Mandatory Extended Warranty?

On today's show we are talking about warranty legislation and new rules around consumer products and appliances. The Province of Quebec just implemented the most comprehensive warranty legislation in North America. But other states in the US have also implemented rules that affect how repairs and maintenance get handled for major appliances and HVAC equipment. ------------ **Real Estate Espresso Podcast:** Spotify: [The Real Estate Espresso Podcast](https://open.spotify.com/show/3GvtwRmTq4r3es8cbw8jW0?si=c75ea506a6694ef1) iTunes: [The Real Estate Espresso Podcast](https://podcasts.apple.com/ca/podcast/the-real-estate-espresso-podcast/id1340482613) Website: [www.victorjm.com http://www.victorjm.com/](http://www.victorjm.com http://www.victorjm.com/) LinkedIn: [Victor Menasce](http://www.linkedin.com/in/vmenasce) YouTube: [The Real Estate Espresso Podcast](http://www.youtube.com/@victorjmenasce6734) Facebook: [www.facebook.com/realestateespresso](http://www.facebook.com/realestateespresso) http://www.facebook.com/realestateespresso%5D(http://www.facebook.com/realestateespresso) Email: [[email protected] mailto:[email protected]](mailto:[email protected] mailto:[email protected]) **Y Street Capital:** Website: [www.ystreetcapital.com http://www.ystreetcapital.com/](http://www.ystreetcapital.com http://www.ystreetcapital.com/) Facebook: [www.facebook.com/YStreetCapital](https://www.facebook.com/YStreetCapital) http://www.facebook.com/YStreetCapital%5D(https://www.facebook.com/YStreetCapital) Instagram: [@ystreetcapital](http://www.instagram.com/ystreetcapital)

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  Welcome to the Real Estate Espresso Podcast, your morning shot of what's new in the world of real estate investing. I'm your host Victor Menasce. On today's show, we're looking at a groundbreaking shift in consumer protection laws that could fundamentally alter how we calculate capital expenditures, underwrite operational expenses, and manage unit turnover in residential real estate. When you manage a multifamily portfolio, or a single-family rental, appliance failure is one of the most persistent operational headaches you might face. Refrigerators stop working, dishwashers leak, the HVAC units break down in the peak summer months, and historically landlords have absorbed these costs either through costly third-party extended warranties or outright capital replacements when a unit fails shortly

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  after the standard one-year manufacturer warranty expires. That landscape is undergoing a dramatic shift, starting in Canada, and also gaining momentum across North America. Recently, the province of Quebec brought into full force one of the most aggressive consumer protection laws on the continent. Bill 29, of course, translated from French, is called an act to protect consumers from planned obsolescence and to promote durability, repairability, and maintenance of goods. Now, this isn't just a minor tweak to retail guidelines. It creates a brand-new mandatory legal warranty of good working order that in many cases far surpasses standard manufacturer warranties, and it applies directly to durable goods.

• 1:23Speaker 00

  Under the legislation, major household items have zero-cost legal protection that automatically follows the product, even if the property or appliance is sold to a new owner. It includes six years of mandatory coverage for refrigerators, freezers, stoves, air conditioners, and heat pumps. It has five years of mandatory coverage for washing machines and dryers and dishwashers. During these statutory windows, if a covered item breaks down under normal use, the manufacturer or retailer is legally required to cover 100% of the costs, including parts, labor, and transportation. Furthermore, the law explicitly bans planned obsolescence. It prohibits manufacturers from using software or hardware design choices that deliberately limit a product's lifespan

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  or prevents third-party repair. It also mandates that manufacturers maintain replacement parts, repair documentation, and diagnostic tools for a reasonable period after sale. So you might be asking, well, is this isolated to Quebec, or is this the beginning of a broader movement? And while Quebec's mandatory zero-cost, six-year warranty model is the most comprehensive in North America, the broader philosophy behind it, the right to repair and anti-obsolescence, is sweeping through legislative halls across the United States. In the U.S., states are taking a different approach, focusing heavily on access rather than direct warranty extensions. California recently enacted Senate Bill 244, the Right to Repair Act, which requires manufacturers

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  of appliance and consumer electronics to make spare parts, repair manuals, and diagnostic tools available for up to seven years after production ends. Minnesota passed the Digital Fair Repair Act, which explicitly bans part pairing, a manufacturer practice where software locks block independent parts from working. Similar legislation's been enacted or introduced into New York, Washington, Texas, and several other states. Now, at the Canadian federal level, Bills C244 and C294 have amended copyright laws to prevent manufacturers from using digital locks to block repairs on HVAC systems, appliances, and heavy equipment. So what is the impact for real estate investors and for property managers? Well, there's, number

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  one, a direct reduction in operating expense and capex volatility. In markets with strict legal warranties like Quebec, appliance repairs for units under six years old shift from a line item expense on the P&L statement to a manufacturer responsibility. You no longer need to buy overpriced retailer extended warranties. In fact, Quebec's law prohibits retailers from even pushing extended warranties without first disclosing the consumer's free legal rights in writing. Number two, unit turnover improves the downtime and the downtime metrics. One of the biggest drivers of tenant dissatisfaction and vacancy loss is waiting weeks for specialized repair technicians or backorder parts. As U.S. states pass the right to repair laws, independent repair technicians gain equal access to parts, diagnostics,

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  and manuals. That breaks the monopoly of factory-authorized service networks, and it gives the property managers faster, cheaper options to get units back online. Number three, for developers, builders, and rehabbers purchasing appliance packages in bulk, hardware quality is going to matter far more than ever. As legislation punishes manufacturers for premature failures, high-quality, easily repairable appliances will eventually dominate the market. You'll want to align your spec sheets with manufacturers that provide modular, easy-to-service equipment, rather than proprietary integrated systems that require total replacement when something as simple as a sensor fails. And then number four, it's important to note that these legal warranties do not cover damage caused by tenant abuse or improper maintenance. So, real estate investors have

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  to maintain clear lease terms around tenant responsibility and keep meticulous maintenance records to ensure a claim isn't denied due to lack of standard maintenance, like, for example, cleaning refrigerator coils or changing HVAC filters. The other end of the spectrum, we're also seeing some cases where insurance companies are forcing owners to replace hot water heaters every eight to 10 years regardless whether they're still good or not. That mandatory replacement schedule is designed to reduce the risk of claims for water damage when a rusted-out water heater becomes a silent source of water damage. Some locations require installing a pan, a drain pan, under a water heater in order to mitigate that risk when a water heater fails, because it will fail at some point. Some areas also require that under a washing

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  machine. Now, as real estate investors, regulatory trends often show up in the operational line items before they hit our radar. So watch your local market and adjust your underwriting assumptions on repair reserves and demand equipment that's built to last. As you think about that, have an awesome rest of your day. Go make some great things happen, and we'll talk to you again tomorrow.