To hire a contractor for your HOA, put the scope of work in writing, get at least three written bids on that same scope, confirm each bidder’s license and insurance yourself, check references, and sign a written contract that the association’s attorney has reviewed. Any board member with a connection to a bidder should say so and stay out of the vote. Those steps take some legwork, but they are how a board gets good work at a fair price and protects the association if something goes wrong.
Most associations rely on outside contractors for repairs and upkeep, from landscaping and pool service to roofing and paving. This article covers selecting and hiring. Once the contract is signed, the job shifts to managing the vendor, which we cover in a separate article.
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Employees vs. Contractors
Some boards consider putting maintenance staff on the payroll. For most associations, and especially smaller ones, hiring an outside contractor (also called a vendor) is the simpler choice. A properly licensed and insured contractor carries its own liability and workers’ compensation coverage, supplies its own tools and crew, and is responsible for how the work gets done. That shifts much of the risk of injuries and property damage to the contractor and its insurers. It does not remove the association’s exposure entirely, which is one reason the insurance checks below matter.
Contractors also mean less paperwork. With employees, the association handles payroll taxes, withholding, W-2 forms and workers’ compensation insurance. With a contractor, you collect an IRS Form W-9 before the first payment and, where the rules require it, file a Form 1099-NEC after the end of the year. The current IRS instructions call for a 1099-NEC when nonemployee compensation paid to a vendor reaches $2,000 or more for the year. That threshold applies to payments made after 2025 (it was $600 before) and may be adjusted for inflation. Payments to corporations are generally exempt, with exceptions such as legal services. Your accountant or management company can confirm what applies to each vendor.
One caution: you cannot make someone a contractor just by calling them one. Whether a worker is an employee or an independent contractor depends on the facts, mainly how much control the association has over what the worker does and how. The IRS looks at behavioral control, financial control and the type of relationship, and an association that treats an employee as a contractor without a reasonable basis can be held liable for employment taxes. A handyman who works only for your association, on your schedule, with your tools, looks a lot like an employee. State tests can be stricter than the federal one, so ask your attorney or accountant if you are unsure.
Start With a Written Scope of Work
Before you ask anyone for a price, write down what you want done. If three contractors each bid on their own idea of the job, you cannot compare the numbers. A useful scope of work covers:
- Where the work is and how much of it there is (which buildings, how many square feet, how many fixtures)
- Materials and quality standards, including any manufacturer or product the board wants used
- The schedule: start date, completion date, and the days and hours crews may work
- Site rules such as parking, access to units, noise limits, protection of landscaping and daily cleanup
- Who pulls and pays for permits
- The insurance and license proof each bidder must provide
- The warranty you expect on labor and materials
For large or technical projects such as a reroof, repaving or structural repairs, consider paying an independent consultant (an engineer, architect or roofing consultant) to write the specifications and review the bids. Before you send anything out, read your governing documents for spending limits, bidding requirements or member approval rules that apply to the project.
How to Hire a Contractor for Your HOA: Comparing Bids
Try to compare at least three contractors, even if the association has used one of them for years, and get every bid in writing. You may end up staying with the same company, but you will know its price and service still hold up. Ask every bidder for the same information so the comparison is fair, and record the answers in one place. Our vendor comparison worksheet lines the bids up side by side.
Price
Cost matters, and budget pressure makes the cheapest bid tempting. Choosing on price alone often costs more in the end. A bid far below the others can mean the contractor misread the scope, plans to cut corners, lacks experience or is not carrying insurance. Ask a low bidder to explain the number. The most expensive bid does not guarantee the best work either. Weigh price against experience, quality and the paperwork described below.
Quality and References
Ask each bidder about its background, how it hires and trains its crews, who will supervise your job, and which similar projects it has finished recently. For bigger projects, a formal request for proposals (RFP) with a short questionnaire keeps the answers consistent. Then call the references. Ask other associations whether the work was finished on time, whether the final bill matched the bid, how the crew treated residents, and whether the contractor came back to fix problems.
Documents to Collect From Every Bidder
- Liability insurance. A certificate showing commercial general liability coverage, with limits your insurance agent considers adequate for the job.
- Workers’ compensation insurance. Proof of coverage for the contractor’s employees.
- State contractor license. The license number and classification for the trade, where your state requires one.
- Bond. The license bond your state requires, plus a performance or payment bond if the board wants one on a large project.
- Business license. The local business license, where the city or county requires one.
- Permits. Confirmation of which permits the job needs and who will obtain them.
Permits are among the most commonly skipped items, and unpermitted work can cause trouble with the building department, the insurer and future buyers. If a contractor you like on price and quality cannot produce these documents, do not hire them.
