Associations lose hundreds of thousands of dollars to unlicensed and uncertified contractors every year. Associations should protect their property by avoiding unlicensed contractors. Unlicensed individuals cannot pull permits and usually carry no insurance. Licensing is not necessarily a measure of competence but it presupposes a certain degree of professionalism and commitment to the industry. When dealing with an unlicensed contractor and the work is not done in accordance with the applicable building codes or workmanship standards, there is no recourse against the unlicensed individual other than through the courts.
Although licensing is not a guarantee of the contractor’s work, it can protect the Association from a number of potential problems such as:
1) Unlicensed contractors are often unfamiliar with building codes, inspection sequences and inspection requirements.
2) Limited recourse for breach of contract and/or defective work. When dealing with a licensed contractor, the Association always has the option of contacting the appropriate licensing agency. Some agencies are able to resolve issues and assist in recovering consumer losses. At a minimum, licensing agencies have the authority to suspend or revoke licensing privileges. This does not eliminate all contractor problems, but does provide contractors with an incentive to conduct fair business practices and comply with the law.
3) Unlicensed contractors are usually uninsured. If an Association uses an unlicensed contractor and property damage occurs, the individual may have no way of reimbursing the Association for damages caused. Furthermore, if a third party suffers an injury at the Association’s property, there may be no insurance coverage. Many homeowners insurance policies exclude claims arising from unlicensed construction practices.
4) If the Association hires an unlicensed contractor and the work is not completed in accordance with state and local building codes, the Association may have to pay additional monies to have the work brought into compliance.
There are steps that Associations can take to help protect themselves from unlicensed contractors.
When hiring a contractor, Associations should:
1) Always ask to see the State of Hawaii license. Note the license number and verify that the license is current and in good standing.
2) Ask for references and check each one.
3) Always get several estimates for comparison.
4) Never pay in cash, and never provide large up-front deposits. Beware of scams when individuals ask for money up-front or will only accept cash.
5) Beware of writing checks made payable to individuals especially, when the Association is dealing with a company or a corporation.
Everything should be in writing. At a bare minimum, a contract should include the contractor’s names, address and professional license number; a detailed description of the work to be completed and materials to be supplies; a completion date and total cost. Have an attorney review all contracts before signing anything.
In these economic times, there are many individuals who try to hold themselves out as licensed contractors. They usually make promises of quick and inexpensive repairs and require large up-front deposits. When work needs to be done, Associations should choose a contractor carefully and make sure the contractor is properly licensed and insured.