Homeowner associations often need to enter contracts to undertake construction work or other improvements that will affect all members of a homeowner association. Unfortunately, sometimes contracts are approved without careful review and contractors who are unqualified or unlicensed are hired. Associations should carefully review all contracts they intend to enter, giving it the same amount of exceptional care that would be required for a for profit corporation. Here are some basic guidelines for protecting your homeowner association when contracted work is required.

Confirm Contractors are Licensed and Qualified

Probably the most important guideline for protecting your homeowner association is ensuring all contractors and subcontractors are licensed and qualified. While one would think this is obvious, there are nightmare stories of Boards hiring unlicensed contractors who go on to cause significant damage. Ask for your contractor’s license information as well as their insurance information–you do not want your homeowner association to suffer financially because of poor workmanship.

Be Specific Regarding the Work

Sometimes contractors are fuzzy regarding the scope of work they intend to perform.  They may fail to describe the types of materials or the labor that is required.  You should make sure that the contract is clearly written and there is no ambiguity in what work is to be performed and how it is to be performed.  For example, does the work involve specific plans, drawings or other specifications and if so they are they included? For exceptionally large or complex projects, it is good practice to have an engineer or architect prepare the specifications.

Ensure All Details Are Clearly Explained in a Written Contract

You will need to be sure all details are clearly described in a written contract. In addition to the type of work to be performed, the price, and the payment method, it is critical to include other pertinent details such as the timeline for the work and how the contract can be terminated.  The contract should also include all warranties.

Be Sure Subcontractors are Supervised and Insured

If there are subcontractors involved in the job, they need to be properly supervised. It is good practice to make a list of all the subcontractors including names, phone numbers, addresses and licenses. Make sure the subs carry insurance and that the contractor’s policy also covers them. You should verify your contractor will have some onsite supervision of their work as well.

Other Considerations and Warnings

Know the amount you are required to pay before a project starts.
Rather than paying by a certain date, schedule your payments by the percentage of the completed work.
Make sure any change orders are documented in a contract signed by both parties.
Do not permit a contract that allows your contractor to hand over your contract to someone else without having your written permission (an assignment).
Do not forget to read the back side of a contract, and if you have any questions, ask for explanations.

Because most homeowner association directors are not legal experts, it is easy for them to miss essential items in a contract. That’s why you’ll need a highly qualified and experienced attorney to go over a contract.
The time to be protected is before signing a contract. You can be confident your rights will be protected when you use the legal services of Smith Jadin Johnson, PLLC. Our boutique law firm serves clients throughout Minnesota and western Wisconsin and has a proven reputation for focusing on protecting the rights or property owners, policyholders and people who are injured. Please contact us for a free consolation.


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