HOAs Should Have Procedures for Retaining Contractors

Management personnel for homeowners associations (property managers and directors) are constantly arranging for maintenance, repair, and improvement work that is required to properly maintain and/or improve the association’s common area property. To make prudent financial decisions about expenditures for maintenance, repairs, and improvements there should be specific procedures for the retention of the independent contractors that are employed by the association. The following described procedures provide an overview of the process.

Obtaining Bids

The first step in the process for retaining contractors should be obtaining bids for the work to be done. It is not uncommon for an association’s governing documents to contain provisions that specify the association’s requirements relative to the bidding process, so management personnel should always be familiar with the content of the governing documents relative to bids. Bids should be obtained from at least 2 or 3 different contractors who are properly licensed and insured. This process enables the management personnel to not only have comparative prices, but to also receive and evaluate input from multiple parties regarding the job. When obtaining bids, it is important to compare apples with apples– not oranges. The competing bids must be for the identical scope of work utilizing the same materials. This requires specification of materials that are to be used.

Evaluate the Contractor’s Experience and Background

It is not uncommon for unlicensed and uninsured contractors to misrepresent information that is provided to a prospective customer for their services. Areas of misrepresentation frequently include stating they have the required license and insurance (liability and workers compensation) when they do not. Unlicensed and uninsured contractors should never be used. To confirm a contractor’s experience and background, management personnel for the association should utilize a form that is designed to be completed by the contractor to provide information about the contractor that may be utilized by the association in evaluating whether or not to use that contractor. The information provided by the contractor should include at least three unrelated references to contact who utilized the contractor for prior similar jobs, and copies of the contractor’s business license, contractor’s license, and insurance certificates. Management personnel should then verify that the information provided is still accurate by checking public records. If the contractor does not provide the requested information, or provides incomplete information, he/she is sending you a message — don’t use that person or company. If the contractor operates as a business entity, check the appropriate government agency website (generally the Secretary of State) to confirm the status and that it is in good standing and confirm that the licenses and insurance are in the name of the entity that is being used. Additional governmental websites provide verification of business and contractor licenses.

Evaluate Contractor Bids and Contractor Documents