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Warranty Issue: Is No One Responsible?

Hey, it happens: your new roof leaks, your new elevators squeak, or your new flooring creaks. It’s the contractor’s job to fix it, right? Or surely it’s covered under the manufacturer’s warranty.

You would think so. Yet as a recent discussion on “Board Talk” (at www.habitatmag.com/board-talk) shows, that may not always be the case.

“Our co-op is having some large equipment (part of the heating/cooling system) installed,” one reader posts. “We’ve had some screw-ups in the past. So I asked our managing agent, ‘Who is bearing the risk on contract – the engineer who designed the specs or the contractor who is installing the equipment?’ I was told that neither company assumes the risk – if the equipment is installed incorrectly or doesn’t perform per spec, we need to pay someone else to try again. This doesn’t seem right to me.”

Nor to Scott Greenspun, either. A partner at the law firm Braverman Greenspun, he notes:

“‘Neither company assumes the risk’ – that just doesn’t make any sense. If the equipment is installed incorrectly, your recourse is against the contractor. If the equipment does not perform to specifications, your recourse is against the manufacturer and possibly against the contractor.”

A contractor installing large equipment would almost invariably have a contract with the board, which would include remedies for various contingencies. “Assuming that specifications have been prepared,” Greenspun says, “the specifications would require a warranty from the contractor to the co-op or condo for labor and materials, with the extent and scope of it particularized in the contract.” Additionally, any equipment the contractor obtains from a manufacturer typically has “certain specified warranty periods that are coming from the manufacturer directly to the co-op or condo.”

Yet in at least one rare instance, a different party may be at fault: the architect/engineer who prepared the specs. “I don’t want to overly complicate it,” Greenspun says, “but if the contractor followed the specifications to the letter and there’s no defect in the equipment yet something is wrong, maybe there’s an issue with the specifications, which weren’t drafted in a way to address the problem. Let’s say you’re putting in a new HVAC system. The size of the HVAC unit may be set by the engineer” who issues specs to the contractors bidding on the job. But after the unit is correctly installed, you might find it’s not working properly because the engineer specified the wrong piece of equipment. “Maybe he specified something too big or too small. The contractor didn’t do anything wrong. Similarly, the piece of equipment is operating in accordance with the manufacturer’s specs. In that instance, if there’s an issue, you’d be looking to the engineer who drafted the specs.”

Of course, the vast bulk of any remedy relies in the board having executed a contract. While virtually every state has implied warranties and statutory warranties – and while there’s a difference between a warranty and a “one-year correction period” – a cooperative or a condominium is best protected by what’s called “express warranties” in a written contract.

And a co-op or condo board is “always going to have a contract for a major capital project,” says Greenspun. In fact, “the specifications will generally say that the contractor has to enter into a contract. There are going to be jobs where you may not have specifications – smaller jobs where you’re just going to get a proposal, and both sides will sign a proposal, and that proposal becomes the contract. Sometimes the proposal is sufficient and sometimes it may be inadequate.” But whether it’s a proposal or a full-blown, 25-page contract, you should have an experienced attorney vet it.

Ultimately, then, it’s hard to imagine a circumstance in which equipment installed incorrectly or not performing to specification would require that “neither side assumes the risk” and the co-op or condo must pay twice.

Join our online discussion forum where board members post questions and the board director community responds.
Want to participate? http://www.habitatmag.com/Board-Talk

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