During contract closeout, the contractor discovers that one of the required warranties was not obtained from a subcontractor. The owner is demanding occupancy next week. What is the most appropriate action?
Correct Answer
D) Provide financial assurance for the missing warranty and complete closeout
The most professional approach is to provide financial assurance (such as a bond or escrow) for the missing warranty while completing the closeout process. This protects the owner while allowing occupancy and final completion.
Why This Is the Correct Answer
Option D provides the most balanced solution that protects all parties' interests. Financial assurance (bond or escrow) guarantees the owner will be covered for the missing warranty while allowing the project to close out on schedule. This approach maintains professional relationships, meets contractual obligations, and provides a concrete remedy rather than just promises. It demonstrates proper risk management and allows the owner to take occupancy as needed.
Why the Other Options Are Wrong
Option A: Withhold final payment until warranty is provided
This option exposes the owner to unacceptable risk and violates contractual obligations. Proceeding without proper warranty protection leaves the owner vulnerable if defects occur, and obtaining warranties 'later' provides no guarantee or timeline. This approach could result in legal liability for the contractor and damages the professional relationship.
Option B: Proceed with closeout and obtain warranty later
While withholding payment creates leverage, it doesn't solve the immediate problem of the owner needing occupancy next week. This approach could delay the entire project closeout indefinitely and may breach the contractor's obligation to deliver the project on time. It also doesn't provide the owner with any warranty protection in the interim.
Memory Technique
Think 'FAIR' - Financial Assurance Insures Responsibility. When warranties are missing, financial backing ensures everyone's protected while the project moves forward.
Reference Hint
Florida Building Code Chapter 1, Section 110 - Certificate of Occupancy requirements and contract closeout procedures
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