Understanding the complexities of construction warranties strengthens your position as a developer or owner and helps ensure your project is finished to quality standards.
Warranties are a familiar concept to most people because they cover nearly all purchased goods and services. Construction projects are no different. There are multiple levels of warranties and guarantees general contractors, subcontractors, and material suppliers provide for all new construction projects.
The terms of these warranties are important for both owners and contractors. They will be relied on to determine liability if something breaks or otherwise malfunctions after construction is completed. Warranty terms are determined by the construction contract and by general laws and regulations, which can vary from state to state. Navigating the subtleties of warranties for a new construction project is important for owners of both residential and commercial properties.
Here are some of the warranties you should understand.
The 12-Month Fit-and-Finish Warranty
The most common type of warranty residential and commercial contractors offer is the 12-month warranty. It is sometimes referred to as a contractor’s guarantee in the construction contract.
Even where not required by law, this warranty is an industry standard and is tied to a contractor’s reputation for producing quality work. It is typically offered on “fit-and-finish” items that may be specifically defined within the contract. It is especially important to owners because it provides initial protection from poor workmanship and ensures the contractor is obligated to repair any defective work uncovered during the warranty period.
When negotiating the contract, owners should require that relevant sections regarding the warranty are clearly and thoroughly defined. Gray areas and unclear language in the contract are rarely resolved in the owner’s favor, so it is prudent to establish clear and specific parameters for what qualifies as deficient work and which types of work will be covered.
Because contractors typically want to preserve their reputation and do not want to make out-of-pocket repairs to completed projects, this standard warranty affords owners confidence that contractors will perform quality work during the project.
Fit-and-Finish Warranty Exclusions
The general contractor’s typical 12-month warranty excludes certain items from repair.
The first set of exclusions is usually for materials or equipment covered by an existing manufacturer’s warranty. At the end of your project, the contractor will provide you with the manufacturer’s warranty information for the materials, so you can contact the manufacturer directly for repairs.
It is important to review these documents carefully and complete any necessary registrations to ensure all equipment has appropriate warranty coverage. Excluded items typically include appliances, pool equipment, and specialty equipment.
The second set of exclusions deals with damage caused by owner or tenant neglect, improper maintenance, and outside forces such as natural disasters. The 12-month warranty is a good faith offering by the contractor to correct work they are responsible for, but as an owner, you have the responsibility to properly maintain and care for the property. If the contractor has reasonable doubt the damage was caused by owner neglect, they will not agree to complete repairs.
Similarly, the contractor is not responsible for completing repairs caused by outside forces, such as a natural or other disaster. Those types of damage are relegated to an insurance claim, regardless of whether the contractor’s warranty period is still in effect.
The final category of exclusions is wear and tear within industry standards. Some items (e.g., drywall, stucco, and concrete) are expected to experience minor cracking due to natural expansion and contraction, and finishes will experience wear and tear from normal use. If observed damage is not caused by improper installation, material failure, or poor workmanship, the contractor will not complete repairs as part of the warranty.
Owners need to understand all these exclusions thoroughly to know what type of repairs will need to be paid for out of pocket or through an insurance claim.
State Laws and Extended Warranties
In addition to the 12-month warranty most contractors offer, states often have additional laws that require extended warranties on certain structural systems and elements. These laws typically outline required warranties for structural components and building systems that would pose a safety risk if not constructed properly.
Systems commonly included under these laws are mechanical, electrical, plumbing, and structural framing systems. For example, although a Texas contractor might offer a 12-month warranty that lasts for 12 months, the contractor is still required to warrant the quality of mechanical systems for two years and all major structural components for six years following completion of construction.
These mandated warranties are not typically included in the construction contract. It is your responsibility to research the laws in your state to determine to what extent failures in mechanical and structural systems are covered by warranties. If you are starting a development in a new state, it is important to research specific warranty laws in that state. There may be key differences between that state’s laws and those in the states where you have completed developments previously.
The 11-Month Warranty Inspection
For all projects that include a 12-month fit-and-finish warranty, it is important to thoroughly review all aspects of the structure as the warranty period ends. Although you will have a good understanding of the potential issues and deficiencies after using the building for a year, hiring a professional to perform an inspection is recommended.
A qualified building inspector can perform tests and find issues you might not be aware of. In addition, when you negotiate correction of any identified issues with the contractor, a building inspector’s official report will carry more weight than your observations.
Even though contractors are obligated to repair issues per the terms of the contract, some will attempt to deny warranty claims by classifying observed problems under an excluded category. A certified inspector can identify in their report whether an issue is within industry standards for wear and tear or is a legitimate problem the contractor needs to address.
Inspectors often offer the 11-month warranty inspection as a specific service and will have protocols and report templates to ensure your structure is thoroughly reviewed. Regardless of your experience as a developer, it is always prudent to engage a third-party professional to offer an objective review of the building before the expiration of the warranty period.
Upgrade your Development Toolkit
Warranties are offered as protection for your investment in a new or remodeled building. Understanding the types and terms of the various warranties you receive when a project is completed is an essential part of ensuring you receive and maintain a quality building.
It is important to understand and define the contractor’s warranty in your construction contract, to keep records of all manufacturer’s warranties on equipment, and to research extended warranties required by state law.
If issues are discovered, successfully completing a warranty claim with the contractor can be a challenging prospect. Engaging a certified inspector assists in validating that the issues you have discovered should be covered by the warranty and promptly repaired.
Understanding the complexities of construction warranties strengthens your position as a developer or owner and helps ensure that your construction project is finished in a quality manner.
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