Those who handle the management of any kind of residential building deal with  contractors and contracts regularly—but they aren’t the only ones who should know about the process. It’s not necessarily an arcane topic—whether the project is a major roof repair or an association-wide window  replacement, the construction process is usually pretty much the same.  

 But what if mistakes are made in the construction process by the property  manager, a consultant or someone else in charge? Who’s ultimately responsible? Whose insurance coverage comes into play? What  recourse exists for building communities having problems with their  contractors?  

 Though an HOA’s property manager is usually the one responsible for handling  construction-related transactions, board members also should have at least a  passing knowledge of what documents, insurance and professional certifications  are needed by anyone doing work for their building. It’s a simple question of boards doing what they can to protect themselves and  their association from unnecessary liabilities. It’s also a matter of residents working to protect the equity they’ve established in their homes, which for many is their largest asset.  

 Checking Credentials

 So your board has settled on a bid from a qualified contractor who appears  capable and ready to do the job. Everything appears to be in order. Short of  signing the contract and telling the contractor to go to work, what’s next? Those who are overseeing the construction project need to obtain and  thoroughly inspect, all of the necessary paperwork for the project, says Peter  Lehr, director of management for Kaled Management Corp. in Westbury. “Check their certificates and insurance coverages, and make sure they’re all up-to-date.”  

 An association’s management should obtain a certificate of insurance liability from any  contractor doing work on their premises. The scope of the project should  determine how much insurance is needed, and board members and others overseeing  the construction process should be on alert for contractors who may mistakenly  (or intentionally) under-insure themselves. Verifying the specificity of  credentials and coverage is of the utmost importance.  

 Lehr stresses that contractors doing work on a building also should carry  workman’s compensation/disability insurance. Failure to do so could ultimately leave an  association on the hook if a worker is injured during the course of the project—even if the worker should have had covered by his or her employer’s insurance.  

 Similarly, ensuring that all tradesmen working on a project are licensed in  their respective trades (when the trade has such licensing, of course) is also  essential to the sound management of a construction job. Landscapers, for  example, must have a permit through the EPA in order to legally use pesticides,  Lehr says, and anyone erecting a scaffold or sidewalk shed must be licensed to  do so.  

 Scrutinize such permits and licenses, Lehr advises. “The management company should be ensuring the certificates and licenses are  valid,” he says.  

 Another vital part of any HOA’s arsenal against faulty construction is the Home Improvement Contractors  Registration Act—HICRA for short—which was recently updated to give associations more protection. The HICRA took  effect on January 1, 2006, and amended the Consumer Fraud Act to establish a  new registration program for home improvement contractors who engage in the  business of selling or making home improvements in the state of New Jersey.  

 “Anyone who does work related to the remodeling, altering, painting, repairing,  renovating, restoring, demolishing or modernizing of a residential property is  covered under HICRA,” says Kimberly Ricketts, director of the New Jersey Division of Consumer  Affairs, which monitors contractor licensing.  

 “The act prohibits municipalities from issuing construction permits for home  improvements to any contractor not registered under the act,” Ricketts continues. “The DCA is also engaged in an ongoing, extensive campaign to educate municipal  officials about the registration requirements.” More information on HICRA requirements can be found on the Consumer Affairs  website at www.njconsumeraffairs.gov.  

 Finally, before signing a contract, it’s also vital for association administrators to check their contractor’s references and perform due diligence to determine whether his or her firm has  had any serious legal problems resulting from a botched job, or from accidents  on projects. This doesn’t have to be a CIA-grade investigation; a simple Internet search can help you  determine if the company is legally licensed to do business in New Jersey, for  example.  

 The Importance of Communication

 Long before allowing work to start on an association improvement or renovation  project, the board and manager should have specifications of the job written up  for the contractor’s review, says Ron Ridgeway, owner of Tri-State Remodeling in Delaware, and a  contractor who regularly works for New Jersey associations. This helps insure  that everyone is on-board with timetables for the work, understands the various  phases of a given project, and are aware of each other’s expectations.  

 The price of the project and the timeframe in which it will be completed are  important to have in the contract. Timeframes can be tricky—contractors often work under multiple deadlines, so it’s imperative that milestones be spelled out for everyone’s benefit.  

 Aside from scheduling, according to Ridgeway, “Some other important things to ask are: Who cleans up after the job is  concluded? What is the schedule for payments to be made? It is important to  understand what role in the work—if any—you [as an association] are agreeing to. If the contractor agrees to clean up  during, or after the work, the contract should state that. It should also state  the extent of cleaning to be done.”  

 Other things to talk about are what happens if the association’s administrators change their collective mind about something during the  process, whether the contractor guarantees all the materials being used, and  who is responsible for getting the required permits.  

 The last issue is fairly straightforward. “Have the contractor acquire any permits required to finish the job,” Ridgeway says. “This causes him to be financially responsible for any work that fails to meet  the minimum code in the state.”  

 The board and manager also should know, prior to work beginning on a project, if  the building wants to pay for a performance and a payment bond. A performance  bond ensures that a project will be finished even if the contractor working on  it goes bust or can’t finish the job. A payment bond provides a building with assurance that  subcontractors and materials costs will be paid, regardless of the primary  contractor’s circumstances.  

 Projects Awry

 The importance of verifying that a contractor’s insurance coverage is adequate and current can’t be overstated, because if there’s a problem during—or even after—construction, the party most liable is most often the association or building.  The only way to protect yourself and your HOA is to hire qualified contractors  who are licensed and properly insured.  

 In every case, the building’s management company should be reviewing the licenses and certificates of the  contractor, and ensuring that those documents are valid. Subcontractors that  are employed by the general contractor are the responsibility of the  contractor. Larger companies should be able to perform the work with their own  workers, which takes any potential problems with subcontractors out of the  picture.  

 But if a bad contractor slips through the review process, and a hired contractor  doesn’t have adequate insurance or the right permits, what should a building’s management do? Is it preferable to give the contractor some sort of grace  period in which to comply? Or should the company be fired, and another company  brought in to do the work?  

 Sometimes, says Lehr, the path of least resistance might be the best way to go. “If a contractor already has been hired, and his experience and references look  good, it’s probably easier to let him get his insurance together than it would be to  replace him.”  

 And if a contractor does poor or defective work on your association’s property, there is help available through the DCA, or through mediation with  the contractor. Despite the protective measures in place however, HOA boards  and managers still need to be smart when hiring a contractor to do work on any  type of project. According to the experts, the smartest way to protect yourself  is with a well-crafted contract—and holding onto that final payment until you’re completely satisfied.                          

 Jonathan Barnes is a freelance writer, who frequently contributes to The New Jersey Cooperator and other publications.