Regular maintenance and repairs are necessary for any community. When that community is an HOA, the board is responsible for getting those repairs done. Keeping the neighborhood’s amenities fully functional for residents, and maintaining the clean look of the community, are important to make sure residents feel they are getting the benefits they expect. Usually, HOAs hire outside contractors to complete these repairs and upkeep. We are going to take a look at how to make sure your HOA gets the best outcome when hiring a contractor– well-done repairs at the best price, and legal protection.
Employees vs. Contractors
Some HOA boards may consider having employees on staff to take care of maintenance and repairs. But hiring an outside contractor (or vendor) instead of an employee is almost always better for the association. First, it reduces your risk of liability. The contractor is responsible for injuries or damage they cause. This removes the possibility that you’ll have to deal with a complicated, costly problem.
Second, hiring a contractor is easier for your organization. It requires less paperwork and is less complicated financially. You can avoid having to handle things like payroll taxes, IRS reporting requirements, and workers’ compensation insurance. There is an IRS form, called 1099, that you do need to have contractors fill in, but that is a much easier route for you compared to an employee’s W-2 form. These are welcome benefits for anyone who isn’t a CPA!
If a friend of a friend has referred a contractor to you, or there is any other personal relationship with the contractor, having a verbal agreement might seem good enough. But don’t do this. You need a written contract that has been reviewed by an attorney. A contract is necessary to protect the HOA and helps protect the contractor as well. Everything is clear and agreed upon, so there are no conflicts later about what was verbally agreed to. Any negotiation has already occurred before the work started. You know exactly what the cost will be and when to expect the work to be completed. If either of those things changes, you have concrete options on how to handle it.
These contracts usually include a scope of work, deadlines for completion, cost of the work, options to cancel the agreement, and language to protect you from damages. Even if it a small job, any time a contractor is used, always use a contract. No exceptions.
Who to Hire?
Figuring out who to hire may take a little legwork, but it is worth it–you will get quality work at the best price. Try to compare at least 3 contractors, even if the association has used one in the past. Get the bids in writing. You may wind up using that previous contractor again this time, but there also could be another one out there who is a better fit. And if you do end up using the same one as last year, you know they are truly still best for the job. Here are some factors to consider for your comparisons. Information on all of these should be required for each contractor’s bid.
First, price. Of course, the cost of repairs is extremely important. Budget pressure can make choosing the cheapest bid appealing. But basing your decision solely on the lowest bid usually leads to problems that can cost you more in the end. The saying “you get what you pay for” often winds up being true. A contractor with the lowest price often means less experience, history of poor work, or other deal-breakers. Weigh the cost and the experience and quality of the work. Just like the cheapest is not always the best, the most expensive doesn’t guarantee the best work either. All factors need to be considered.
Second, to weigh in your decision-making is the quality of the work. You should have potential contractors fill out questionnaires that tell you their background, how they hire employees (do they have minimum requirements? What is the experience level of the employees for your project?), and what projects they have completed in the past. Asking for and checking references will also give you a good idea of how to compare their work. You also may consider sending out more formal Requests for Proposals (RFP).
Third, there are documents that all HOA should collect from any contractor being considered:
- Liability Insurance
- Surety Bond
- Workers’ Compensation Insurance
- State Licenses
- Business License
Permits are one of the most common things that are skipped over. But having any permits that are necessary will save you headaches down the road. Even if you really like a contractor’s work and price, if they are missing any of these documents, you shouldn’t hire them.
If a board member has any personal or professional relationship with the contractors being considered, that board member should let the association know. They also should abstain from voting not on who to hire. Keeping the process open, and erring on the side of caution will protect everyone in the long run.