In most states, you, as the contractor, are required to provide a one-year parts and labor warranty on your work. That means if something goes boom, you go back and fix it without charging the client for the repairs. This assumes, of course, the problem was caused by improper installation of materials or material failure. This also assumes normal wear and tear. The warranty period normally begins at substantial completion of the work.
A letter we received recently asked a few questions about warranties in construction. Let me walk through his questions and share my thoughts.
“1. Substantial completion. I think that could be determined by the final inspection from the local authority. However, that could be incorrect due to work still ongoing after that final inspection or if it is a job that does not require a permit.”
Like what you’re reading? Purchase
Markup & Profit: A Contractor’s Guide Revisited. The basics of running a profitable construction business. Softcover, eBook, and audiobook formats
Order it Here
As an arbitrator the criteria I used, if it wasn’t stated otherwise, was that substantial completion was the day of the final inspection of the project by the governing authority. I’ve seen language that stated substantial completion was when the client could use the improvements as they were intended to be used. Whatever works best for your business, just make sure it’s spelled out.
“2. Who is actually responsible for making sure the warranty is addressed? Say the paint on a wall started flaking because it was not prepared properly. That would be more likely the GC following up painter. But say an outlet stops working and/or it keeps tripping the breaker. Then that would in theory be the electrician. But who has to make sure it is taken care of? If a client calls me, I would contact the responsible party and tell them to take care of it. But I have also seen where a letter was given to the client at the end of the job with the respective contractors’ contact info so they can contact them directly.”
If you’re a general contractor and you wrote the contract, it’s your responsibility to get the problem fixed. In rare cases you could tell the client to call the supplier or manufacturer to get repairs made but for most other happenings, I believe the GC should handle it all. That’s why you’re paid the big bucks. If a breaker keeps tripping, you, not the client, need to call the electrician and get them out for repairs or replacements, whatever is needed. The contract needs to state what the client should do in case they need to invoke the warranty.
“3. The terms of the warranty should be spelled out. For example, when there is a failure, the respective contractor or GC should be immediately contacted and followed up in writing. If they fail to respond, then the owner can do the remedy and bill the contractor. If the owner does not contact the contractor or GC, then all bets are off (in so many words)”
Most states today have a “right to fix” rule. That means the client notifies the GC there is a problem. The GC has 10 days to respond and arrange to get the problem fixed in a timely manner. If the GC doesn’t respond, the client has the right to affect repairs through whatever means and send the GC a bill for those repairs. In most situations, that’s a fair approach.
They went on to say:
“I am trying to find some examples of warranties with the right wording as well as specific exclusions such as acts of God, vandalism, improper maintenance. I am not trying to necessarily get out of it, but if one is not careful, the client could try to get more than what is fair.”
Your warranty should be as simple as possible. Maybe I am a bit jaded after 60 plus years in this business, but I always wonder what the buying public will dream up to cause me grief. My advice is to keep it simple, direct and to the point, and outline what your warranty does and doesn’t cover. Review it with your attorney before you add it to your contract.
Whatever you do, don’t ignore your clients when they call with a problem. When you’re doing your detective work to find the cause of the problem, if it’s your responsibility, get it fixed. If it isn’t your responsibility, call a quick meeting with the owner, show them what and where the problem is, and let them decide how they want to address it. If they want you to fix the problem, give them a quote. If they don’t want you to do the repairs, be happy you’re out of the loop. Whether you’re doing the fix or not, take photos of the problem so you can document it, then head for the shop.
Warranty work doesn’t happen that often so unless it is a major incident, address the situation then ask for a referral.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.
Listen to the audio here, or select dots on the right to download: