The HVAC company my warranty is through was bought out - does the new company have to honor the warranty?

Question

I had my furnace replaced and AC installed by an HVAC company in May 2022. The quote stated that the work came with a 2 year labor warranty and 12 year parts warranty. In January-ish 2023 I noticed some white sediment around the base of the indoor unit (the unit is in the basement so I don’t see it often - it’s likely the sediment was there earlier) It seemed to get worse over the next couple months, so in May I emailed the company with pictures and a request for feedback (“Is this normal? Do you need to come out?”, etc) but they didn’t respond.

In August 2023 I called the company and to my surprise, the number was answered by a different company name. The original business is still listed on Google, but the website and phone number redirect without notice to the new company. I explained the situation to the new company, who scheduled a warranty-covered visit. A couple days later (before the scheduled apt) I got a call from another person with the company stating my apt had been misscheduled and I would be charged for the visit, since it had been more than a year since install. I explained that the original work had come with a 2 year labor warranty - after checking with her service manager, she came back and said that the labor and parts were under warranty, but that I would still be charged the trip charge (around $190) as well as for “any special equipment or heavy machinery used to make the diagnosis.” I expressed concern that this seemed to go against the warranty, and she stated that the original company that gave me the warranty no longer existed. She went on to state that they had originally honored that company’s warranties, but that “they knowingly did bad work on so many occasions that we’ve gotten a lot of these calls and it’s money out of our pocket, so we can no longer honor these warranties carte blanche.” I canceled the visit in order to better understand my rights - I’m worried that based on communication so far, it’s totally unclear what parts of the warranty they’ll honor and I may get charged heavily and unexpectedly for service.

So, questions:

1. When a company buys another, do they assume responsibility for that company’s existing warranties, etc? If so, is there a law or regulation I can reference when attempting to convince them to do the work?
2. The first company quote said “2 year labor warranty” but didn’t specify what that covered. Is there a legal standard there? If the new company has to honor the old warranty, what is covered under the labor warranty (trip charge, “heavy equipment diagnostics”, etc)?
3. What’s my best next step? If I have a legal right to this warranty service, what laws or regulations should I cite to the new company to convince them, and what do I need to be careful of when communicating with them?

Thank you, hopefully-legitimate legal people of the internet! 💕

Answer 1

It depends upon how the purchase is structured.

If the new company bought the entire entity that was the old company, or if it purchased only the old company's assets but expressly assumed the warranty obligations, then the new company is on the hook.

If the new company bought the assets of the old company and didn't assume warranty liabilities of the old company, then the old company which is a corporate shell that received the sale proceeds is on the hook.

The easiest way to proceed is to ask the new company to honor the warranty and if it fails to do so because it purchased assets and didn't assume the liability, to demand a remedy from the old company.

Answer 2

1. When a company buys another, do they assume responsibility for that company’s existing warranties, etc? If so, is there a law or regulation I can reference when attempting to convince them to do the work?

If they buy the old company, then the old company continues to exist along with all its obligations. For example, when the Elon Musk group bought Twitter, Twitter continued to exist along with all its obligations.

However, in small business transfers, people rarely buy the company because it comes with those obligations, many of which are unknown and unknowable.

Instead, they buy the assets from the company - its name, phone number. Client list, work-on-hand etc. - exactly what is bought varies from deal to deal. The old company usually retains things like ongoing warranty obligations.

As an outsider, you are not privy to the details of the contract.

What happens to the old company varies. Sometimes it might just be exiting a particular market, in which case, it likely still exists and would be requires to honour its warranty. Most of the time it’s selling its business because the owners don’t want to work any more - they will usually wind the company up in accordance with local law. Creditors (like you) will be notified by a public announcement - these days, a notice on the regulator’s web site - and you have a limited period of time to make a claim. If no one does, then the company is wound up and no longer exists. Which means your warranty no longer exists.

2. The first company quote said “2 year labor warranty” but didn’t specify what that covered. Is there a legal standard there? If the new company has to honor the old warranty, what is covered under the labor warranty (trip charge, “heavy equipment diagnostics”, etc)?

A “labour warranty” refers to defects that are caused by faulty installation, a “parts warranty” covers faulty parts. It does not refer to either the labour or parts involved in rectification.

In your case, for the warranty to apply, the “white sediment” would need to be the result of the original company installing the unit incorrectly. If its cause by a faulty unit, the warranty does not apply.

3. What’s my best next step? If I have a legal right to this warranty service, what laws or regulations should I cite to the new company to convince them, and what do I need to be careful of when communicating with them?

The most likely scenario is the warranty died with the original company and the new company has no obligation.

You could get them to do the repair and then not pay them and raise the warranty as a defence when they sue you. Or you could get someone else to do the repair and send them the bill and sue them when they don’t pay. Neither option seems cost effective.