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(From the July 2006 Issue of The ARIZONA SUNLANDS Newsletter)
We’ve dealt with this topic previously, but this may be a good time to revisit the subject. We have had both really good experiences and really bad experiences with home warranty companies, so our response would be dictated by WHICH company you were considering. A good idea is to Google the name of the company in your web browser and see what comes up on the internet regarding first-hand experiences from actual customers, as well as any pending legal actions.
The biggest problem we have with home warranties in Arizona is air conditioning claims. Until you’ve been in a home with non-functioning air conditioning in Phoenix when the temperature outside is 112 degrees, you can’t fully appreciate the importance of a quick response. And remember, it is probably a good 20 degrees or more warmer inside the house.
Consider that in Ohio or Pennsylvania, where year round the temperatures may range from 0 degrees to 90+, home heating and cooling companies probably have a relatively evenly paced business year round. About the time the heating season is over, the cooling season begins, and demand for service of either one type or the other, over twelve months is somewhat constant.
But in Phoenix, it begins getting warm in May, and then goes from hot to really hot from June through September. The corresponding demand for air conditioning service goes crazy over these 5 months. The rest of the year temperatures are pretty moderate, with occasional need for heating in the evenings or early morning, so heating and air conditioning vendors have much less work.
Home warranty companies do not actually employ their own technicians, but typically contract with various local vendors to service the claims. Small independent companies want these relationships because they guarantee a certain amount of additional business each year, but they come with some restrictions – the warranty company dictates the amount of money they will pay for various repairs and, more importantly, there is often a requirement that any major parts must be purchased through the warranty company.
In turn, the warranty companies have direct purchase agreements with major parts companies or even specific manufacturers for complete units, as well as replacement compressors, condensers, and fan motors. When these components are required for a claim, the home warranty company has them drop shipped directly from the parts house or manufacturer to the local vendor. In this way, the home warranty company saves the markup on the repair parts, and the local vendor makes money only on the reduced labor charge that was negotiated with the warranty company.
In some sense this is a recipe for problems. Because the service companies have such a terribly unbalance work load throughout the year, they tend to get very backed up in the prime cooling season. Additionally, they want to service their own customers first, particularly since on that work they make money on the parts, and they also likely make more money on the labor. This gives them some motivation to put the work from the warranty company further back on the schedule and service their own customers first.
Meanwhile, once landlords have paid for an annual service or warranty contract, they do not want to pay an additional amount to a company in order to get work done immediately. But what is to be done when tenants, especially older ones or families with infants, find it unbearable to live in a home without air conditioning, and when the warranty company can’t get anyone out for two or three days, or even longer? The Arizona Landlord and Tenant Law states that air conditioning is an essential service and the Landlord must find away to get it restored promptly.
Even if the contract vendor can go to the property immediately, he may still be required to purchase any major component parts through the warranty company, which could cause a delay of several days until those parts can be shipped to Phoenix.
Service contracts can be a way to cap the amount an owner must pay for repairs each year in the operation of a rental property, but it is critical that a landlord discusses the contract thoroughly before signing with a home warranty company. Especially, it is important to ask what their policy is regarding emergency air conditioning repairs when it is 100 degrees or more? Will they guarantee service within 24 hours, including service requiring replacement of major component parts, or even an entire new system? And if they cannot get a vendor to make the repair promptly, will they authorize an outside licensed contractor who is immediately available to do the work?
Remember that most policies have a deductible – a minimum charge which to the property owner, typically ranging from $45 to $55. This charge is sometimes passed on to the tenant, however, there is some question whether or not this is legal under Arizona Landlord and Tenant Law, since provisions in the law state it is the landlord’s responsibility for provide for reasonable amounts of heating and air conditioning. There is nothing in the law that permits passing any part of this responsibility on to the tenant, including the payment of a deductible.
A final caveat – last year the Federal minimum standard for air conditioning energy efficiency was increased from 10 SEER to 13 SEER. Parts are gradually getting rarer for older units and since the newer more efficient units are quite a bit more expensive, some home warranty companies have additional deductibles when major components or the entire unit must be replaced.
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