Q&A: When an Association Uses an Unlicensed Contractor

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.”

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2 Comments

  • Hi, This is occurring at my HOA as well. The President of the condo association chose her tenant and employee to repair our three story porch without insurance or a license. They provided a different company on the building permit, and have continuously lied and extended the construction by months and by thousands of dollars. The one finished porch looks crazy and amateurish. I'm afraid both will need to be knocked down and rebuilt. My condo President owns the majority of the units and does not reside in the building. Her son serves as treasurer. They request special assessments for construction projects without getting the right permits, and we rack up violations. No one in the building seems to care. Everyone just pays $7-10k extra a year without questioning. If I hire a lawyer I understand that I will have to pay for their attorneys fees, too. They are ruthless and honestly, frightening. I've received threats from them in the past. I'm losing my mind, my health and money over this. The city has put a Lein on all of the units and I cannot sell. Please help!
  • "Second, because the contractor is uninsured, the association will become the defacto workers compensation insurer should he get injured on the job" This is only true if the work performed by the subcontractor is performing work that is within Association's usual course of business, is under control of the association and does not require any substantial expertise. Construction contractors do not meet any of these three requirements in most situations. For example, and Association Board is not in the business of replacing roofs so an association would not be liable for the work comp of a roofing contractor. To my knowledge there is only one court case in the United States that has found an association liable for the work comp of a construction contractor and this was due to the fact that the Association was paying the contractor an hourly wage, controlling his hours and controlling his work. Hiring a subcontractor that provides management, doorman, daily or maintenance services is another story and should be addressed as so.