Negotiating Better HOA Contracts

By Sabrina Biehl Published Dec 16, 2014 01:10 am Updated Feb 3, 2015 10:20 am

Winter is the time of year that the board should be arranging and reviewing proposals for fair weather renovation projects. Painting, fencing, pool replastering and roofing are but a few of the major items that fit the profile. There are several practical reasons for starting the process early:

Contractors are more available. Winter is a slow time for many contractors. This means they have the time to thoughtfully consider your work and produce a good proposal.

Better pricing. Sometimes the work you want done can be performed during the winter months, (even certain kinds of roofing). If you agree to start the project now, you just may save a significant amount of money. When work is slow, many contractors are willing to offer better pricing to “seal the deal”.

Scheduling preference. If you accept a contractor’s proposal now, you can generally dictate the scheduling. Set the date now. If you wait you may not make the schedule at all.

Arranging for money. If you haven’t accumulated enough reserve funds, you will need several months to discuss, approve and collect a special assessment.

Coordination with residents. If the project is extensive and disruptive, you will want to warn residents well in advance. This will give them the opportunity to work around or even plan vacations strategically.

Always get references and check them out. It is important to use only contractors that have a good track record. Make sure the references are for work that is comparable in size and complexity to yours. It is not uncommon for small contractors to get in over their head when trying to nail down work. Feel comfortable that they can deliver what they promise.

Always, always, always use contractors that are properly licensed, bonded and insured to do the work they are contracting to perform. If you have any question about requirements, contact the state licensing board. Use it.

Get named on their insurance. Insist on getting a current copy of the contractor’s liability insurance coverage directly from his insurance agent. If you accept the proposal, require that the HOA be included on this insurance as an “additional insured” and get an appropriate and current insurance certificate from the contractor’s insurance agent to prove it.

Make progress payments. Do not make advance payments on the project work. This is often the sign of a contractor on a “shoe string” that may be using your money to pay other jobs’ labor or supply bills. You could be left high and dry with uncompleted work. Instead, use progress payments that pay for work actually completed. Usually, make no more than one per month and be sure to inspect the work to verify completion.

Consider paying for a Performance Bond. For large and expensive projects, requiring a Performance Bond provides assurance that the contractor will perform, or, another contractor can be hired to finish the job. It costs extra but is often worth it.

Get Lien Waivers. When making payments, have the contractor sign a Lien Waiver for the amount tendered. (Your attorney can provide the appropriate form or ask the state contractor’s board for a sample.) A Lien Waiver is the contractor’s promise that he has paid (or will pay) all labor, material and supply bills related to the work to date. Keep in mind that if your contractor “forgets” to pay his suppliers or subcontractors, those folks have the right to place a lien on the HOA property to secure their debt. It’s a good policy to require copies of all supply, material and labor bills be attached to and referenced in the signed Lien Waiver.

It’s also appropriate to have all materials delivered directly to the job site and to pay for materials directly. You will need someone in charge of ordering the material and making sure it’s delivered and secured.

For any substantial construction, it is very important to involve an attorney who can draft or review the contract. Don’t bypass this important step. There’s a lot riding on what the board is obligating the HOA to.

There is much planning involved in rolling out a successful renovation project. Forget the leap of faith on this one. The safety net just may not be there when you land. Get a jump on your renovation projects and get a quality job done on schedule and at the best price.

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