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Sunday, May 29, 2022

HOA Homefront: Tips Before Starting Major Repairs in Your Community

One of the biggest challenges the HOA has to face from time to time is major reconstruction.

Whether a new roof, balcony rehabilitation or other major repair, specialized volunteer boards and professional managers are not regularly involved in hiring for such work. Therefore, many potential losses may contribute to additional costs or risks. Before sending the contract to a legal advisor for review, consider these 12 planning tips.

What does the HOA need? HOAs often ask bidders to recommend the association’s “scope of work”, meaning a description of the work, and “specifications”, the specific materials to be used. While contractors usually prepare the proposed scope and specifications of work at no charge, if multiple bidders are involved it is important that there is a consistent scope and specification or the bids may not be properly compared to each other.

Advisor. Qualified consultants can advise the HOA regarding the scope and specifications of the work, the form of the contract arrangement, bid evaluation and responding to contractor requests for additional money. Such consultants typically charge by the hour and act as the HOA’s client advocate throughout the project. Many HOAs will benefit greatly from this kind of help.

What kind of contract value? A fixed price bid is just one type of payment arrangement. Depending on the circumstances, a contractor may be hired on a “cost-plus” basis, with the actual costs of the work marked down by an agreed percentage. Another type of arrangement is “time and materials”, in which the contractor is charged an hourly rate for his labor and is reimbursed for the cost of the materials provided (with or without markup).

lowest bid? The cost of a project that includes the risk of substantial hidden damage (eg dry rot or termites) can be very difficult for contractors to estimate and can raise the bid price. In that case, a “cost-plus” arrangement may prove to be better for both parties, as the contractor is not locked into a fixed price and therefore will not need to reduce his or her price to protect against further complications.

payment schedule. Contractors often propose payment schedules based on a percentage of completion. However, how does the HOA know that the percentages quoted are accurate during the ongoing project? Find out the percentage of completion versus more fixed paid signposts.

test project. In projects with repetitive work such as decks or balconies, paying the contractor on a cost-plus basis for the first location may enable a solid fixed unit price for other locations.

License – Mandatory. Disqualify contractors without the correct license for the work, or if their license number does not match their business name. View licenses at www.cslb.ca.gov.

funding. If a bank loan or special appraisal is the source of the funding, be careful about signing a repair contract before the money is on hand.

project budget. Consider other project costs, including incidental line items, in the HOA’s budget.

quality control. Spending more money for a consultant to spot-check the contractor’s work can save money and headaches in the long run.

Other planning considerations. What will be the working hours? Is there a need for space for material storage? How will residents be advised of work starting from their building or street?

“Measure twice… and cut once,” goes the old construction saying. Good advance planning is always better than undoing mistakes.

Kelly G. Richardson is a Fellow of the Community Association Lawyers College and Richardson is a partner of Ober Denicillo, a law firm known for community association advice. Submit questions at kelly@rodllp.com.

World Nation News Desk
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