Pay Attention to the Details A Guide to Hiring Contractors

When it comes to work in, on, or around a residential building, there’s really no such thing as a small job. Whether a minor fix or a major capital improvement, there are a number of factors that determine the success of a project, particularly when it comes to the facade and exterior maintenance.

Generally, it's the property manager who takes the lead in hiring contractors for everything from paint touch-ups to full-on roof replacements. There are scores of different contractors, all with different specialties and reputations. Some are great at managing all the aspects of work and safety, and some are not. While property managers will be a huge boon to the process, it's ideal to get a third party involved in finding a contractor. “The primary thing is to have a good architect, who you trust to help guide you through the bidding process on what it is you need to get done. You have a needs assessment done, you see what the work is, then you bid out and find out the reputation of the companies,” says Dean Roberts, an attorney at the law firm of Norris McLaughlin & Marcus, P.A., with offices in Bridgewater.

Look to the Property Manager

Just like most other walks of life, property managers will often a trusted and known quantity for small projects like painting jobs or basic maintenance projects. But, for larger projects, finding a contractor includes a few extra steps. “With respect to any contracts, you should get three bids, so that you can compare them and see if they’re reasonably in line. It’s very important to check their credentials. How long they’ve been in business, get a list of references, call multiple references, and find out what experiences they had with that particular contractor,” says David Dahan, a shareholder attorney at the law firm of Parker McCay in Mount Laurel.

Part of the bidding process involves securing the requisite permitting and licenses. “You want to make sure they’re properly licensed. You want them to be registered with the state of New Jersey. There’s a Contractor Registration Act, and they’re assigned a registration number. You want to make sure they have insurance, and see that before any work is done. You want the association to be named as an “additional insured” in the policy,” says Dahan.

One of the major caveats involved with larger-scale exterior projects is just getting things done on schedule. Contractors can sometimes juggle many different jobs and with so many variables like weather, weeks can stretch into months. “The thing you really have to watch out for is the work that comes up that isn’t on the original bid. The minute they start playing with the bricks, you know they’re going to find something. There needs to be a clear structure about who determines the work, how the change/order system is going to work, because you don’t want to make a $25,000 job into a $100,000 without some checks and balances on approval. I’ve seen some contracts that give contractors a whole lot of discretion, and that’s not a good thing,” says Roberts.

Property managers also need to keep aesthetics in mind, especially if the building is older. “With a lot of historic buildings, there’s a real art to it,” says Mary Wangler, who is a property manager in the Midwest. “If you’re talking about replacing cedar boards, or replacing stucco, or doing tuckpointing you have to be careful. If you want a tuckpointer, you want someone who has experience in historic restoration.”

When it comes to older architecture, newer, cheaper materials can look very out of place. “There are some aspects to exterior work that require a lot of judgment, and a lot of material calls,” Wangler continues. “If you’re not paying attention or don’t know what to look for when they’re quoting, you might have materials that make the building look completely different.”

Property managers also become the main conduit of communication between contracted workers and unit owners. With the nature of exterior work, a lot of projects can disrupt everyday life for building residents. “One of the key jobs of management is to let residents know what’s going on because the absence of information creates invariably the most negative outcome you can have. There are scheduled disruptions that you just need to let people know in advance so they can plan accordingly. They have to know the schedule is an estimate. They have to understand this is a project with a lot of variables,” says Roberts. Updated websites with a fairly complete picture of scheduled work go a long way in keeping owners and residents informed of what's going on, and at least providing a warning of what they may be walking into when they get up in the morning and make it to the lobby.

On some projects like facade work and tuckpointing projects, even if windows are closed, there’s dust and dirt that can enter. In those cases it's important for people to cover their personal property, or take pictures and things down, as the vibration of the work can cause potential damage inside units.

Cover Yourself

While the property management and outside parties will be doing most of the heavy lifting, boards still need to be involved in the major steps of the contracting process, and stay up to date on progress. “The board shouldn’t be hanging off the scaffolding making sure the bricks are in place, but they should be making sure the management is reporting to them on a regular basis, as to schedules, status of work, and primarily any changes in work. Communication fosters a lot problem solving in that you deal with it before it’s a problem,” says Roberts.

Smaller co-ops and condos—especially those that are self-managed and perhaps less savvy in dealing with contractors—should demand to see the contractor’s license, not just take his or her word for it. Some contractors open for business have tried to fake their credentials by simply sticking a sign on their door, when they're not actually licensed with any department or recognized as a contractor.

Legal pros say that especially with larger projects, co-op corporations and condo associations should load contracts with an extensive listing of insurance requirements and limitations to the building’s liability. First, the contract must indicate the extent of the general liability insurance coverage the contractor must maintain. Second, it should require workers compensation insurance. There's also another possible layer of additional liability insurance. In addition, the contract needs to stipulate that the property owner—in this case, the cooperative corporation or condominium association—is additionally insured on the insurance policy.

Given the complexity of insurance and legal issues involved in contracted work in a residential building—and the high stakes—it's vital that a qualified attorney review all major contracts, so as to catch any sneaky fine print in the policy that could take protection away from the building.

For example, there could be a clause in small print that says the additional insurance endorsement applies only if the contract specifically calls for it. The contract should also include a “hold harmless agreement” ensuring that the contractor is going to hold the owner and the property manager harmless for any negligence on their part.

To be 100 percent sure the property is protected, insurance professionals recommend demanding an actual copy of the contract or policy, not just a certificate of insurance, and running the contract by the building's insurance broker.

If the contractor’s insurance doesn't include coverage for injuries to their employees, the insurance company won't pay the damages. In theory, the co-op or condo can go after the contractor.

When undertaking a lengthy project, the manager should keep a close watch on the contractor’s policy expiration dates. “If you have a very large project, you can make progress payments, and the work can be done phases. You may have an architect or engineer inspecting the work, and that person will let everyone knows it’s approved, and that will trigger the association cutting a check for that particular work,” says Dahan.

If the building discovers that the contractor's insurance has expired, work must be suspended immediately. At that point, the pros say you might give the contractor a few days to produce an active policy. If they fail to produce that, send them packing.

Attorneys recommend including a termination clause in the contract to protect the building in case you discover mid-project that the contractor misrepresented their coverage from the outset. “Sometimes, say in a huge project like a roof, you have a 10% contingency that you leave out a couple months after the job is done just to make sure nothing goes wrong,” says Wangler.

Indemnification

In addition to provisions in the contract determining the scope of the contractor’s insurance, attorneys want to see an indemnification rider. If the contractor ends up doing something that is a result of negligence or intentional wrongdoing, you want to obtain indemnification.

The American Institute of Architects (AIA) issues contract forms that can be filled in by both parties for small jobs and used as the base document for larger jobs, to which riders can be negotiated and added. Beyond saving the building time and money, the AIA contracts are advantageous because they are informed by legal precedence.

One thing boards do not have to worry about is shareholders second-guessing their choice of contractors or the terms of contracts. The individual shareholder has no right to look at the documentation of the contractor, so when they are selected, the individual unit owners are basically allocating the responsibility of vetting and hiring them to the board alone.

In the end, even though a co-op or condo board member has a fiduciary duty to be at least conversant about the process of vetting and dealing with contractors, unless that board member happens to be an insurance or construction attorney, really knowing the intricacies of the relationship and its various potential pitfalls is a pretty tall order.

Fortunately, there are legal and insurance professionals whose sole job it is to protect their clients—boards and buildings just like yours—from those headaches.

Steven Cutler is a freelance writer and a frequent contributor to The New Jersey Cooperator. Editorial Assistant Tom Lisi contributed to this article.

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