Sage Advice US

Warranties: Your obligations once the work is done

Close up photo of a man holding a circular saw and cutting a metal rod. Sparks are flying.

As a contractor, your legal obligations don’t end once a project is completed. Most construction contracts impose warranty requirements that can last a year or more after a project is handed over to the owner. Knowing both the length of warranty called for on each job as well as the interplay of the law and your contract can help you avoid some common conflicts.

Final payment versus warranty work

Legal disagreements often occur when a warranty claim is raised before a subcontractor receives final payment. At this point, subcontractors don’t want to go back to do warranty work until they’ve received final payment. However, most standard contracts are pretty straightforward on the subject. A very common provision, as the one below, states that the job isn’t done until the punch list and any claimed warranty work is complete, which gives the owner or general contractor the right to withhold final payment until then.

This subcontract shall not be considered completely performed until all punch list and warranty claims hereunder are fully satisfied, irrespective of any payment disputes between subcontractor and contractor and/or any unpaid balance claimed by subcontractor.

As a subcontractor, you can address the final payment issue and also limit the scope of your warranty by adding a provision similar to this:

Subcontractor does not warrant that project will function as intended or envisioned or that the design professional has done its job correctly. Any warranty shall be void if the total subcontract price is not paid in full or if the work or materials supplied by subcontractor are abused, not maintained, or modified in any way.

Length of warranty

Another concern relates to how long the warranty is in effect. The industry standard is one year, but warranty obligations could last up to three years or longer depending on the jurisdiction and type of project. Instead of using the standard one year, many subcontracts measure a warranty period by the longer of several time scenarios. A typical provision could read:

Subcontractor shall warrant and guarantee to contractor and owner and any and all successive owners all work performed and materials and equipment furnished under this subcontract against defects in materials and workmanship for the longer of (i) one (1) year from the date of final completion of the project, or (ii) for any longer period if so specified in the contract documents or (iii) for any applicable period as required by law.”

Let’s delve into the nuances of each of the three warranty time scenarios mentioned above:

  1. One year from completion
    As a sub, your one-year warranty period doesn’t start once you’ve completed your portion of the work; it starts once the entire project is finished. So, if your work is done three months prior to the entire project’s completion, your warranty wouldn’t end for another 15 months after you put the last touches on your part of the job. This is why “substantial completion of subcontractor’s work” versus “final completion of the project” is the more preferable provision for any subcontractor.
  1. Longer period as specified in the contract documents
    There are other documents that when “incorporated by reference” become part of the subcontract. One of those documents is the prime contract. If there is reference to a longer warranty in the prime contract or any other contract document, you as a sub are obligated to that warranty period, unless you specify that in the event of a conflict, the subcontract controls.
  2. Applicable period as required by law
    In some cases, a warranty period may be required by law. One example is Florida’s Condo Warranty Statute, which stipulates a warranty up to three years for certain trades. So even though your contract may have you providing a one-year warranty, the law may require you to meet a longer warranty period.

The promise

A construction warranty is a contractor’s promise that what was built was built right. Standing by your work also means correcting any issues that could occur during the warranty period. Make sure you are aware of the different situations that impact your warranties to both meet your legal obligations and protect your rights.