By Curt Liscum, RRC, RRO
Senior Consultant
warranties. The first installment can be found at Benchmark, Inc. 1 of 3, and provided guidance in identifying who the warrantor is, as well as discussed warranty definitions, history, types, and typical warranty coverage. The second installment can be found at Benchmark, Inc. 2 of 3, and discussed typical warranty exclusions/limitations, remedies, addenda/riders, building owner responsibilities, and warranty durations and forms. In this installment we will discuss warranty transfers, the relationship between the roofing material manufacturer and authorized contractor, typical installing contractor warranties, warranty fees, and a warranty strategy for building owners.
At the conclusion of this series, we hope to have helped our readers unravel and understand the complex world of commercial roof warranties, examine the status quo roof warranty process, and offered an alternative (more accountable) warranty strategy for building owners.
WARRANTY TRANSFER
Commercial roof warranties are a contractual relationship between a roofing material manufacturer or installing roofing contractor and property owner, therefore any remedies are to the benefit of the building owner, not the building. If the building owner changes, the warranty must be updated to reflect that change. This is accomplished by a warranty transfer. Not all warranties are transferable. Most standard warranties are transferable with the procedures and costs varying amongst roofing material manufacturers. Typically, a warranty transfer would consist of submission of a request for transfer by the building owner, payment of a transfer fee, site visit and review by a representative of the roofing material manufacturer, repair of any identified conditions by an authorized contractor at the owner’s expense, and finally when all is done, delivery of an updated warranty by the roofing material manufacturer.
The transfer should be completed before finalizing the arrangement or there may be a lapse in warranty coverage. As a result, the cost of required repairs may not be considered in the building purchase price.
MATERIAL MANUFACTURER/AUTHORIZED CONTRACTOR RELATIONSHIP
The contractual relationship between the roofing material manufacturer and authorized installing roofing contractor, as it relates to a commercial roof warranty, stems from the agreement authorizing the contractor to install warranted roof systems supplied by the manufacturer. As you may guess, this agreement varies among roofing material manufacturers, as do the warranties themselves. Generally, the agreement requires the authorized contractor be responsible to the manufacturer for their workmanship for the first two years of the warranty duration. This agreement is strictly between the roofing material manufacturer and the installing roofing contractor and does not involve the building owner, except that a manufacturer may require the use of the installing contractor for non-warranty covered repairs or modifications during the two-year period. Once the two-year period has expired, most manufacturers permit any authorized contractor to perform repair or modification work.
INSTALLING ROOFING CONTRACTOR WARRANTY
Most of this article has been centered around a commercial roof warranty offered by a roofing material manufacturer. However, it is common on roofing projects that the installing roofing contractor is required to provide a warranty directly to the building owner in addition to the warranty offered by the roofing material manufacturer. The common differences are that this warranty coverage is generally shorter in duration (2 to 10 years), and that the warranty not only covers leaks but also workmanship defects. Normally this warranty has similar exclusions and limitations to the commercial roof warranty offered by the roofing material manufacturer. This warranty is a direct contractual relationship between the installing roofing contractor and the building owner and does not involve the roofing material manufacturer. This warranty sometime confuses owners as they believe that leaks during this two-year period need to be reported to the installing roofing contractor and not the roofing material manufacturer. This is not the case, according to the terms of the commercial roof warranty, all leaks must be reported to the roofing material manufacturer within the specified time period.
WARRANTY FEES
Commercial roof warranty fees are not insignificant and can add thousands of dollars to the cost of a roofing project. Most roofing material manufacturers charge from $0.05/SF to $0.30/SF with a common amount being in the $0.10/SF to $0.20/SF range. In addition to the cost of “system upgrades,” addenda or riders can add $0.10/SF to $0.50/SF to the cost of the warranty fee. All too often coverage of an addendum or rider (like hail or wind) is already included in property insurance and the increase addendum or rider fee is analogous to an increased insurance premium.
It is common practice in the industry for roofing material manufacturers to offer material warranties at no cost. Although installing roofing contractor’s warranties have value, their fee is almost always included in the installation cost of the roof system.
When you compare the warranty fee to an investment for annual preventative maintenance, the commercial roof warranty fee is much less. However, as we discussed, roof maintenance is an owner requirement of most commercial roof warranties.
WARRANTY STRATEGY
A commercial roof warranty may be considered by some as a part of their overall building risk management plan, and therefore any strategy must be reviewed and implemented as a part of that overall plan.
The most common approach is to include a long-term (20-year) commercial roof warranty from the roofing material manufacturer as part of the project. Projects in areas of high winds or an increased potential for hail damage may include addenda or riders to help cover those events. Included would be a shorter term (two-year) warranty from the installing roofing contractor. Although this approach is used on thousands of roofing projects each year, it does have some shortcomings:
- The commercial roof warranty is subject to the myriad of terms, conditions and limitations of the expressed warranty written and offered by the roofing material manufacturer.
- This approach does not engage the installing roofing contractor into any long-term responsibility for their workmanship. They are the only project entity that is truly responsible for installation quality assurance.
- This approach may include duplicate premiums for events already covered by property insurance, such as wind or hail damage.
- With this strategy, there is no coverage from the designer of record for the quality of the design. Roofing material manufacturers and installing roofing contractors specifically exclude roof design from any expressed commercial roof warranty.
An alternate strategy may be to have each member of the project team be responsible for their portion of the low-sloped commercial roofing project. Following are suggestions for consideration:
As a part of the project, obtain a long-term (20-year) material warranty from the roofing material manufacturer to cover leaks associated with a material defect. This warranty is generally provided at no cost and strengthens the relationship with the roofing material manufacturer by involving the manufacturer as part of the roofing project team.
The next part would be to obtain a mid-term (10-year) warranty from the installing roofing contractor to cover leaks associated with installation workmanship. This contractor warranty could include annual preventive maintenance for the first five years that would repair or replace installation defects – even if the defect is not yet leaking. As confirmed by the National Roofing Contractors Association (NRCA), most leaks in a newly installed roof are associated with installation workmanship and happen within the first three to five years of service. This approach strengthens the relationship with the installing contractor and establishes them as a key entity on the roofing project team.
To close the “design” gap, use insured architects/engineers/consultants (A/E/C) with experience and knowledge in roof design on the project, thereby engaging their errors and omissions (E&O) insurance to cover any leak caused through design concerns.
Establish a comprehensive annual roof preventive maintenance program to review and maintain the roof and all associated appetences to achieve maximum longevity from the system. This could utilize the knowledge and expertise of a qualified A/E/C or professional roofing contractor.
And finally, as a part of the building risk management plan, review and understand the property insurance for coverage during significant weather events.
Regardless of the commercial roof warranty strategy implemented, it is imperative that as a functional part of the overall building risk management plan, that the commercial roof warranty is reviewed and the terms, conditions, and limitations are understood. Warranties can provide limited assurances to the owner that the roof will perform as intended, but only if you understand the true benefits and limitations of the documents.
Reference Documents
“Roof System Warranties” Consumer Advisory Bulletin by National Roofing Contractors association (NRCA)