Why Your HOA Should Only Hire Licensed and Insured Contractors

Part of the Insurance Warehouse HOA Risk Management Series: five short guides for association boards and property managers. A printable one-page version is at the end of the article.

Every association needs repairs to keep the property safe: roofing, concrete, railings, plumbing, snow removal. A handy board member or an unlicensed contractor can look cheaper on paper, but if the work fails or someone is hurt, the association and its board can end up holding the bill. Only licensed and insured contractors should do the work.

Why not do it yourself, or take the cheapest bid?

• Quality. Licensed trades earned that license through training, testing and continuing education. They get it right the first time.
• Lower long-term cost. Contractors buy materials at better prices, and work that fails has to be paid for twice.
• Accountability. A licensed contractor’s reputation and license depend on standing behind the work.
• Liability. If a repair is done wrong, say a handrail that gives way, the association is responsible for the consequences.
• The right tools. Many jobs need equipment and experience a volunteer simply does not have.

What a license means

• The contractor has met the state’s minimum competency standards, carries the required insurance, and has paid the required fees.
• Permits are pulled when required, so the work is inspected and to code.
• You get a signed contract, and there is a licensing board to answer to if something goes wrong.
• Not every trade requires a license in every state. Even where it is not required, hire licensed contractors anyway.

What insurance means for the association

• If a worker is injured or a neighbor’s property is damaged on the job, the contractor’s general liability and workers’ compensation respond first, not the association’s policy.
• Without it, an injured worker or damaged neighbor looks to the association, and a claim on the association’s policy affects its premium and its record for years.

Before signing the contract

• Ask for a copy of the contractor’s license and confirm it is current.
• Get a certificate of insurance showing general liability and workers’ compensation, with the association named as additional insured on the liability policy.
• Check that the coverage dates run through the end of the project.
• Keep the license, certificate and signed contract with the association’s repair records.

A note on volunteers

Board members who do repairs themselves are usually not covered the way a contractor would be. Save volunteer time for oversight and let insured professionals do the work.

Printable version