Warranties on new residences
Who must offer a warranty?
Contractors that contract to build a new home must make a written offer of a warranty to the owner or first purchaser. The warranty protects against defects in materials and workmanship for the structure. (ORS 701.320)
This law does not apply to manufactured dwellings.
What is a warranty?
A warranty is an obligation by the seller that the seller’s product (a new home) is free from defective materials or workmanship, together with a promise to repair or replace the defective items and faulty work. A warranty is not a guarantee. Repair or replacement is satisfied by meeting building industry standards. There does not need to be complete customer satisfaction. Generally, a warranty does not cover items that arise from customer neglect.
What does a new home warranty cover?
Typically, these warranties cover:
- Structural defects: Warrants against failure of structural components such as the load-bearing elements of the home.
- Major home system failures: Warrants against failure of plumbing, electrical, heating and air-conditioning systems. Also warrants against failure of major appliances, such as refrigerators, dishwashers, ovens and stove-tops.
- Workmanship: Promises to repair defects in the work performed, such as installation.
All warranties are contracts. The terms of the contracts vary. Some warranties, for example, cover only major home systems. Others provide limited coverage for all of the listed items. Still others exempt certain products or installations. Some warranties allow for the purchase of optional, additional coverage. Any warranty contract satisfies the new law.
Who must supply the warranty?
Although you, the contractor, must offer a warranty, you decide whether to supply the warranty directly or through a company that sells warranties. A direct warranty is a contract between you and the owner or purchaser. A purchased warranty is a contract between a company that sells warranties and the owner or purchaser. Either warranty satisfies the new law.
What period of time must the warranty cover?
The law does not require a specific time for warranty protection. A typical new home warranty protects against structural defects for five to ten years and promises to repair or replace major systems for one to two years.
You may select the time period for the warranty.
How much can you charge for the warranty?
The law does not set any limit on the amount you can charge. Typically, new home warranties purchased from warranty companies cost from $250 - $500. There may also be a service fee, like a deductible, which the homeowner pays when requesting service. A typical service fee is $50.
When must you offer the warranty?
The contractor must, in writing, offer the warranty either before or at the time the contractor and owner (or purchaser) sign a contract for the construction of the home.
What must you do to prove that you offered the warranty?
The contractor must include statements in the contract that:
- The contractor made a written offer of warranty
- The owner or purchaser accepted or rejected the offer.