Episode 1: Why Associations Should Not Hire Unlicensed Contractors

You would think that association board members know better than to hire a contractor that is unlicensed.  But sometimes in an attempt to save money, associations hire unlicensed contractors.  In the long run, however, this practice can be more costly than hiring a licensed contractor.  Here is an example:

An association in Miami Beach contracted a construction company recommended by a homeowner to remodel the association’s lobby.  The homeowner swore up and down that this contractor had done a great job remodeling their unit and by far was the least expensive.

Because the contractor was recommended by a homeowner, the board did not vet the contractor and did not have their attorney review the contract.  After all, the contractor was highly recommended by this very active homeowner and the contractor’s price was well beneath all other proposals.  This was too appealing to pass up. 

The project was a disaster! 

The contractor was over budget and took three times as long to complete the job.  In the end, the contractor abandoned the job and disappeared with the association’s money.  The homeowner, who highly recommended this contractor, sold his unit and was never heard from again.

Fortunately, this example is fictional, but situations like this occur more commonly than we think.  To help in avoiding these horrible situations, associations should always hire a licensed contractor where the work being performed requires a license.  Vetting a vendor is actually easier than one thinks, and with a few key strokes, association boards have a tremendous amount of information at their fingertips.   Some of these issues, and other things an association may want to think about prior to choosing a contractor were discussed during a recent interview in Allied Property Group’s podcast, Community Association Matters. 

In the State of Florida, an association can visit myfloridalicense.com to verify that a Contractor is licensed with the state; and sunbiz.org to confirm that a corporation is active.  They can also visit their county clerk of court websites and / or conduct a records search to find out if there are any pending or past law suits against the contractor and / or the qualifier or any unsatisfied judgments.  It is a good idea to also ask for a Certificate of Insurance and request that the Association be added as an Additional Insured where legally permitted, and review the coverage to make sure it is adequate.  All of these, and many other factors should ultimately be discussed with the Association’s attorney prior to entering into a contract.

Lastly, the association should ask the contractor to provide references.  Although this may seem trivial, think of it this way: isn’t it a potential red flag if the contractor will not provide references?  Isn’t it a potential red flag if the references provided were for jobs very different in scope than the job being considered?  You should accordingly contact the references and ask a series of questions, such as:

• Whether the project was completed on time and in budget;
• Were there any issues with the city or county inspectors;
• How communicative was the contractor during the process.

Now what happens if things go wrong?  Hopefully you have consulted with an attorney prior to signing a contract, and they have worked with you throughout the process to help add layers of contractual protection. 

These are basic suggestions for associations to consider when hiring a contractor.  Every association is different, and every situation is unique.  Get management assistance from Allied, and get legal assistance from your lawyer.  For more information and in depth thoughts, you can also listen to our podcast, Community Association Matters.