There is always work to be done on a building, whether it’s a simple lobby repair or a major capital improvement, but finding the right contractor for the job takes some work. If the vetting process is not done properly, the results could be disastrous.
Consider the following hypothetical scenario: wanting to move quickly on a capital improvement project, the board of a fictional building hastily approves a contractor without bothering to do any reference or background checks. Maybe the contractor was mentioned by a friend of a friend, or just appeared toward the top of a cursory Google search. After the project is already underway, the property manager digs around for information and discovers that the contractor’s license is expired—and although there were rave reviews posted on the contractor's website regarding the quality of his previous work for other clients, nobody at this building reached out to those clients to verify that the reviews attributed to them were true. When the property manager visits the contractor’s previous worksites, it's clear that the contractor isn't qualified to do what he's been hired to do for the manager's building.
And the surprises aren't over. The manager also finds out that the contractor doesn't have the proper insurance coverage—which leaves the building open to massive liability if something should go wrong in the course of the project. It’s looking at those small details that could be the difference between hiring a qualified contractor who can complete a job properly and has the right documentation, and hiring an inept, unqualified contractor that could cause significant trouble for the building.
Know Who You're Dealing With?
“We always advise associations to undertake a thorough due diligence period in reviewing bids and proposals from contractors,” says Kelly C. Elmore, principal at the law firm of Kovitz Shifrin Nesbit in Chicago. “Once a contractor is selected by the board, we strongly recommend that an association consult with legal counsel in reviewing the contract. No matter how small an association, a simple review of a contract could ultimately save the association thousands of dollars (or more) as the attorney should ensure that proper termination language is included in those situations where there is a default on the contract, or where the contractor has failed to provide sufficient insurance or licensing documentation.”
In the past, according to Ted Verner, vice president of property management with The Habitat Company in Chicago, the process of vetting a contractor was a tedious one. “Insurance gets updated each month, so if you’re not aware of it and the contractor’s policy lapses we wouldn’t know unless we check each month,” he says. “The board entrusts us to do all of the proper paperwork, so to ensure that we have a good contractor, we partnered with a company, Compliance Depot, which makes sure that anyone working in our building has the right insurance. They also make sure that the contractors have a license and they do other background checks.”