What Warranty Do I Have to Offer?

Last week I got a question from a contractor who had read the June 2016 Consumer Reports article on home improvement. He told me that nine out of 10 contractors in the CU article claim to offer a written guarantee of their work. He wanted advice on the guarantee he should offer. My answer: “Fine. We can work up a written warranty. But understand that all your jobs come with a warranty already – even if you never breathe a word about it in the contract.”

Here’s why that’s a true statement. Forty-six states and the District of Columbia impose an “implied” warranty on contractors on nearly every construction project. Just by taking a job, you guarantee work will be done using customary skill and care, will comply with accepted standards and the finished project will be reasonably fit for the intended use.

Who enforces that warranty? Courts in every state decide construction warranty claims on a case-by-case basis. Exactly what meets state standards and how long the warranty lasts are a question for the judge and jury. Some states (AZ, CA, RI, SC) publish a list of construction standards – defining what constitutes a construction defect. Other states (DE, KY, LA) consider anything that doesn’t comply with the building code to be a defect.

Is there any way to avoid this implied warranty? Yes. That’s called a “disclaimer” of warranty. A carefully worded disclaimer will be enforced in most states if clear and conspicuous (bold type, upper case, “as is,” etc.), especially if the defect in question is part of the negotiations and will be obvious to the buyer. But don’t try to include a disclaimer in every construction contract. That won’t work.

Four states don’t imply any warrant. Instead, GA, ME, MN and NJ require contractors to give an express (written) warranty: Georgia requires a written warranty on single-family and duplex dwellings. See my blog post of March 31, 2009 for details. Maine requires a written warranty for residential jobs over $3,000. Minnesota requires a guarantee on materials and workmanship for one year, plumbing, electrical and HVAC for two years and structural components for 10 years. New Jersey contractors have to include a written guarantee with each bid.

What About an Express Warranty?

All states permit express written warranties in addition to the warranty required by state law. Here are the options if you want to offer more than the minimum warranty. These are listed in order of the least risk to the most risk to the contractor:

• When you install materials, equipment or appliances that come with a written manufacturer’s warranty, pass warranty documents to the owner.
• Offer a warranty on named components. For example, the roof won’t leak for five years or cabinet doors won’t sag for 10 years. Construction Contract Writer offers a good choice of warranties for 40 construction trades – everything from asphalt paving to windows and for any period you select.
• Offer a warranty on all material and workmanship. For example, “Contractor warrants that the work shall be free of defects due to faulty material or workmanship for the period specified in this agreement.”
• Offer a broad form warranty. This is the warranty usually required on public works projects: “Contractor warrants that work performed under this contract shall conform to the contract documents and be free of defects in material, design furnished and workmanship performed by contractor or any subcontractor or material supplier for the period specified in this agreement.”

If you use Construction Contract Writer, the choice is yours. Just check a box to offer the warranty you prefer.

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. 

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 express 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.