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“WHAT DO YOU MEAN WE HAVE TO GO TO PENNSYLVANIA TO ENFORCE OUR WARRANTY?”: ROOF REPLACEMENT, VENUE CLAUSES, WARRANTY LIMITATIONS, AND OTHER PITFALLS IN CONDOMINIUM REPAIR CONTRACTS

flat roof pic

The Life and Death of a Roof: A condominium building with a low-slope roof (commonly but incorrectly referred to as a “flat” roof) will need a reroof every seven to twenty years. This is a major budget item that can cost from $8 to $15 per square foot of roof deck, which quickly adds up to hundreds of thousands of dollars on a typical Florida condominium building. Roofing is one of the largest investments a condominium association will ever make. If the results are a faulty roof, the decisions made can quickly become the biggest source of grief a condominium board will ever face.

Your Warranty – Will Anyone Answer the Phone? One benefit of a reroof project is the warranty from the manufacturer and roof installer. But manufacturer’s roof warranties (and often, other vendor contracts) contain unpleasant fine print surprises. All warranties are not created equal, and an effective Board must look far into the details of the warranty document, far beyond the number of years promised, and who is making what promises. When shopping for roofing contractors you will hear flowery terms like “master contractor” and “elite contractor,” or “non-prorated warranty pledge” and “lifetime warranty.” None of these marketing terms mean anything if something goes wrong with your expensive new roof. All that will matter is the legal language in the contract and warranty.

The legal entities that are the roofing installer’s corporation or LLC can be (and often are) quickly dissolved and reformed at the convenience of the roofer, resetting their past liabilities to zero. For this reason and many others, a roofing installer’s warranty is typically not as valuable as the roofing manufacturer’s warranty.

The Fine Print May Be Where The Money Is:   One of those surprises could require your association to hire a lawyer in Pennsylvania, or go before a judge and jury in Michigan, to enforce the warranty to pay for a roof leak in your Florida building. Chasing a roofing contractor or manufacturer back to their home state for a lawsuit after they fail to meet warranty obligations can be prohibitively expensive. Many major roofing contractors and manufacturers include clauses in their warranties that would require your Florida association to bring any lawsuit to enforce the warranty in the manufacturer’s home state. One author of this article has recently testified as an expert witness in a lawsuit brought by a Florida condominium over a roof warranty dispute. The association was forced to hire a lawyer in Pennsylvania to prosecute the case in the manufacturer’s home county in Pennsylvania. Hiring a second and remote lawyer necessarily costs the association a great deal more money. Many lawyers would agree that a Florida condominium association suing a manufacturer in its home town may face a further problem of jury bias in favor of the “home town” company.

Conversely, the association would have greater negotiating leverage if the manufacturer faced the costs of hiring a Florida lawyer to defend its product before a Florida jury from the association’s home county. The manner in which the litigation venue is typically specified by the roofing companies is no accident.

It’s important for the association, when signing any contract with a vendor or service provider, to carefully read all of the vendor’s contract. The “fine print” or “boilerplate” (usually the final few paragraphs or back side of the contract) contain clauses that shift the advantage to the vendor if there’s a dispute about performance or a lawsuit. The co-author’s lawsuit involved a clause that read:

“Any disputes or actions relating to or arising out of the work to be performed pursuant to this Sales Agreement shall be exclusively governed by the laws of the Commonwealth of Pennsylvania. Jurisdiction and venue of any action proceeding out of relating to the Agreement shall be vested in the courts in Washington County, Pennsylvania. (e.s.) Purchaser irrevocably waives any objections it now has or may hereafter have to the convenience or propriety of this venue….. To be valid, any changes to the Warranty must specifically approved in by Corporate Officer of manufacturer”

Florida courts will enforce these “venue clauses” and “choice of law clauses”. Usually, paying a lawyer to challenge such a clause is money wasted. The time for the association to win the venue fight is before the contract is signed. The association’s representative should read all bids and contracts with care to make sure it doesn’t contain references to “venue,” “actions,” or “jurisdiction” in other states, or refer to the law of a state other than Florida.

The bigger picture is that a contract that is difficult or costly to enforce is a ghost of a contract. If a vendor makes it too expensive to legally enforce a contract, it can walk away from the promise and get away with it. (Economists and lawyers call this “transaction cost,” and transaction costs are one of the biggest overlooked issues in legal disputes. In simplest terms, let’s not spend a dollar to recoup fifty cents. Venue clauses are designed to make the buyer spend a dollar to recover the fifty cents.)

Suggestions For The Battle Of The Fine Print:

  1. Cross Out The Language And Have The Change Initialed. Buyers shouldn’t hesitate to strike out unacceptable language in a contract before the salesman closes the sale. This is when you have the negotiating leverage — not after a roof or other problem manifests. We mean, literally, take a pen and strike through the language, so it looks like this:

Any disputes or actions relating to or arising out of the work to be performed pursuant to this Sales Agreement shall be exclusively governed by the laws of the Commonwealth of Pennsylvania. Jurisdiction and venue of any action proceeding out of relating to the Agreement shall be vested in the or courts in Washington County, Pennsylvania. Purchaser irrevocably waives any objections it now has or may hereafter have to the convenience or propriety of this venue….. To be valid, any changes to the Warranty must specifically approved in by Corporate Officer of manufacturer. [YOUR INITIALS][SELLER’S INTIALS][MANUFACTURER’S INITIALS]

This may or may not work. The salesman may protest, pretend to walk away, or really walk away and take his company out of the game. This suggestion applies to any contract — from a reroof to buying bottled water to lawn service. As with most negotiations, the party who needs the deal more typically backs down. If your association has asked for competitive bids for the project — as suggested below — it should have a few vendors to choose from. This should give your association leverage.

The manufacturer whose clause we quote above anticipates this move by requiring any warranty changes to be approved by a “corporate officer.” The association would need to secure the signature of the manufacturer’s corporate officer to make the strikethrough and deletion stick.

  1. Competitive Proposals. A major project (such as a reroof, a balcony restoration, or a cathodic protection system) should start with an invitation to competitive bids, in writing, with written specifications prepared by a design professional. The invitation to bid and specifications can contain your own version of the venue and choice of law provision, and other useful legal tools beyond the scope of this article. These may conflict with language in the vendor’s boilerplate. However, the courts will typically hold that language created for a specific transaction will control over general “boilerplate” used by the seller for all its transactions.

It’s important to remember the roofing installer and the roof material manufacturer are two different legal entities. The contract between the association and the roofing contractor may not necessarily be legally binding on the materials manufacturer. In fact, without careful draftsmanship, it probably won’t be.

A warranty is only as good as the ability of the vendor it to stay in business, provide the repairs, or pay claims. This is one reason the manufacturer’s warranty has value. A local roofer may go out of business or lack the money to pay a judgment; the manufacturer is likely to have a deeper pocket.

Like two parachutes, two warranties are better than one. The goal should be to have both the installer and the manufacturer provide separate warranties.

 

Andrew Showen is a board certified construction lawyer with Hill Rugh Keller & Main, Orlando, Florida, 407-926-7460 ([email protected]). Sean Burlingham, P.E., 321-693-2049 ([email protected]) is an engineer practicing in Brevard County and across the state of Florida with expertise in concrete buildings and condominiums. This article is not legal or engineering advice and does not create a client relationship.