Community associations, condominiums and, in some cases, homeowners’ associations, are charged with repairs of portions of building structures under their maintenance function, and will often be required to repair casualty damage. Most contractors will deliver a proposal which is slanted to the contractor and lacks many important provisions and protections for the Association. This article will address some of the major provisions of a construction contract.
1. Scope of Work: It is imperative that the contract detail the work to be performed. Sometimes an architect, engineer or other consultant will assist.
2. Contract Sum: It is important to fix the cost of the work. Some contracts are unit based, such as in concrete work, such that prices per unit are specified with estimated quantities. The Association should object to a contract which states that the contract sum is the amount awarded by the insurance company, as such contracts have been held to be illusory and thereby unenforceable.
3. Performance Dates; Liquidated Damages: There are three such dates, Commencement, Substantial Completion and Final Completion. The Association might consider insisting on a liquidated damages clause, meaning that if the contractor fails to achieve Substantial Completion when required under the contract, the contractor is liable for an established sum per day until Substantial Completion is achieved.
4. Progress Payments and Retainers: The contract should detail when the contractor will be paid. It is typical that a specified percentage is withheld from each payment (known as retainage), with retainage paid upon Final Completion.
5. Hurricane and Tropical Storm Protection: When contract performance spans the height of the hurricane season, it is important that the contract detail required preparation. Preparation includes demobilization, protection of the site and remobilization after the storm danger has passed.
6. Contract Administration: In larger contracts, it is recommended that the Association retain the services of an architect, engineer or other professional to oversee the work. Administration includes inspection of the work, approval of draws, and control of quantities used in a unit price contract.
7. Insurance: The Association will want to be a certificate holder and additional insured on all liability policies. Be aware that the typical certificate of insurance contains exclusion language for additional insureds which must be addressed.
8. Contractor Liability: The contract should detail the extent of the liability of the contractor for causing damage to the property, including unit interiors.
9. Warranties: There are two warranties, namely that which is provided by the contractor and then that provided by the manufacturer or supplier. The contract should provide that the issuance of any warranty from a manufacturer or supplier is a condition to final payment under the contract.
10. Chapter 558, Florida Statutes: This statute obligates the Association to follow detailed pre-suit procedures in connection with defective work. These procedures do not benefit the Association. The statute allows the parties to opt-out of the statute; the Association should insist on same.
Construction law is complicated. An Association should consider engaging legal counsel to prepare the construction contract to ensure that the above provisions, as well as other significant considerations, are correctly addressed.
By Jay Steven Levine, Esquire. Mr. Levine is the principal of Levine Law Group and has over 30 years of community association law experience. The Firm, which handles community association, commercial litigation and real estate matters, has offices in Boca Raton and Palm Beach Gardens.