Using unlicensed contractors in common areas

I am a new board member in our HOA and discovered that the board has been hiring unlicensed plumbers and electricians to do work in common areas. This to me is wrong as I think it leaves us liable in case of a wrongful injury suit. Does anyone have opinions or experience in this area. When I brought it up in a board meting I was immediately met with hostility.

Charles,

Could you be more explicit about the "work in common areas?" Not all "work" requires a licensed contractor. Are the jobs being done things that require a building permit or is it just maintenance like replacing light bulbs and leaky faucets?

So far as I know you are correct. If a board knowingly breaks the law, its members are not protected by the HOA's D&O (directors & officers) insurance.

For now, make sure your name is in the minutes as being opposed to the use of unlicensed contractors. You may have to make a motion that you know won't be supported by other directors to get your name on record.

See if the other directors will at least ask your HOA attorney to give you an opinion.

Thank you all for your experience and advice.

Charles,

Who are these unlicensed contractors who are doing this work? How and where does your association find them?

Are you certain that the work that is being performed requires a contractor's license? In my state work may be done lawfully by an unlicensed contractor if the value of the job is less than $800.

Does your association normally obtain building permits for the work you are concerned about? Are permits required?

Does California license individual employees of a contractor? In my state, only the contractor is licensed; he is free to hire whomever he wishes to work for him. During the short period I lived in California I observed that the employees of the contractor hired by my own employer were generally unskilled and incapable of performing the simplest of tasks, such as wiring GFCI outlet or installing the shower controls right-side-up. (I corrected both of those problems myself.)

This brings me to the point that if the person(s) doing the work you described are employees of the association and the state does not license individual employees then they do not need to be licensed contractors, regardless of the value of the work. A person who works by the hour at the direction of your association is an employee; a person who charges by the job is a contractor.

You may be under the impression that your association will be off the hook by using a licensed contractor but the reality is that if someone is injured on your property your association will be the defendant. It will be up to your association to seek damages from the contractor.

Have you sought out legal advice as to when a contractor's license is required and when it is not? You have expressed a concern that you could be held personally liable under some circumstances. I do not know whether your concerns are valid, but it would be wrong for you to act as a board member based on a fear that may not be justified. That is, just as you would be in breach of your fiduciary duty to act for your personal gain, you would be just as wrong to bury your association in needless expenses in the erroneous belief that you would suffer a personal loss. If you are concerned you should seek out competent legal advice as to when you do and do not need a licensed contractor.

Thank you KerryL1
This was very helpful.
I am sure there are many more cases litigated which prove the fact that an association that hires unlicensed and uninsured contractors is putting all it's members(not only board members)at risk of financial loss.

I read Heiman v. Workers Comp Appeals Bd. and reached a different conclusion. California has the most convoluted statutes that intertwine contractor licensing with workman's compensation. My conclusion is that a condo association should never hire a contractor, licensed or not.

The problem is that a condo association does not own the property, so certain exemptions for homeowners do not apply. To avoid the risks that come with unlicensed and uninsured contractors, the association needs to verify that the contractor's license is valid at the time the work is performed. The association also needs to verify that each and every one of the contractor's employees is covered by workman's comp. Finally, the association needs to verify that the contractor has valid liability insurance. You need to do that every day before any work is done and you will need to verify the workman's comp any time during the day if a new worker shows up. You will spend a small fortune on verification.

On the other hand, you could hire a handyman. You will know he is covered by workman's comp because you will be paying the premiums. Your general liability policy will cover damage the employee does, if any, and you will know that the policy is in force because you are paying the premiums for that, as well.

This is one of those times when it would be wise to consult with an attorney experienced in labor law before taking any advice from the internet.

The biggest concern is over vendors entering your property, to conduct official work, and they don't carry worker's comp or liability insurance coverage.

The best advice in this thread involves the hiring of companies where the employer doesn't carry worker's compensation. Essentially, courts are likely to rule that the HOA is the "employer" of workers hurt on the property and their boss doesn't cover them. The lawsuit would nail the HOA. I had this discussion with our HOA insurance last week as a preventative discussion.

Companies that don't cover employees with worker's comp policies are shifting the worker safety liability onto the HOA to save money.

In regard to "unlicensed" work, it depends on the work involved but I would resist having non-electricians working inside electrical panels and the like. Hanging a light fixture or ceiling fan? No biggie if you trust the worker.

You're exactly correct - I suspect your board may be getting testy about this because (1) it's cheaper to hire unlicensed contractors and spending less makes them look good in the eyes of the homeowners and/or (2) some of their friends or associates may be getting the work (that's a whole 'nother topic!)

To me, taking the time to have the proper credentials is a sign of good and ethical business. Years ago, I worked in consumer protection and found most of the home improvement complaints involved people who could do the work (some better than others), but were horrible businesspeople. The licensing and insurance is a cost of doing business and you have to set your prices to reflect all that. Instead they cut corners on things like workman's comp and didn't go through the licensing process (too time consuming and expensive).

But if you use unlicensed people and they mess up, the city or county may hit you with a fine for not using people with credentials, not to mention more hits if the work isn't up to code. Now you have to pay to fix all of that and your association's master policy might deny the claim and if it's very expenses, here comes a special assessments to make this right.

I don't care what an individual homeowner does to his/her home with HIS/HER money, but when it comes to an entire community, the stakes are considerably higher and as Melissa likes to say, everyone's money is at stake. I would think most people don't want some hack doing the work. I think you may want to start rallying your fellow homeowners to compel the board to change its thinking - or put in some new board members.

I find one of the misconceptions that people have about licensed contractors is that they equate the license with mastery of the trade. Not so.

In my state, to obtain a license as an electrician, for example, a person must submit written evidence that he was employed by one or more licensed electricians for at least five years. He is not tested on his knowledge of the craft nor on his expertise. I do not believe that the registrar of contractors conducts any evaluation of the applicant's skills. The boss' secretary would be eligible to become a licensed electrician due to her employment by a licensed contractor.

Recently I met a person whose family has been in the plumbing business for several generations. This person is a licensed contractor but he admitted to me that his personal skills are no better than the average handyman and that when work needs to be done he relies on his employees, at least on of whom is a master plumber.