Contractor Requires Personal Payment

Now for the second time recently, a contractor that our HOA engaged for repairs has asked that we make out the check for payment not to the company that we hired, but to the individual who did the work. Today, the contractor went so far as to say he couldn't cash a check made out to the company.

In each case we received a bid on the company letterhead. We researched the company ahead of time to be sure it was legitimate and carried workman's comp insurance.

It's the same money either way, but I'm uneasy with the request. Does this present any liability to the Association? Has anyone else faced this situation?

If they are licensed, bonded, trusted, etc. what difference does it make to you how the check is made out?

Law

I do not know what the contractor is doing (wink, wink, wink) but I see no complicity even if you paid him in $100.00 bills.

Just get a receipt or a paid in full note for cash....LOL

Of course he can't cash a check made payable to his company, most banks won't do so.

If you received a bid on the company's letterhead, payment should be made to the company (unless the bid documents say otherwise). When the company reviews its books, what's to prevent them from taking collection action against your HOA since the company has never received payment.

And, yes, the IRS and potentially several state agencies would take issue with this practice. Paying an individual involves certain reporting requirements (which may or may not apply to a "company"). Your HOA could be liable for penalties and/or other sanctions for not following those reporting requirements.

I also wouldn't be surprised if the companies insurance carrier would balk at any claims you may have to submit.

John,
Thank you for confirming my suspicions. In the future, will insist that payment be made to the company, and will make this condition clear up front.

Time out.

Why not simply call the company to see if this guy can receive payment in his name because insurance coverage likely comes w/ work performed through the company IF this person is an employee and not the proprietor.

If he is his own company, who cares how the check is written IF the HOA dues payers receive prompt, courteous and competent service while enjoying the protection of worker's comp and liability insurance?

Let the HOA be an HOA. Let the IRS do its job and not worry about except what it means for your homeowners. Otherwise, busybody board members will cost you a good vendor.

Lawrence,

I would have much the same concern. Writing the check to the person who did the work leaves your association open to claims that you did not pay for the work. No payment means no warranty. It leaves your property open to mechanics' and or materialmen's liens.