Construction Contracts Part 1
This article is first of a 3-part series regarding Community Association Construction Projects and contracts for condos, HOAs and coops, which serves as a follow-up to our live presentation to the Broward County Condominium and Cooperative Association. Please check back frequently to view the remaining articles in the series as they are published.
When undertaking any construction project, there are several legal and practical matters to consider. For board members with no background in construction or community association law, managing construction projects of any size can prove quite daunting.
The board must follow certain statutory requirements even before a contractor is selected. The condominium and cooperative statutes require associations to conduct a competitive bidding process for contracts with a price in excess of 5% of the association’s annual budget (10% for homeowner’s associations). While the law does not require a minimum number of bids, it is always prudent to consider no less than three. The association does not have to accept the lowest bid.
As part of the bidding process, the association should require that all potential contractors submit proof that they are properly licensed and insured. Without a proper license, your contractor will not be able to pull the legally required permits, subjecting the association to code enforcement issues with the local government. If the contractor does not carry insurance, workers who suffer an injury on the job site will undoubtedly look to the association for compensation.
A construction project of any significant size will likely require financing from a bank or other lending institution. Securing financing is a tedious and highly complex process which often requires the association to execute documents numbering in the double digits. Associations should always involve their legal counsel to ensure the association is protected and receives favorable terms. Many lenders actually require the participation of the association’s counsel as an assurance that the board of directors follows proper protocols.
The Adelson Law Firm represents condominiums, HOAs and cooperative throughout South Florida and can help you negotiate with contractors and lenders, as well as guide your association through the complex construction process. Our law firm has extensive experience advising clients on community association construction projects
Call the Adelson Law Firm today at (954) 458-9238 to schedule a consultation.