Tuesday, March 31, 2009

A New Dawn for Georgia Contractors: Warranty

Not many residential contractors in Georgia are good at writing warranties for their work. Builders usually think of warranties as bad news: Nothing good ever came from a warranty. Better to ignore the issue and hope clients never give it a thought.

That's about to change. Georgia Code Section 43-41-7 (the Written Warranty Act) now requires that residential contractors deliver a written warranty before starting work on any job valued at over $2,500 (see footnote 1). The Georgia legislature left it to the State Licensing Board for Residential and General Contractors to decide what has to be in that warranty. The Board's regulation (see footnote 2) went into effect on August 4, 2008.

There are two ways to look at this. First, the Written Warranty Act is just another burden contractors have to carry (or find a way to avoid). Second, you could decide that the Written Warranty Act is an opportunity likely to make or save you time and money. I think it's the latter and will explain why.

When you buy a car or a set of tires or get your car serviced, you get a warranty as part of the deal. That warranty draws a line in the sand – identifying exactly what's covered and what isn't, reducing the margin for dispute. Car dealers and appliance manufacturers wouldn't even consider doing business without a written warranty – for their own protection. Licensed residential contractors need warranty protection even more than appliance dealers. Your risk of loss is greater. A good contract with favorable warranty terms will lay off that risk.

And the Written Warranty Act makes it easy. The only iron-clad warranty rules: (1) It has to be in writing. (2) Has to explain what's covered and what's excluded. (3) Has to identify duration of the warranty. (4) Has to describe claim procedures and (5) response options. (6) And has to assign any manufacturer warranties. What your warranty says on those six points is entirely your call. Nothing in Section 553-7-.01 ties your hands. You can cover or exclude anything and for any period so long as you touch all six bases.

There's a certain symmetry to this new law. For several years, Georgia's Right to Repair Act (see footnote 3) has protected residential contractors from suit over claimed construction defects. Before filing suit, the home owner has to work through a 90-day settlement procedure. To get that protection, all you need do is insert a one-paragraph notice in the construction contract.

So now the scales are in balance: Obligations of the homeowner under the Right to Repair Act weigh against obligations of the contractor under the Written Warranty Act. In a way, it makes perfect sense.

If you need help drafting warranties for your jobs, the Web site Construction-Contract.net has a good selection of sample contracts for residential work, each with a warranty and Right to Repair notice that comply with Georgia law.

The download is free and available in PDF (Adobe Acrobat), RTF (MS Word or WordPad) and CCF (Construction Contract Writer) formats.

1 Official Code of Georgia Annotated 43-41-7. Written warranties required
A licensed residential contractor and any affiliated entities shall offer a written warranty in connection with each contract to construct, or superintend or manage the construction of, any single family residence where the total value of the work or activity or the compensation to be received by the contractor for such activity or work exceeds $2,500.00. The residential contractor division shall establish the minimum requirements of such warranty. The parties to the warranty may agree to submit any or all disputes arising under the warranty to arbitration. Such agreement to arbitrate shall be enforceable as provided in Part 1 of Article 1 of Chapter 9 of Title 9, the "Georgia Arbitration Code."

2 Compiled Rules and Regulations of the State of Georgia Section 553-7-.01 Written Warranty.
(1) Definitions:
(a) “Covered contract” shall mean any contract to construct, or superintend or manage the construction of, any single family residence where the total value of the work or activity or the compensation to be received by the contractor for such activity or work exceeds $2,500.00.
(b) “Single family residence” shall be deemed and construed to mean a “one or two family residence” as defined in the current edition of the state minimum standard International Residential Code (IRC).
(2) A licensed residential contractor and any affiliated entities shall offer a written warranty in connection with each covered contract.
(3) A licensed residential contractor that enters into a covered contract shall provide a written warranty which describes, at a minimum:
(a) Covered work and activities;
(b) Covered exclusions;
(c) Standards for evaluating work and activities, which standards shall be those set forth in the current edition of the Residential Construction Performance Guidelines as published by the National Association of Home Builders;
(d) The term of the warranty, including commencement date(s) or event(s);
(e) Claim procedures;
(f) Contractor response options (such as repair, replace or compensate);
(g) Assignable manufacturer warranties.
(4) Prior to the execution of a covered contract, a licensed residential contractor shall attach a complete copy of the written warranty (or an identical blank standard form of it) to the covered contract or otherwise make same available for review.

3 Official Code of Georgia Annotated Sections 8-2-35 to 8-2-41

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