Verify the License and Insurance Yourself
A photocopy handed over with the bid is a starting point. Look up the license with the state licensing board and confirm it is active and covers the kind of work you are hiring for. Ask for the certificate of insurance to be sent by the contractor’s insurance agent, check that the policy dates cover the whole project, and ask the association’s own insurance agent whether the limits are adequate and whether the association should be named as an additional insured.
Workers’ compensation deserves particular attention. If a worker is hurt on association property and the contractor has no coverage, the injured worker may look to the association to pay. Checking before the crew arrives is one of the simplest ways to limit the association’s liability.
Put the Agreement in a Written Contract
When the contractor is a friend of a friend, a handshake can feel like enough. It is not. Use a written contract for every job, large or small, and have the association’s attorney review it. A contract protects the contractor as well as the association, because the negotiation is finished before work starts and nobody has to argue later about what was said. A contract for association work usually covers:
- The scope of work, attached or written into the contract
- The price, the payment schedule and how change orders are approved and priced
- Start and completion dates, and what happens if the work runs late
- For ongoing service contracts, response times for emergency and routine calls
- The length of the contract, how it renews and how amendments must be made
- Insurance, license and permit requirements for the whole term
- Indemnification, meaning the contractor’s promise to cover losses its work causes
- Warranty terms on labor and materials
- How either side can end the agreement
- How disputes will be resolved
Avoid signing the contractor’s standard form without review. It was written to protect the contractor.
Once the contract is signed, put each job in writing with a numbered work order that sets a not-to-exceed amount.
Disclose Conflicts of Interest
If a board member has a personal, family or business relationship with a contractor under consideration, that board member should tell the rest of the board before bids are discussed and should not vote on the hire. An open process protects the director, the board and the contractor from later accusations of favoritism. Many states have statutes on contracts in which a director has a financial interest, and many governing documents add their own rules, so check both before the vote.
In California
California regulates construction contractors through the Contractors State License Board (CSLB). The points below reflect what CSLB and the statutes say as of this writing.
- When a license is required. CSLB states that it is illegal for an unlicensed person to work on a project valued at $1,000 or more in combined labor and material costs, or on any project that requires a building permit or uses employee labor.
- How to check a license. Use CSLB’s Check a License search, which works by license number, business name or the name of a person on the license, or call (800) 321-CSLB (2752). CSLB also suggests asking to see the contractor’s pocket license and a photo ID.
- Bond. Licensed contractors must carry a $25,000 contractor license bond. CSLB cautions that this bond may not cover multiple complaints or a project worth more than the bond, so do not treat it as protection for a large job.
- Workers’ compensation. A contractor with employees must carry workers’ compensation insurance. Under CSLB’s workers’ compensation requirements, concrete (C-8), heating and air conditioning (C-20), asbestos abatement (C-22), roofing (C-39) and tree service (C-61/D-49) contractors must carry it whether or not they have employees.
- Liability insurance. CSLB notes that commercial general liability insurance is not required for a license. Your contract has to require it.
- Unlicensed workers. Labor Code section 2750.5 presumes that a person doing work that requires a contractor’s license is an employee, and makes a valid license a condition of independent contractor status. An association that hires an unlicensed person for work that needs a license therefore risks being treated as that worker’s employer, including if the worker is injured. Ask the association’s attorney how this applies to your situation.
- Approving the contract. Civil Code section 4935 lets the board discuss the formation of contracts with third parties in executive session, with the matters generally noted in the minutes of the next open meeting.
- Conflicts of interest. Civil Code section 5350 applies the Corporations Code rules on contracts in which a director has a material financial interest (sections 7233 and 7234) to every association, incorporated or not. Under Corporations Code section 7233, the usual safe path is full disclosure of the material facts to the board, good-faith approval by enough votes without counting the interested director, and terms that are just and reasonable to the association.
For more on keeping common areas in good repair, see our maintenance and vendors section.
The Law Behind This Article
Every legal point in this article comes from the official text. Each link below opens it in a new tab.
Civil Code sections: 4935 · 5350
Corporations Code sections: 7233
Labor Code sections: 2750.5
Other sources: IRS: Instructions for Forms 1099-MISC and 1099-NEC · IRS: Independent Contractor (Self-Employed) or Employee? · CSLB: What Is Illegal Contractor Activity? · CSLB: Finding the Right Contractor · CSLB: Workers’ Compensation Requirements
This article is general educational information, not legal or insurance advice. Laws vary by state and your association’s governing documents control many of these questions, so check with your association’s attorney or another qualified professional about your situation.