Client Login A Pre-warranty Condition Assessment — conducted in the final months before a contractor’s one-year warranty expires — is one of the most effective risk mitigation tools available to multifamily owners and REITs. Deficiencies that go undetected before warranty expiration can transfer millions in repair costs from contractor to owner, even on high-end developments that appear move-in perfect.
The following case study illustrates why this single step protects asset value on newly constructed properties.
The Project
Property Condition Assessments, LLC (PCA) was retained by a large multifamily apartment REIT to evaluate a newly constructed, high-end, 308-unit, eight-story urban infill apartment community built over a three-level subterranean garage.
PCA’s client was preparing to buy out its development joint-venture partner and wanted an independent evaluation prior to expiration of the one-year contractor warranty. Their objective was to confirm that construction materials and workmanship were consistent with their significant financial investment and expectations for a very high-end design and amenity package.
Why a second look was warranted
The development partner and design team had already completed the traditional punch-list and repair program as part of construction closeout. A second, more targeted review was also completed prior to PCA’s engagement, intended to capture any remaining issues before warranty expiration.
As a result, stakeholders rightly expected that the property would be in near-perfect condition with minimal outstanding deficiencies.
The Assessment
PCA deployed a multi-disciplinary team to conduct a focused, one-day site visit covering all major building systems:
- Architectural
- Structural
- Roofing
- Accessibility
- Mechanical, electrical, and plumbing (MEP)
- Fire- and life-safety
- Vertical transportation
The evaluation emphasized not only visible conditions, but also system performance and adherence to design intent.
What we found
Despite the recent construction and multiple prior punch-list efforts, PCA identified deficiencies across numerous systems, including:
- Exterior envelope and waterproofing issues
- Roofing and drainage concerns
- Interior finish deficiencies
- Life-safety and code-related items, some involving missing or incomplete installations specified in the original design
Many of these issues were not readily apparent and would not typically be identified through conventional punch list reviews. The findings highlighted the gap between cosmetic completion and true system performance — particularly in complex, high-end developments where multiple trades and design elements intersect.
The financial impact
The financial implications were material. PCA identified approximately $1.5 million in corrective work, much of which was attributable to contractor responsibility and therefore recoverable under the warranty.
Without PCA’s expertise, these costs would likely have transferred to ownership once the warranty expired.
Key takeaways
This case demonstrates the critical importance of conducting a comprehensive condition assessment prior to warranty expiration. Even for newly constructed, luxury assets, such assessments provide essential risk mitigation by ensuring that construction deficiencies are identified and resolved before they become an owner’s financial burden.
If you are approaching the one-year mark on a newly constructed asset — or preparing to buy out a development partner — a pre-warranty condition assessment is one of the most cost-effective protections available.
For more information or to discuss a pre-warranty assessment for your property, please contact Dania Phillips, Executive Vice President, at dphillips@pcallc.com or (626) 685-9560 ext. 202.