In the aftermath of the recent hurricane season, many Associations will be faced with hiring one or more construction contractors, contractors for remediation or contractors for other Association work. If your Association is faced with choosing and retaining a Contractor or other vendor, hiring the wrong Contractor can be costly or problematic for the Association.
As an initial consideration, the obvious “due diligence” should be undertaken by the Association, such as asking for references, investigating the financial stability of the Contractor or vendor, and checking with the local “Better Business Bureau” and local department of consumer affairs, to determine if there are an excessive number of complaints regarding the contractor. The Association may wish to engage counsel, to determine if any administrative complaints or lawsuits have been filed in the past or are pending against the Contractor.
Many times, a Contractor will present either an “offer,” “proposal,” “estimate,” or other preliminary document that, if signed by the Association and the Contractor, would become a binding contract.
It is almost never recommended that such documents be signed, as they are usually only a few pages and do not contain sufficient detail, for matters such as the complete description of products to be installed and utilized, commencement and completion dates, and other important considerations, including the contractor’s insurance, detailed warranties and other provisions regarding the “scope of the work.”
For a contract exceeding one hundred thousand dollars, particularly for construction work (including roofing repairs), a brief “work order” is almost never recommended as the primary agreement between the contractor and the Association. Where extensive work is to be performed, your Association should consider using one of several contract documents developed by the “American Institute of Architects” (“AIA.”) The use of an AIA Contract will provide standards for such issues as dates of commencement and substantial completion, detailed provisions regarding payments or “draws” and such items as insurance, dispute resolution and an Agreement that accompanies such contracts, which is known as the “General Conditions” of the Contract (AIA Form A-201).
A construction industry practice that is very common, especially immediately after a major storm, is to offer to Condominium Associations an “Assignment of Benefits” contract.
The typical Assignment of Benefits contract has the advantage of having the payment for all reconstruction and repairs (other than the insurance deductibles) “covered” by the assignment of the Association’s rights to receive the insurance proceeds directly to the contractor.
Unfortunately, some unscrupulous contractors will take the insurance proceeds, and do substandard work, or even fail to complete the job.
An Association should have its legal counsel thoroughly review any proposed Assignment of Benefits contract, before signing.
Finally, any Association undertaking substantial construction work should consider retaining a Consulting Engineer, Architect or Consulting Contractor who will act as the Association’s representative and a go between with the Contractor and the Association.
Preventing or limiting construction disputes will save your Association needless aggravation and expense.