Florida Condo & HOA Legal Blog : Florida Condo Lawyer & Attorney : Becker & Poliakoff Law Firm : Condominium & HOA Law Blog

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:

• Unlicensed contractors are often unfamiliar with building codes, inspection sequences and inspection requirements.
   
• 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.
   
• 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.
   
• Unlicensed contractors cannot pull permits. If the Association pulls the permits for an unlicensed contractor, then the Association, not the person doing the work, is held responsible.
   
• If the Association hires an unlicensed contractor, the Department of Business and Professional Regulation or the Building Department may issue a cease and desist order to stop the work, and may decide to take legal action against the Association to impose civil penalties for aiding and abetting unlicensed activities.
   
• 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.
   
• If an unlicensed contractor does not pay his subcontractors or suppliers, the Association may be liable for these costs. Subcontractors and/or suppliers who work for unlicensed contractors still have the right to file liens on the Association’s property.

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 Florida license.
    
2. Note the license number and verify that the license is current and in good standing. To check on the license, call 850-487-1395 or visit www.myfloridalicense.com.
    
3. Ask for references and check each one.
    
4. Always get several estimates for comparison.
    
5. 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.
    
6. Beware of writing checks made payable to individuals especially, when the Association is dealing with a company or a corporation.
    
7. 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.
    
8. 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.

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It is important for all condominium purchasers to know the very strong warranties that come with their purchase of a condominium unit. A developer grants each first-time purchaser of a condominium unit implied warranties under Section 718.203, Florida Statutes. The warranties are for fitness of purchase and merchantability and commence upon the issuance of the Certificate of Occupancy for the subject improvement and continue for three years or one year from turnover, whichever comes last, but in no event more than 5 years from C.O. There is also an implied warranty of fitness for purpose for contractors and suppliers providing labor and material to the construction of the Condominium improvements. This warranty commences upon the issuance of a Certificate of Occupancy and continues for 3 years. 

The warranty period should not be confused with the statute of limitations. An Association’s statute of limitations with regard to known defects is tolled until transition of the Association and expires 4 years from transition. This means that as to known defects, responsible parties have to be pursued within the 4 year period from transition. For latent defects, that is claims which are not known and cannot be discovered through the exercise of reasonable diligence, suit can be brought for up to ten years from completion of each improvement. This means that so long as any suit is commenced within 4 years from the time the defects were discovered or should have been discovered with the exercise of reasonable diligence, which shall not exceed 10 years, the suit will be timely.

Of course the Chapter 558, Florida Statutes, procedure may toll the statute of limitations, and I will discuss more about that next post.

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Last week I wrote about Indemnification. Specifically about hiring contractors and ensuring that contract clauses were properly worded so that the Association was being indemnified and not providing the indemnity. At the end, I concluded by noting that indemnification in the absence of adequate insurance may be illusory. What does that mean?

Remember that the whole idea for indemnification is to have another party hold the Association free from liability for any negligent conduct. However, if the indemnitor does not have adequate funds then what good is the indemnification? 

For example, Happyland Condominium contracts with Acme Lawn Care for monthly maintenance services. Acme is a small shop with only a 10-year old truck and 2 riding lawn mowers as assets (total value $5,000) and no insurance. One month Acme is driving the truck from the front to the back of the property when the it runs into and kills a jogger. The Association and Acme are sued by the family for wrongful death, and millions of dollars in damages. The Association has put in the contract that Acme shall indemnify the Association from any claims made against the Association as a result of Acme’s conduct. The Association demands that Acme indemnify it against the wrongful death claim.

Despite the language of the contract, Acme does not have the wherewithal to defend the association or hold it harmless from liability. In such a case, the Association would be responsible to defend itself against any claim (ostensibly through its own insurance carriers) with no recourse against Acme for out-of-pocket expenses (such as the insurance deductible). Also, if the Association’s insurance is insufficient, or the claim denied, then the Association could itself be facing significant liability. If Acme had insurance, then the Association could be able to recoup against Acme’s carrier for anything not covered by the Association’s own carrier, and would also give the Association’s carrier the possible right to subrogate against Acme’s carrier.

Clearly, it is important that in addition to language about indemnification that all vendors/service providers also have adequate insurance. This would provide actual protection for the Association, not just the illusion of protection. Such requirements should be put into the contract, and verified at the start of any work as well as at periodic points during the life of the contract.

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