Reader Questions - Who Fires the Bad Contractor?

Hello Kelly,

A company that the general membership voted to select is performing work at our complex. In researching the selected company’s contractor’s license, it was discovered that the license has been suspended and the owner had previously filed bankruptcy. Our property manager recommended we disqualify the contractor, and asked that we homeowners vote on whether to keep or change contractors.

I and my neighbor voted to immediately disqualify the contractor, but the other owners want to keep them. Do we have any recourse? We do not want to use this company that clearly has issues.

Appreciate your feedback!

K.B., Redondo Beach

Dear K.B.,

This situation illustrates exactly why associations have boards of directors – to make most association decisions. Every homeowner will not read management packets and attend all board meetings, so the members should allow the board to do its job. One of the most fundamental board functions is to select and hire vendors to maintain or repair the common area. The board cannot and should not abdicate its responsibility and let the membership decide such questions. On very major projects, it is a very good idea to have “town hall” meetings, for the members to learn of the need for a major project, or to meet the vendor selected to perform the work. However, the meeting is to communicate with the membership, not to have the membership decide anything. The final decider on vendor selection (or termination) is the board of directors, acting within the Business Judgment Rule. Certain decisions will be listed in the bylaws as outside of the board’s power and requiring a member vote.

If a contractor is performing work which requires a license, and their license is suspended or revoked during the time the work is performed, the customer is not required to pay the contractor for the work performed while unlicensed. To check a contractor license, visit www.cslb.ca.gov. When checking a license, also make sure that the license is in the name of the company or person named on the contract. Sometimes a contractor will “borrow” and list another’s license – which is illegal and does not make the contractor “licensed”.

Contractors also should have workers compensation and liability insurance in force at all times during the work being performed for the association, and it should be required by the contract.

If the contractor’s licensing or insurance lapses during the course of the work, the contractor should immediately be stopped from working and not allowed to return to work until proof of licensing and insurance is provided.

The board usually needs some expert help in deciding whether to terminate a contract, and the manager is a key board resource. The fact that the manager is recommending termination is important, because the professional manager is usually the board’s first Business Judgment Rule resource. Before making this decision on a significant or complicated contract, legal counsel and a construction consultant may also be important resources. The association’s attorney will weigh legal risks, and determine what the contract says regarding termination. The construction consultant will help advise the association as to the quality of the work compared to normal standards, and provide construction expertise which the manager and lawyer lack.

Thanks for your question (and hoping the board steps up),
Kelly

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.