Structural Warranties Help Builders Avoid Legal Costs

Avoid Legal Costs


Structural Warranties Help Builders Avoid Legal Costs

How a Structural Warranty Can Help Your Home Building Company Avoid Costly Legal Problems

The last thing any home builder needs is legal trouble and the fees that come along with it. An express structural warranty helps protect both builders and homeowners from excessive legal fees by providing a written guarantee against defects and faulty workmanship.

All states require a builder to deliver a home with a warranty that meets their state statutory or implied warranty laws in order to protect its citizens, even if the Builder makes no specific written or oral agreement to the buyer. These warranties generally state that a home will be reasonably free from defects in workmanship and materials and provide for a warranty of habitability, which means the home will be fit for its intended use.   The primary basis for lawsuits against a Builder by a homeowner is for a breach of these statutory or implied warranties.  If a Builder delivers a home without a written agreement pertaining to warranty obligations they may lose valuable protection that an express written warranty will provide. Our structural warranty warranty is the most comprehensive in the industry and meets most of the builder’s statutory, or implied, warranty obligations.  The 2-10 HBW express warranty also includes a binding arbitration clause that is contractually agreed to by the homeowner and this helps protect a builder from potential frivolous or unwarranted lawsuits.   Arbitration of disputes is much faster, less costly and the results are more predictable.  This is because the arbitration services use construction professionals versus a dispute being heard in front of a jury that may not have any construction knowledge.

The 2-10 HBW warranty is fully transferable to subsequent home buyers and increases the overall value of the home in a competitive market. The seller can transfer the remaining portion of the ten year warranty to the buyer so they have confidence the home is protected against structural defects.  2-10 HBW has paid out over $250 million in structural defect claims; helping their customers and allowing builders to transfer their risk of loss to protect their business assets from a loss of income from potentially damaging claims and associated legal costs.

A Structural Warranty as Part of a Builder Risk Management Program

A structural warranty is an integral part of any builder’s risk management program. How does a structural warranty help protect builders against damaging legal costs? By providing a variety of protections through our warranties as mandated by the Department of Housing and Urban Development.

First, in order to be a HUD-approved warranty provider, we must provide a quality control plan that implements a process for reviewing and approving our builder member. This assures the proper inspection of the property, reviewing the quality of inspections and processing homeowner complaints in due course. Builders must apply for membership with 2-10 HBW, which involves conducting a financial credit review and a review of their building experience.  A 2-10 HBW builder must have good credit and a minimum of three years’ experience in building before their membership will be approved.  This is valuable from a risk management perspective and provides assurances to potential buyers that they are buying a home from a quality builder. When a particular property is warranted, 2-10 HBW requires inspections of each home enrolled and may conduct extensive plan reviews and other steps to ensure that the homebuyer is working with a quality builder and buying a quality built home. By meeting our rigid underwriting and risk management standards, builders are helping to protect themselves from potentially costly lawsuits.

Secondly, we protect builders through the structure of the legal mechanisms provided in a 2-10 HBW structural warranty. All disputes are required to go through arbitration rather than the courts, which helps protect builders from the high legal costs associated with formal lawsuits carried out in a court of law.

Our builders also help avoid the cost of structural defect investigations because if a claim is made, the warranty insurer hires a licensed professional engineer to inspect the home, In addition, the length of our structural warranties can help protect builders many years after the original structure has been built. Our warranties provide ten years of structural defect coverage as approved by the Department of Housing and Urban Development.  (NOTE – a builder may not want to extend their liability beyond their state statute of limitations.)  By using a 2-10 HBW warranty the Builder may effectively limit their liability to the terms of the warranty.

Reduce your risk with 2-10 Structural Warranties for Home Builders, become a member today!