WORKING WITH CONTRACTORS

Want access to MHCO content?

For complete access to forms, conference presentations, community updates and MHCO columns, log in to your account or register.

December 20, 2016
Phil Querin
MHCO Legal Counsel
Querin Law

 

Under Oregon law, anyone, who for compensation, arranges or undertakes or offers to undertake or submit a bid to construct, alter, repair…for another, any building…structure, project…or improvement attached to real estate, is a “contractor.”  See, ORS 701.055(3)  Although there are several exceptions to this law, the ramifications of this broad definition can have a significant legal effect on park owners and managers who have work performed in their community.  Here are some general rules to avoid liability when working with contractors:

 

 

Make sure that your contractor is licensed and bonded with the Construction Contractor’s Board (“CCB”)

 

The person submitting a bid to perform work at the park should provide you with their CCB number.  The number should appear on their business card and on any proposal to perform work.  Do not accept an oral representation that a person is registered with the CCB – get the number and then check the contractor out with the CCB.  Using the number will allow you to verify whether the person is registered, and determine whether there are any open claims against them.  This can be important, since even though CCB licensees must be bonded (in the amount of $15,000 for general contractors and $10,000 for specialty contractors[1]), too many claims at one time can deplete the bond.  Additionally, licensing requires that the contractor maintain public liability insurance in the amount of $500,000 for general and specialty (non-residential) contractors.[2]

 

Additionally, should the work not be performed according to industry standards, if the worker is licensed, you will have up to one year within which to bring a claim against him through the CCB.  If the CCB determines that correction must be made, it will require that the licensee perform the work.  If the licensee fails or refuses to do so, you may file a claim for the cost of repair against his bond

 

Make sure your contractor provides proof of worker’s compensation insurance.  

 

"Employer" means any person…who contracts to pay a remuneration for and secures the right to direct and control the services of any person. ORS 656.005(13)(a).  Thus, if you hire someone to perform certain work, say, to repair or re-roof the clubhouse, and they incur an on-the-job injury, you would likely be deemed to be the “employer” if they have no insurance  If the injured worker received medical treatment, Oregon’s State Accident Insurance Fund (‘SAIF”) would send you the bill for reimbursement.  Depending upon the injury, this could amount to thousands of dollars.

 

The best way to protect against using an uninsured worker is to make a habit of only hiring contracting companies who employ their own labor force.  Generally, the larger the company, the less risk there is that they are “going bare,” i.e. not paying their workers compensation insurance premiums.  The expense

of such insurance can cause some small contractors to forego the cost, but represent to consumers that they do have such insurance.  Verification is the best policy.

 

Avoiding Disputes Regarding Unpaid Liens.

 

If you have work performed through a general contractor, i.e. he or she is employing one or more subcontractors, it is imperative that you make sure the subcontractor(s) are paid on time.  If you pay the general, but the general does not pay the sub, the sub may still retain lien rights against you.  If the general contractor becomes insolvent, or otherwise fails to pay the sub, the park owner could be placed in the position of having to pay the sub to avoid the filing of a lien on the property – even though the general contractor has already been paid for the same work.

 

There are several ways to keep this result from occurring: (a) pay the sub directly and obtain a lien release; (b) pay the general when he or she provides you with a lien release from the sub; (c) never pay the general beyond the value of the work performed (i.e. don’t let the general be paid for work that has not yet been done) (d) make sure you verify that the payment is for work that has actually been done on the job; (e) pay attention to the Notice of Right to Lien forms that you receive, so you know which subs would actually have valid lien claims.

 

Similarly, you want to make sure that your general contractor stays within his budgeted amount for the job, and does not submit for payment beyond the agreed-upon amount, or for work that has not yet been performed or supplies that have not been delivered.

 

Selection of Contractors.  

 

As with the selection of all professionals, the best way to select a good contractor is by word of mouth – i.e. referrals from satisfied customers.  This is the best advertising one can have.  While there is nothing wrong with starting out with the Yellow Pages, it is prudent to ask any selected contractor for a list of references.  Check a few of them out.  Questions to ask would include (a) Did the contractor do the promised work? (b) Was the work done on time and in a professional manner? (c) Were there any hidden costs, charges, expenses, or add-ons that weren’t discussed in advance? (d) Would the customer use them again?

 

And most important, don’t accept the first bid that you receive.  Some contractors do not expect to get all of the jobs they bid – so bids can vary wildly from company to company.  When you receive a bid from a contractor you may be interested in using, have a conversation with him or her, just to make sure their approach to the project is the same as yours, and that the two of you are compatible. 

 

Never hire a contractor without a written contract.  It doesn’t have to be fancy – but it should be professional looking.  It should cover (a) the scope of the work; (b) the price of the job; (c) the completion date[3]; (d) any warranties for the work to be performed (e.g. one year for all workmanship and material)[4]; (e) the payment schedule.[5]

One last thought:  While mandatory mediation and arbitration is favored by many lawyers and can be a useful tool in the resolution of disputes, if there is such a clause in the contract and a dispute arises, the contractor may prevent CCB involvement if they give timely notification to the CCB.  Although this is not necessarily bad – some alternative dispute resolution processes are very good – park owners should keep it in mind when reviewing the terms of the contract.  If you want to retain CCB involvement in the event of a dispute, you may not wish to agree to an alternative dispute resolution provision in the written contract – and visa versa.

 


[1] ORS 701.085 (2), (3).

[2] ORS 701.105 (a), (b), (c).

[3] Most contracts will contain a force majeur clause, i.e. a provision saying that they will not be responsible for delays relating to weather, war, strike, acts of God, change orders, or matters outside of their control.

[4] Even if there are no express warranties, the requirement that the work be performed according to industry standards, still applies and may be enforced by the CCB.

[5] It is prudent to have a hold-back arrangement so that a final percentage is paid upon completion.  You always want your payments to be slightly behind the completed work, so you can see what you’re getting before payment.