By Sandra L. Gottlieb, Esq. and Stephanie Rohde, Esq.
Now that the rainy season is soon upon us, many associations have been scrambling to get their association roofs repaired or replaced to avoid water intrusion issues (leaks). In every roofing contract that we have prepared or reviewed, the most important issue is the warranty.
A roofing contract should include two types of warranties, the manufacturer’s warranty and the roofing contractor’s warranty. Typically, the manufacturer’s warranty will cover a long period of time (10-20 years), and may include materials and possibly workmanship, but generally excludes “incidental and consequential damages.” This means if something goes wrong (and the new roof leaks), the manufacturer will cover the work that was performed under the contract (i.e., it will pay to replace the roof, but not the cost of labor) but will not do anything about the resulting damage from the leaks, like the damaged ceiling, walls, furniture, carpet, etc. This is an especially important consideration and issue in a roofing contract, where poor workmanship can result in extensive water damage and/or mold intrusion throughout both the common area and individual units. And in our experience, workmanship is usually the source of the leaks, not the material.
To cover consequential damages, the association should usually look to the contractor’s warranty. Typically, the contractor’s warranty will be for a shorter period of time (one to five years), but will be more comprehensive. As the manufacturer’s warranty is not negotiable, the association should expect the contractor’s warranty to cover those costs that the manufacturer’s warranty doesn’t, including cost of labor and incidental and consequential damages. Although this warranty usually has a shorter term, if a roof is not installed correctly, problems will typically become evident during the first rainy winter, meaning even a one-year warranty is valuable.
What if the roofing contractor is not willing to provide a contractor’s warranty? This should immediately set off an alarm bell for the board, as you should expect a reputable contractor to warrant its work. Unfortunately, these contracts can be tempting, as contractors who don’t provide a warranty can significantly underbid their competitors. The truth is that just because the contractor does not provide a warranty does not mean that the association has no recourse against the contractor. Absent a written warranty, the association still has the right to sue the roofer for negligence and/or breach of contract. However, prevailing in such a lawsuit is more difficult, because the association has to prove that the roofer did something wrong, which is more difficult than just proving that the roof leaked and there were damages.
We strongly advise our clients against entering into a contract without (at the minimum) a contractor’s warranty of at least one to five years, depending on the components and the work performed. Protecting the association’s investment and ensuring that the association gets what it paid for is an important part of the board’s fiduciary obligations to the association. However, ultimately this is a business decision for the board. Before entering into a roofing agreement provided by the roofer, we strongly encourage boards to have association legal counsel review the contract, as usually it is one-sided and only protects the contractor. In addition to making boards aware of the risks and potential liabilities, counsel can maximize protection, even if a contractor’s warranty is lacking, by clarifying the standards for performance and making sure that the manufacturer’s warranty is adequate. If a board is going to take a contract risk, it should prepare itself for homeowner challenge by documenting its decision-making process.
Sandra L. Gottlieb, Esq. is a partner in the Common Interest Development Law Firm of SwedelsonGottlieb and a Principal of Association Lien Services. She may be contacted at slg@sghoalaw.com. Stephanie Rohde, Esq. is a transactional Associate Attorney at SwedelsonGottlieb, and she may be contacted at smr@sghoalaw.com.