 to the buyers of a newly built Coconut Grove home. The couple who purchased the home sued builder Bandklayder Development in 2018 after discovering defects, and in 2023 the trial court ordered the company to pay up based on current repair costs.

However, on appeal, the appellate panel pointed back to a 1982 Florida Supreme Court ruling that concluded damages for a contract breach must be measured “as of the date of the breach.” That meant the buyers needed to prove damages based on 2017 or 2018 costs — not 2023 costs. Despite proving their claims, using the wrong date for calculating damages meant the couple walked away empty handed.

In June, the same appellate court ruled against the Eloquence on the Bay Condominium Association, which had sued the developer and contractor of the 20-story North Bay Village tower over building code violations. During the trial, both sides agreed that damages should be based on 2015 repair costs. However, the association’s evidence only showed costs from 2019 and 2022.

The jury sided with the builder, and on appeal, the Third DCA upheld the decision. Since the condominium association never provided evidence of the 2015 costs, it lost the case.

In July, the Fourth District Court of Appeal reversed nearly $500,000 in damages awarded to homeowners in Broward County who had sued Vuletic Group over a botched remodel. The trial court based its judgment on more recent costs, but the appellate court said damages should have been tied to the time of the breach, echoing the earlier rulings.

These cases send a clear message: Damages must be based on costs at the time of the breach of contract. However, it is not always obvious when that breach occurred. Was it the day the purchase of a home closed? The day problems were first reported? Or later, when a contractor failed to fix them? If there are multiple contracts and multiple issues, it gets even trickier.

For homeowners, all this information can feel overwhelming. Repairing major defects today costs far more than it did years ago, especially with recent inflation. State law does allow plaintiffs to collect prejudgment interest from the date of the loss, which may help close the gap in some cases. Still, interest may not fully account for the labor and material costs surge that has hit the construction industry over the last several years.

The rulings also underscore the importance of strategy. Plaintiffs must work closely with attorneys and expert witnesses early in the case to gather historical estimates, invoices, or testimony that accurately reflect damages as of the breach date. This may require gathering historical industry pricing data and presenting it through expert testimony.

Alternately, if a property owner can quickly identify what needs to be corrected at the time of a contract beach and incurs the expenses right away, those out-of-pocket costs may be used to establish damages at trial. Without using the correct measure of damages, even strong claims can fail, or collapse on appeal.

The bottom line is that anyone considering a construction defect or contract lawsuit in Florida needs to be prepared with expert help to understand these rulings. Accurately identifying the date of the breach is essential, and the failure to do so can result in losing a case. . .

Georg concludes his article by pointing out that those facing a potential construction or contract dispute should not wait until trial to build their case. He suggests that they consult with an experienced attorney early, secure the right experts, and preserve the evidence needed to prove damages at trial. Georg notes that taking such proactive steps can protect their rights, strengthen their claims, and help them to avoid the costly pitfalls highlighted in these recent rulings.

Our firm salutes Georg for sharing his insights into the takeaways from these recent rulings with the readers of the Miami Herald.

Our firm’s South Florida community association attorneys write about important matters for associations in this blog and our Miami Herald column, which appears every two weeks on Sundays, and we encourage association directors, members and property managers to click here and subscribe to our newsletter to receive our future articles.