What are the Types of Damages a Property Owner Can Recover for Construction Defects?

When a property owner experiences construction defects in their property, one of the important considerations as to whether or not to pursue a construction defect lawsuit is what types of damages may be available to remedy the defects. This is an important consideration, as without a complete understanding of all the available types of damages, property owners may not be setting themselves up to obtain all of the recovery to which they may be entitled.

Initially, it is important to understand what constitutes a construction defect. In Florida, section 558.002(5), Florida Statutes, defines a construction defect as “a deficiency in, or a deficiency arising out of, the design, specifications, surveying, planning, supervision, observation of construction, or construction, repair, alteration, or remodeling of real property” resulting from:

(a) defective material, products, or components used,

(b) violation of applicable codes in effect at time of construction or remodeling which gives rise to a cause of action pursuant to section 553.84, Fla. Stat. (2020),

(c) failure of the design of real property to meet applicable professional standards of care at the time of governmental approval

(d) failure to construct or remodel real property in accordance with accepted trade standards for good and workman like construction at the time of construction.

Once a construction defect is established, property owners are often left wondering what damages they can expect to recover. This blog is intended to provide an overview of the types of damages that a property owner may be eligible to recover in a construction defect action.

Types of Damages That Can Be Recovered

Cost of Repair

Under Florida law, there are several types of damages that a property owner may be eligible to recover for construction defect claims. These include the five main types of damages discussed below as well as other potential consequential damages.  In general, “the proper measure of damages for construction defects is the cost of correcting the defects, except in certain instances where the corrections involve an unreasonable destruction of the structure and a cost which is grossly disproportionate to the results to be obtained. Gory Associated Industries Inc. v. Jupiter Roofing & Sheet Metal Inc., 358 So.2d 93 (Fla. 4^th DCA 1978); Edgar v. Hosea, 210 So.2d 233 (Fla. 3d DCA 1968);  Temple Beth Sholom & Jewish Ctr., Inc. v. Thyne Const. Corp., 399 So.2d 525, 526 (Fla. 2d DCA 1981).

In determining the cost of repair, the owner is entitled to the reasonable cost of repairing or restoring the defect to comply with the original design. Temple Beth Sholom & Jewish Ctr., Inc. v. Thyne Const. Corp., 399 So.2d 525, 526 (Fla. 2d DCA 1981). However, cost of repair damages may be prorated to account for an increased life expectancy of the repaired structure. This proration can be common in cases involving defects that require replacement of parts of the property that generally have extended lifespans, such as a defect requiring roof replacement several years into its usable life.  Mall v. Pawelski, 626 So.2d 291, 292 (Fla. 4th DCA 1993).

Diminution in Value

Diminution in value damages are awarded where other forms of damages such as cost of repair would result in economic waste. This occurs when the cost of repair substantially exceeds the reduction in the property’s value. Diminution in value damages are most commonly awarded when the structure would have to be torn down and rebuilt to cure the defect. Grossman Holdings Lt. v. Hourihan, 414 So.2d 1037, 1040 (Fla. 1982) (tearing down and reconstructing a home built with the wrong exposure would result in economic waste and as such damages are limited to the difference in value between the house contracted for and the house built).

Diminution in value claims typically come in three forms:

• Impaired Marketability: A construction defect can make a property more difficult for an owner to sell or lease. Impaired marketability damages can be awarded by the courts for this negative impact on the owner’s ability to sell or lease the property because of the defect.
• Stigma: Stigma damages are those awarded to address the lasting impact on a property’s value even after the construction defect has been remedied. These damages often have an uncertain long-lasting effect on a property. Damages are awarded for the “stigma” this causes. Some common examples include mold, water, and termite damage. See e.g., Orkin Exterminating Co. v. DelGuidice, 790 So.2d 1158 (Fla. 5th DCA 2001).
• Loss of Use: When a construction defect prevents an owner from using their property, loss of use damages can be awarded. This is type of damage is discussed further below.

Costs Incurred to Access Repair Areas

Another type of damages potentially available to property owners is the costs incurred to access repair areas, which would be in addition to the cost of repair. These damages can be awarded when there are additional direct costs associated with accessing a repair area along with the actual cost of repairing the defect. Mid-Continent Cas. Co. v. Treace, 186 So.3d 11 (Fla. 5^th DCA 2015) (Appellate court upheld damages for cost to access as well as the cost to repair water damage caused by faulty construction).

Loss of Use Damages

Loss of use damages are another type of damage a property owner may be able to recover in addition to cost of repair damages. Construction defects can often cause significant time disruptions for property owners. These delays can limit a property owner’s ability to lease the property to a potential tenant, costing rental income.  Additionally, the defect might prevent or delay the property owner’s ability to sell the property, thus losing the ability to use proceeds from the sale.  In these cases, the property owner may be entitled to recover damages for the lost income from the inability to use the property.  Even residential property owners may be displaced from their home during repairs, in which case, the costs to relocate may be recoverable damages for loss of use of the property, even if it is not a complete loss of use. See Fisher Island Holdings, LLC v. Cohen, 983 So.2d 1203 (Fla. 3rd DCA 2008); Gonzalez v. Barrenechea, 170 So.3d 13, 15 (Fla. 3rd DCA 2015).

Prejudgment Interest

Property owners may also be able to recover prejudgment interest on the amount of their damages. The prejudgment interest rate can be established either by contract or by statute. “Prejudgment interest compensates the plaintiff for the loss of use of the amount awarded, and thus interest accrues from the date the money was due until the date of judgment.” Regions Bank v. Maroone Chevrolet, LLC, 118 So.3d 251, 257 (Fla. 3d DCA 2013). When a construction defect arises, interest begins accruing from the date of loss. The court in Argonaut Ins. Co. v. May Plumbing Co., 474 So.2d 212, 215 (Fla. 1985), held that the “loss itself” occurs when there is a “wrongful deprivation” of the plaintiff’s property by the defendant. As construction defects can take several years to present themselves, prejudgment interest may be substantial amount. If the construction contract does not include a specific interest rate, then the statutory rate will apply. As of July 1, 2021, the current statutory interest rate is 4.25% per annum.

Attorney’s Fees

In addition to damages for the actual defect, a property owner may also be able to recover attorney’s fees. In Florida, each party is generally responsible for its own attorney’s fees unless there is a contract provision or a statute that provides for award of attorney’s fees. Price v. Tyler, 890 So.2d 246, 251 (Fla. 2004).  Therefore, the underlying construction contract must be reviewed to determine if it may provide a basis for recovery of attorney’s fees to the prevailing party.

Conclusion

In Florida, there are several types of damages available to property owners when their property is impacted by a construction defect. When faced with the negative impact left by a construction defect, it is important for property owners to obtain legal advice to ensure that they are maximizing their recovery.

Authors:

• C. Ryan Maloney, Esq.
• Maxwell Salain, JD Candidate