Understanding the Importance of Statutes of Limitations for Boards

Jennifer Stewart
Partner, Smith Buss & Jacobs

A statute of limitations defines the maximum time allowed to initiate legal action following a particular event, such as a contractual dispute or a slip-and-fall case. Knowing the time limits for different claims and understanding tolling options — where the statute of limitations can be extended — can make a significant difference in legal strategy and financial planning. Proactive steps, from marking key deadlines to seeking counsel, provide boards with a stronger, more informed position in effectively managing potential claims.

TIMING IT RIGHT. The statute of limitations plays a key role in guiding a board’s decisions on whether to pursue a legal claim or to defend against one. Boards need to understand how long they have to act on a potential claim, as well as how long others have to file claims against them. We often have boards come to us and find out that their window closed months or years earlier, but they never realized it. When this happens, they have lost a valuable opportunity.

DIFFERING DEADLINES. Each type of legal claim has a unique statute of limitations. A breach of contract claim generally has a six-year statute of limitations, while a professional malpractice claim has only three years, and a warranty claim might have as little as one year. In a situation where a construction contract went sour, these claims may all be mixed up in the same dispute. So if a board spends three years trying to resolve an issue without involving legal counsel, it might miss out on certain claims that expired earlier. 

STOPPING THE CLOCK. In some cases, the statute of limitations may be tolled, or paused, extending the period during which a claim can be brought. That was often the case during the pandemic due to court closures. There are also circumstances where tolling applies under specific conditions, such as when someone is incapacitated and unable to exercise their rights.

In certain situations, creative legal approaches can also allow boards to navigate around time limits. For example, if the board at a new-construction condo discovers concealed issues years after taking over from the developer, a straightforward breach of contract claim may be applicable and would be subject to a six-year statute. At the same time, a fraud claim — where deliberate concealment is alleged — may allow boards an additional two years from the date of discovery. Although these workarounds can be complex and require extensive legal expertise, they can help boards pursue claims that may otherwise seem barred.

FINANCIAL PLANNING. Boards might need to allocate funds in anticipation of potential litigation, so being aware of statutes of limitations can help with that planning. For example, if someone slipped and fell outside your building in 2023, you would want to set a calendar reminder for the same month in 2026 to see if that person has taken any court action, since the statute of limitations for such claims is three years. If they do sue, insurance should cover such cases, but you still want to be prepared financially for potential legal fees.