OPERATIONS: CONSTRUCTION WARRANTIES
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. •
DAVID JACOBS
David Jacobs is a senior project specialist with Owner Builder Advisors. His experience includes construction labor, construction risk management, and sales. Jacobs uses his background in both on-site and in-office construction work to better assist OBA clients.
46 | think realty magazine :: july - august 2024
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