Minimum Due Diligence for Contractors

At a minimum, before you authorize any third-party contractor to do any task, you should ensure that either your board of directors or your property manager carries out the following due diligence:

  • Get the state contractors’ license number
  • Verify with state officials that the license number is valid.
  • Make checks payable to LLCs and corporations, not to individuals.
  • Don’t pay huge deposits up front (escrow is normally fine, or materials charges).
  • Get proof of insurance – both workers compensation and contractors’ liability insurance.
  • For larger projects, you may ask the contractor to put up a ‘completion bond,’ or ?surety bond,? which pays your association in the event the contractor can’t or won’t complete the project according to contract.
  • Put contracts in writing.
  • Have the contractor obtain necessary permits and show them to the board’s representative. Sure, the association can get the permits, but they won’t be granted without insurance in place. This is a useful reality check to screen out unlicensed and irresponsible contractors, while also limiting the association’s liability.

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