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SPONSOR ACE IN THE HOLE: THE INDEMNIFICATION CLAIM

In the usual case, claims by a sponsor against a construction manager or contractor ("contractor") for construction defects in a condominium building are subject to the six (6) year statute of limitations for contract claims, which starts to run from the date the contractor completes work on the construction project. Claims by a sponsor against an architect or other professional ("architect") for design defects in a condominium building are subject to a three (3) year statute of limitations, which starts to run from the date the architect completes its services on the construction project.

However, instances arise where a condominium board of managers and/or individual unit owners ("board") file claims against a sponsor for construction and design defects in the condominium building after the statute of limitations runs against the contractor or architect due to the fact that the contractual sale dates of the condominium units start the six (6) year statute of limitations applicable to claims by the board for design and construction defects in the condominium.

In those cases, the law of indemnification protects the sponsor. Although the sponsor may not have a direct claim against the contractor or architect due to the running of the statute of limitations, the sponsor may assert an indemnification claim against the contractor or architect to the extent the sponsor has to pay damages to the board for design and construction defects in the building, i.e., the sponsor can recover any monies it has to pay to the board for the defects from the responsible contractor or architect because the statute of limitations for the indemnification claim does not start to run until payment to the board is made.

Our attorneys are available to assist clients in drafting appropriate contract language.

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