Protect Your Board From Contractual Pitfalls

To avoid locking yourself into a bad — and potentially costly — agreement, you must …

REVIEW THE CONTRACT WITH AN EAGLE EYE 

Boards are all familiar with the process of hiring contractors — bidding, getting proposals, selecting and signing. But boards often move too quickly, which can land you in trouble. Often, someone will give me a contract to review, and then I find out that it’s already been fully executed. They think the document listing the work and costs is just informational, and they sign it and then ask, “Can you make us a contract?” And my answer is, “That document is the contract.”

So boards often end up getting stuck with very short and insufficient proposals that they’re bound to. The problem is that they’re written by the contractor for the contractor. They don’t have any of the critical items that we would require, such as indemnification. They’re bereft of any obligations with regard to insurance. There’s no ability to recover attorney fees. And a lot of times they have automatic renewals, which can lock you in even longer. 

We had one case that involved a landscaping and snow removal contract. The board assumed it was the same as the previous one and just went ahead and signed it. It turned out some services had been removed and the scope of work was not clearly defined. The contract price did not include things the building was going to need, so those services were all add-ons with extra fees and costs. The board was tied into a three-year contract with a contractor who was not doing a great job, and we had no way to get rid of him. It’s time-consuming to go to court, and the fees generate very quickly. The board ultimately had to pay the contractor a fee to get out of the contract so that they could hire another contractor who actually does more work for less money.

BEWARE THE SCAFFOLD LAW. Many boards think that if the contractor has a certificate of insurance, they’re all set, but they’re not. We represented a board that had hired a roofer with a $5 million insurance policy and was just crowing about how protected and secure it was. But something wasn’t right. We did some digging and found the contractor did indeed have a $5 million policy, but it expressly excluded any roof work, so it was useless. Section 240 of New York’s Labor Law, also known as the scaffolding law, protects the rights of construction workers at risk of falls from heights while on the job. Building owners have a statutory obligation to ensure the safety of workers. If somebody falls from a ladder and doesn’t have a harness, or falls from a scaffolding without a railing, the co-op or condo is liable. So you need to make sure you have a contract that specifically shifts liability to the contractor or subcontractor.

DO YOUR HOMEWORK. Your best bet is to stick with quality contractors and really check references. Spending a few hundred dollars up front to have contracts properly reviewed by your attorney can save enormous costs and headaches down the road. The devil really is in the details. You can’t be penny-wise and pound foolish.