Q. We had some gutter and minor roof repairs scheduled. The budget is tight for some other reasons and the president stated that her husband was qualified and would do the work for free. He is not licensed or insured and will be working on 9 of the 24 units. Owners have been complaining that there is ice building up on the steps and the contractor also identified some small issues with the roof line and siding at the gable in addition to the need to re-fasten the gutters.
Although we agreed to use licensed and insured contractors, the other board members agreed to use her husband. This is to avoid doing an assessment. They have also agreed that we should always try to have members of the association do work for free if they volunteer.
Should I be worried about this? I am not at all comfortable.
—Worried About Liability
A. “Pursuant to a board member’s fiduciary obligation to the unit owners of the association,” says attorney David Hartwell of the Chicago-based firm Penland & Hartwell, LLC, “each member must address association issues in a businesslike manner and refrain from decisions that are inconsistent with sound business judgment or otherwise could be construed as self-dealing. In this case, although the board had correctly agreed to only use licensed and insured contractors, it abandoned its policy and chose to use one of the director’s husbands who did not meet the prescribed qualifications.
The downside of this choice is several fold. First, this choice was not the result of a typical vetting process for contractors and is a departure from its prescribed hiring process. Second, because the contractor is uninsured, the association will become the defacto workers compensation insurer should he get injured on the job; and the association is not properly protected should the contractor cause damage or injury during the work. Third, it is unlikely that a formal contract was entered into between the parties and thus the full terms of the engagement are unclear, there would not exist clear terms of indemnification to protect the parties in case of injury, and likely no warranty of the work will exist. Lastly, due to the familial connection to a board member, the board will be less likely to address deficiencies in the performance of the work.
While the responsible expenditure of association funds is always a primary concern of the board, it should refrain from adopting questionable business practices as a mechanism to save on the cost of a project. Each board member has an obligation to identify and object if necessary to practices which are inconsistent with good business judgment.”