Application of Magnuson-Moss Warranty Act to consumer products sold in new homes

Application of Magnuson-Moss Warranty Act to consumer products sold in new homes.

Supplenzentcd, Letter of Response

November 26 1976

Dear Mr. Canavan and Mr. McMahon:

This letter supplements the Commission s letter to you of October 20 1976, responding to your request of September 28, 1976, for an interpretation of the application of the Magnuson-Moss Warranty Act Pub. Law 93-637 ("the Act") to warranties on new housing. As noted in the Commission s earlier letter, your request has been treated as an application for an advisory opinion under Sections 1. 1.4 of the Commission s Rules of Practice.

This is also in response to Mr. Canavan s letter of November 1 1976 to Chairman Collier, seeking reconsideration of the Commission s decision to extend the effective date of the rule on Informal Dispute Settlement Procedures to May 1, 1977, rather than October 1, 1977 as HOW and NAHB had requested.

Your request for reconsideration is denied. These provisions of the Act ADVISORY OPINIONS 1031

became effective on July 1976. On June 10, 1976, in response to HOW' s request for an extension of time because of "logistical problems, the unique characteristics of the industry s product and unanswered legal questions " the Commission extended the effective date until January 1977. Your most recent request again cited logistical problems and what you described as continuing uncertainty as to the Act's application as reasons for a further delay, and that request was granted in part.

The Commission has gTanted these requests on the understanding that HOW would need additional time to comply with the Act. It did not grant them to accommodate HOW's efforts to obtain legislation exempting itself from the Act's coverage.

The Commission believes that the 10 months delay already granted is fully adequate for good faith compliance. This letter also provides HOW with the further guidance you have requested regarding specific product coverage. Ample time should remain thereafter for HOW to comply with the law s requirements by May 1977. With respect to product coverage, the definition of "consumer product" limits the applicability of the Act to personal property, "including any such property intended to be attached to or installed in real property without regard to whether it is so attached or installed." This provision brings under the Act separate items of equipment attached to real property such as air conditioners, furnaces and water heaters. The coverage of separate items of equipment attached to real property includes, but is not limited to, appliances and other thermal, mechanical and electrical equipment. (It does not extend to the wiring, plumbing, ducts and other items which are integral component parts of the structure.) State law would classify many such products as fixtures to and therefore a part of, realty. The statutory definition brings such products under the Act regardless of whether they may be considered fixtures under state law.

To provide further specificity, attached to this letter is Appendix A containing a list of items which the Commission believes are covered by the Act when sold with a home. The list also specifies products which the Commission believes are not covered. The list does not exhaust the possible items of equipment that may be purchased as part of a home; it is offered as guidance rather than as a definitive, exhaustive listing. The key to understanding the attached list lies in the distinction between the physical separateness of an item and the separate funCtion

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of an item. For example, both roofing shingles and furnaces may be physically separate items at a. given point in time. However, physical separateness of an item is not determinative. Rather it is the separateness of function, which distinguishes the two. A furnace has mechanical, thermal or electrical function" apart from the realty, whereas roofing shingles have no function apart from the realty. Such items as humidifiers, burglar alarms, smoke detectors, water heaters and kitchen appliances are separate items of equipment which have separate functions of their own. However, such items as wiring, ducts gutters, cabinets , doors and shower stalls are not functionally separate from the realty.

We expect that the attached list will provide the specificity needed to make decisions concerning the drafting and coverage of the HOW warranty.

By direction of the Commission.

ApPENDIX A