Thursday, June 12, 2014

Construction Warranty in 50 States

Warranty isn’t a popular topic with contractors. Warranty claims come in two sizes, expensive and even more expensive. Worse, no one wins a warranty dispute. And there’s almost nothing a contractor can do to avoid warranty claims. Better to cross your fingers and ignore the subject.

If that’s how you feel, keep reading. I’ll offer another viewpoint.

No too long ago I took a call from a contractor in a dispute with a condo association. The contractor had laid pavers around the perimeter of their complex. It was a big job and the condo Board was pleased – at first. About two years later the pavers started to “pump” where trash trucks made stops. The association claimed the pavers weren’t laid to spec. They hired an engineer and a lawyer and demanded that the entire job be torn out and done again –at the contractor’s expense. The job had passed every inspection, including soil density tests. But the original contract didn’t say anything about warranty.Obviously, the contractor needed help.

Warranties come in two flavors, express (written in the contract) and implied, either by court decisions or by statute (state law). All states enforce the terms of any express warranty in the contract. Most states also require that residential construction be done in a workmanlike manner. That’s an implied warranty. It’s not part of the contract and is separate from any written express warranty. The term and coverage of implied warranties will be whatever a court decides on a case-by-case basis or whatever state law requires.

Warranties State-by-State
Many states restrict or limit any attempt to disclaim the implied warranty of workmanlike construction, especially on residential jobs. For example, Kansas imposes a fine of up to $10,000 for trying to disclaim an implied warranty of fitness for purpose. Other states permit a contractor to disclaim implied warranties if wording, type size, and placement in the contract are just right.

Minnesota’s statutory warranty has to be written into every residential contract – three paragraphs of very precise language. The warranty runs for one year on materials and workmanship, two years on plumbing, electrical and HVAC and ten years on any "major construction defect".

California makes residential builders liable for a long list of construction defects. The builder has to either make repairs or compensate the owner for the loss – including relocation and storage expense. The warranty expires in either one, four or ten years unless another expiration period is in the contract.

Pennsylvania law implies a warranty of good workmanship -- what's reasonable under the circumstances, not perfection. An implied warranty of habitability is breached if a defect presents a “major impediment to habitation”.

New Jersey provides an express Home Owners Warranty (HOW) to all buyers of new homes. Every new home sold in New Jersey comes with a limited warranty against construction defects for up to ten years. Home builders in New Jersey are required to enroll in either the state warranty plan or a private warranty plan approved by the state.

Georgia’s Written Warranty Act requires that contractors deliver a written warranty before starting any residential work valued at over $2,500. See my blog post of March 31, 2009.

Every residential job in both Florida and Texas comes with an implied warranty of good workmanship and habitability. But contractors in both states can disclaim all warranties if the contract leaves no doubt about what’s covered and what’s not.

In New York, the implied warranty requires that work be done with reasonable care and competence. Any attempt to disclaim that warranty is unlikely to work.

So what’s a contractor supposed to do?
My advice is to be pro-active. Don’t have your warranty dispute end up on some desk at two law firms. Write an explicit warranty into your contracts. Identify exactly what’s covered and what’s excluded. That would have saved my friend the paving contractor thousands. In his case, pavers were subsiding where water from yard sprinklers drained across the pavement. A written warranty excluding damage from standing water would have saved at truckload of grief.

Where do you look to find out what warranty your state requires? Where do you get good warranty agreements that protect contractors, no matter the type of project? I’m glad you asked. The best source I know is Construction Contract Writer. The trial version is free.