Warranty Pitfalls

by Jeff Evans, RRC

Over the past several years we have written various articles about warranties. Topics such as what length of warranty is best, whether labor and material or "system" warranties are better, and what you need to do to keep from running afoul of warranty limitations. In this article, I wanted to share the pain of a couple of our clients, who have had recent and unfortunate warranty stories.

Client A is a retail business in a rapid growth mode. They built five stores in one state in one year, all with the same general contractor, roofer and roofing manufacturer. Everything during construction of these five stores went fine; the manufacturer issued the warranties, and the client closed their construction file on all five stores. Then a year or so later, several of the stores developed roof leaks. The roofer had since gone out of business, so the manufacturer was contacted. They sent out a statement that they had not been paid in full for the warranties, and under the terms of the warranty, no warranty existed unless all bills due them had been paid. The general contractor had long since been released, and the manufacturer now claimed it would cost $16,000 to reinstate the warranties.

Client B is an insurance company with an active real estate investment division, who purchased an office building with an eight-year-old roof. They were given a copy of the 20-year manufacturer's warranty, which correctly stated the seller's name. While the roof is in fine condition, some time after closing the transaction, the warranty was read, and it was discovered that the warranty requires the roof to be inspected (and repaired), and a fee paid before the warranty is transferred.

Client C built a new building and after the single-ply roof was complete, the roofing manufacturer issued a warranty. Benchmark was asked, as part of a routine inspection, to examine the roof prior to closing of the construction contract. The roof was found to be well below the manufacturer's specifications, with poorly detailed flashings, open seam voids and incomplete membrane terminations. The roof had also leaked several times since completion.

The roofing contractor had already been paid and the client was told by the roofer that, "your roof is fine, it has a warranty - contact the manufacturer." The manufacturer responded that the roofing contractor was on an "early warranty release program," which allowed them to get the warranty before the roof was actually inspected by the manufacturer. The client thought that issuance of the warranty meant the roof was approved by the manufacturer, so he released the contractor's payment. Now the roofer and the manufacturer were pointing fingers at each other.

Client D had reroofed four sections on his manufacturing plant over the last few years, all specified and overseen by the same roofing manufacturer. During the client discovered no warranties had ever been issued, none had ever been specified (although they had been verbally promised), and the manufacturer's representative had moved into a new territory out of state. When called, the old rep sounded surprised about the omission, but promised to follow-up and get the warranties issued. The client is still waiting.

Warranty issuance does not mean the job is complete.

The issuance of a warranty does not signal the completion of a roof, and it does not necessarily assure that the roof was installed correctly. It does not mean the roofer has paid the manufacturer for his materials or for the warranty. There are several methods for closing those holes in a roofing contract:

1. Ask to see the manufacturer's inspection punchlist, and inspect to see if it was completed.
2. Ask for a lien waiver from the warrantor prior to paying off the roofer.
3. Call for third party inspection of the roof prior to final payment.

Make sure the warranty is transferable.

When buying a building with a roof warranty, read the warranty. If the warranty needs to be transferred, ask the sellers to be responsible for that action. Most manufacturers are reasonable about this, but some are less so.

If you are reroofing a building in preparation for sale, make sure you request the manufacturer that the warranty be transferable after sale. You have a lot more leverage before committing to a reroofing contract than after the roof has been paid for.

Follow through and keep track of your warranties.

One manufacturer admitted in private that they figure as many as 50% of the warranties they issued would be lost or forgotten. They don't go out of their way to bring it to your attention. The longer the warranty, the better the chance there will be turnover in personnel, and the less likely anyone will remember which roof has a warranty and with whom.