Dealing with Contractors

With so many things in an association-run community depending on cash flow, one of a manager’s most important duties is to carefully watch costs. But there are so many other aspects of managing a community—such as hiring and training staff, keeping on top of maintenance, and fielding member requests and complaints—that you might be tempted to spend less time on keeping track of contractor costs.

Some condominium buildings have a shared, central laundry room for members, instead of washing and drying appliances in units. Even in planned communities with freestanding homes, the association may decide to use a common laundry room. But it’s not as easy as buying washers and dryers and installing some method for charging members for the services. It’s more involved than that. Having a well-maintained laundry room in a condominium building or a community is important for both residents and associations.

Resorting to litigation if a contractor violates your agreement with it is an unfortunate situation for many reasons. Lawsuits take up valuable time that the association could be using in a positive way to better the community. And a lawsuit might ultimately end up costing even more than the amount that the contractor owed the association anyway. Even if you’ve agreed that a claim must be resolved by arbitration, those costs can skyrocket too.

Paying a contractor up front to do work for your association isn’t a good idea. If it does a shoddy job, your only recourse would be to sue the contractor for not living up to the agreement. But this can be costly. And it’s avoidable—if you protect yourself from subpar workmanship or a failure to finish the job. Having the contract state that the association can make “progress payments” as the contractor moves ahead with the work, and including a “retainage” clause, is a way to encourage a contractor to complete the job to your satisfaction.

It may seem like tax season—and the paperwork that accompanies it—has just passed, but remember that as you manage your community year-round, you need to be aware of tax issues that could arise in the future. A common issue to keep your eye on is the use of outside, third-party workers to perform jobs, such as cleaning, in your community. If you don’t handle paying these workers properly throughout the year, you could get into tax trouble with the IRS or state and local tax agencies later.

If your community is in a region of the country that gets snow, hiring a snow removal contractor may be inevitable. Typically, snow removal contractors provide associations with a form contract to sign. But a form contract may not always work to your benefit—for example, it may not have a payment plan that's beneficial to you or specifically spell out such things as when the company should start plowing after a snowfall.

If you draft your own snow removal contract, ask your attorney about including the following seven key protections.

In last month's issue (Aug. 2010), the Insider explained how to identify when the brick façade on your building needs repointing work. Repointing work is the chiseling out of old, worn mortar between bricks and having it replaced with fresh mortar.

Communities often rely on a variety of outside contractors or vendors to perform services on their behalf ranging from landscaping to plumbing. If one of your members complains about harassment or discrimination by one of these contractors, it's not enough for you to apologize and explain that he doesn't work for the association.