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120 COMMERCIAL CONSTRUCTION & RENOVATION — JULY : AUGUST 2016 Understanding the world of warranties By Michelle Schaap I n the commercial construction setting, warranties can be written to commence as of substantial or final completion, date of beneficial use or another agreed triggering event. The commencement date and duration of a warranty can greatly impact a contractor's financial and performance obligations for a project as well as for future work. As an owner, the commencement and duration of warranties, and the types of warranties given, impact whether the owner will have the benefit of a contractor knowledgeable with the project to make timely repairs at no additional cost to the owner. The Contractors For a contractor, whether warranties commence upon substantial or final completion, the timing difference ideally would be no more than 60 days – the projected period for completion of punch list items, resolution of open change orders and delivery of closeout documents. But if the project close out is extended due to disputes with owner, the warranty that commences on final completion may not start for more than 90 days following substantial completion. With the warranty period extended, the contractor can be negatively impacted in various ways, including his ability to fulfill obligations on future projects, his bonding capacity and his bottom line. For subcontractors conducting work in the earliest stage of a project, the impact of the commencement of warranty periods can be far greater. If a subcontractor completes an access road, other contractors then will use that roadway for site access long before project completion. If subcontractor's warranty period commences only upon comple- tion of the entire project, its accepted work may be subjected to substan- tial wear and tear long before the commencement of the warranty period, requiring the subcontractor to effectively provide a warranty extending from the completion of his work, through completion of the project (per- haps a year or two later), and then through one or two years thereafter. If a project is suspended for any reason, wear and tear on work already performed likely would cause satisfactorily installed work to prema- turely age, requiring warranty repairs that might not have otherwise arisen had the project progressed in accordance with its original schedule. In negotiating warranties, contractors should be mindful of fu- ture projects. Contractors must consider the need to pull forces from the next project to return to a completed project for warranty work. If warranty work requires special equipment already redeployed for new work, the new project could be delayed while resources are pulled to fulfill warranty obligations for a prior job. For a bonded job, a delayed completion date will tie up the contractor's bonding capacity further – particularly if a warranty bond is required, too. Contractors should be prepared to stand behind the quality of their workmanship and materials. When negotiating warranty commencement dates and durations, however, contractors should give careful consideration as to how their work relates to the project overall; whether their completed work will be impacted by other (subsequent) work and/or delays, and to plan and protect themselves accordingly for the instant project as well as for future commitments. Making count it