By Jessica Dye

NEW YORK, Dec 6 (Reuters) - A Queens judge has denied a contractor's bid to dismiss a lawsuit brought by the city for defective construction work, saying the statute of limitations did not begin to run until the physical work required by the contract was completed.

Supreme Court Justice Orin Kitzes on Nov. 27 denied a motion from contractor Admiral Construction LLC to dismiss the 2012 lawsuit brought by the New York City School Construction Authority. The lawsuit sought $1.7 million for allegedly defective construction work that Admiral had performed on a public school in Brooklyn.

In moving to dismiss the suit, Admiral argued that it was filed four days after the six-year statute of limitations for breach of contract claims had expired. To calculate when the statute of limitations began running, Admiral used June 29, 2006, the date when the construction authority certified the project as "substantially completed."

Admiral cited several rulings from state trial and appellate courts that used the date of substantial completion to calculate the statute of limitations for breach of contract claims brought by contractors seeking payment from owners.

The city responded by citing a 1995 Court of Appeals ruling, City School District v. Hugh Stubbins & Associates, which found that "an owner's claim arising out of defective construction accrues on date of completion."

Kitzes agreed with the city.

Unlike breach of contract claims brought against owners by contractors, claims brought by owners against contractors accrue on the date the physical work is actually completed, the judge held.

"(I)t would be unfair to limit an owner's time to commence an action for defective work to a period when the work has not been completed and the defective work might not be apparent," Kitzes wrote. "Consequently, it would be unfair to allow an owner to delay the accrual of the claim for payment until the work was fully completed."

A lawyer for the SCA, New York City Law Department senior counsel Gerald Singleton, said that the ruling "makes clear the distinction, for statute of limitations purposes, the difference between a claim by an owner for defective performance and a claim by a contractor for payment."

A lawyer for Admiral could not be immediately reached for comment Thursday afternoon.

The case is New York City School Construction v. Admiral Construction LLC, Queens Supreme Court, No. 701218/2012.

For SCA: Gerald Singleton of the New York City Law Department.

For Admiral: Michael Galina and Gayle Rosen of Rabinowitz & Galina.