What your roofing contractor is not telling you
Is a limited lifetime warranty real, or does it really just sound too good to be true?
Have you heard of 40-year shingles actually lasting 40 years? Not me.
Recently we were reviewing proposals (bids…estimates…whatever you want to call them) for some roof work at a multifamily asset.
As so often happens, the proposal information was lacking; so we asked a few simple questions to the institutional real estate fund. Their partner shot back some quick answers.
What is manufacturer’s warranty? “40 years.”
What is the total number of squares (SQ) of roof material? “1,375 +/-”
What is average rating (in years) of the shingle? “Manufacturer says 40 years.”
Hmmmm.
Typically when we work with investment funds on CAPEX projects, most institutional multifamily asset owners are replacing asphalt shingle roofs after 20 to 25 years. Rarely do we see roofs that are beyond 30 years old, let alone 40 years old.
It’s not magic. It’s math.
Being curious, we decided to dig into the manufacturer’s technical data regarding these “40 year” roofs that reportedly had Limited Lifetime warranties.
Turns out, the manufacturer believes the roof (material) will last about 180 months, or 15 years.
So what does note 1 say for the “Limited Lifetime” warranty period?
For any non-individual owner, such as a corporation….or any non-single family residential home, the Warranty Period of these Shingles is limited to 40 years.
Ok. Got it.
What about “Refer to Chart A” for the reduction figure of the warranty beyond the 15-year protection period?
The reduction figure for months 181-206 is n/260.
While the reduction figure for months 207-480 is 384/480.
Finally the reduction figure for months 481+ is 432/480.
Uh, great, thanks. What does this mean in plain English?
A manufacturing defect resulting in leaks is found in January 2034 in shingles purchased with a 40 year limited warranty. The shingles were purchased in January 2016; 18 years, or a total of 216 months have elapsed since the purchase.
The manufacturer’s warranty obligation will be reduced by (384/480) = .80, so the maximum obligation would be 20% (100 – 80) of the cost of the replacement Shingles. Even better, the maximum dollar per square* of roofing would be limited to $40 /SQ from the last row in the warranty figure/ table above.
*A square (SQ) of roofing is approximately 100 square feet (sf).
In our proposal review mentioned earlier, the contractor reported that the materials made up approximately 61% of the costs.
Whether this figure is accurate or not, let’s say the cost per square (SQ) was $300, our actual cost of material would be $180 /SQ.
So based on the warranty language, the manufacturer has further reduced their warranty liability by another 22% based on their “maximum liability/ dollar limit per square” figure.
Let’s say the roof replacement cost $412,500. The maximum obligation is 20%, or $82,500. Not bad. But wait with a limit of $40/SQ (x 1375 SQ), the maximum dollar limit is now $55,000.
Look… $55,000 from a manufacturer is nothing to sneeze at, but do not get it twisted.
No intelligent business is going to create future (unknown) liabilities for themselves in the future (ie, “lifetime warranties” are rarely lifetime).
Unless of course, you are Tesla offering an infinity warranty.
Now, that we know what our ‘lifetime’ (and very) limited warranty will cover, let’s check out the conditions that need to be met in order for the warranty to even be applicable.
The manufacturer’s warranty is to help you with actual material defects. Yes, defects do occur in any industry that creates a high volume of products. For every 100 widgets, maybe 5 were built incorrectly.
But let’s get back to roofing.
Most manufacturer’s will have some sort of language defining basic conditions for the warranty to apply. Most importantly, did the contractor install the roof in accordance with the manufacturer’s installation instructions as well as the local building code requirements?
While this “condition” seems innocent and simple enough, the chances that the roofer met these conditions are slim to none.
Why? Because these codes and references total over 1,000 pages of information! How many roofing contractors actually have a copy of these, let alone have read them:
Manufacturer’s Installation Guide 45 pages
International Building Code 736 pages*
International Existing Building Code 290 pages
International Energy Conservation Code 192 pages
City Adopted Amendments 120+ pages**
Total 1,383 pages
* 14+ pages related to roofing
** depending on the jurisdiction
I may be crazy, but it seems like at least 1,000 ways to exclude the coverage of a warranty.
Roofers (who like to roof, and not read/ review code requirements) have the impossible task of trying to follow all these different instructions.
The next time you need to prove that the cause of a roof leak is ONLY related to a material defect and not installation mistakes…good luck. Hopefully you have some smart thinkers on your team to present your case…
Never mind the fact that the manufacturer may not even be in business in 15-20-30 years down the road.
Exclusions and Limitations
One manufacturer has 7 pages of terms, conditions, and 21 actual exclusions/ limitations on how or when their warranty applies.
Let’s dig into the fine print:
Any costs incurred for any, work, repairs (whether temporary or permanent) or replacements not authorized in advance in writing by Manufacturer.
Wait, what? You are telling me that if I repair my roof and do not request advance authorization from the manufacturer in writing, my warranty coverage is now excluded. Here are a few more questions for you to consider:
Did your roof contractor include the slope of the roof in their proposal?
No? You should always ask.
What if I told you that your 15 year warranty above is reduced to 12 years if your roof slope is considered “low?”
Here is what one manufacturer describes:
REDUCED WARRANTY COVERAGE FOR LOW SLOPE ROOFS
The Limited Warranty terms set out in this document only apply to Shingles installed on roof slopes of 4 in 12 (1:3) and steeper. The limited Warranty Period for Shingles installed on low slope roofs (i.e. those with a slope of less than 4 in 12 (1:3) and down to 2 in 12 (1:6)) is 12
years, and will be prorated for material only (with no ‘guaranteed’ Protection) at an annual reduction rate of 8.33%.
Believe it or not, there are certain materials that perform better or worse depending on the roof slope. For example, asphalt shingle roofs do not perform well on slopes less than 4:12.
If they did, why would a manufacturer (who makes shingles all the time) reduce their obligation (and warranty) on slopes less than 4:12?
Roof Warranties & What You Need to Know
So what does all of this nonsense mean?
- Unless you have an infinity warranty from Elon Musk, I mean Tesla, your “lifetime limited” warranty is just good sales talk from your roofer or their manufacturer for charging you more money up front
- Your asphalt roof should last between 20-30 years. Period.
- Substitute the word warranty for “insurance policy.” A manufacturer’s roof warranty, especially a limited lifetime warranty, will have different coverages over whatever the duration is. Just because the duration is the same, does not mean the coverage is the same. You get what you pay for.
- Most manufacturing defects will likely show up within 10 years or so. By then, you may have already sold the asset.
- In the end, instead of worrying about the cost or duration of a warranty, focus on the cost of the actual product and the quality of the installation.
- How good is the roofer? How long have them been in business?
- Who do they work for?
- Do they have the experience, references, and track record to do what they say they are going to do?
- Are they able to provide enough detail to indicate that they actually understand the project? Can they tell you how many square of shingles are needed, what their material cost is, how much their labor runs, etc etc?
- Try your best to avoid the FOMO of buying some expensive warranty “policy” with all kinds of terms, conditions, and exclusions that you may not be able to live up to. It sounds too good to be true, because probably it is.