Contract and Payment for Work Requiring Prior HOA Approval

[NateW]

I am getting estimates to have a fence installed around the perimeter of by back yard and to build a stairway for an existing deck that is 10 feet above the ground. Both of these projects require an application (with plans) to be submitted to my Homeowner's Association and of course, HOA approval.

The first contractor presented me with a written estimate for my signature that would become the contract if I signed it. 50% payment is due at the time of signing, balance upon completion of the work. I did mention beforehand that HOA approval is required for these jobs and the contract is contingent on HOA approval. Thus, I do not want to pay the contractor of my choice anything until a proper application is presented to, and approved by, my HOA. I don't mind submitting the application with the contractor's plans, though.

I am also providing the contractors with the HOA requirements for decks and fences (the HOA is pretty picky about the type, style and materials used).

Those of you that have been through this before, how did you handle it?

Thanks.

 

[Gotadimple]

The way you outlined it. Present the plans and other requirements to the board for approval at their next board meeting. Once received, sign and monitor.

Most estimates have a time limit, just make sure your board knows that and meets within the approval window so you can preserve the rate and scope of work.

- Rita

 

[Lewis Clark]

Good idea to give the contractor the list of HOA requirements, but don't rely on the contractor to follow them all without supervision. You need to verify the requirements are met.

 

[NateW]

Thank you Rita and Lewis for your comments. Very good points I'll keep in mind.

 

[MichaelB]

Our HOA not only authorizes projects and approves designs, it also imposes insurance and licensing requirements on contractors. I make that clear upfront, and ask the contractor to include language in the contract that final payment is conditioned on HOA approval. I’ve done multiple projects and contractors have always cooperated. All of them have worked with HOAs previously, which I found helpful.

 

[Walt34]

Good idea to give the contractor the list of HOA requirements, but don't rely on the contractor to follow them all without supervision.

This, of course. But also write in the contract that approval is contingent upon the HOA (here it would the the Architectural Review Committee) approving the plans. That also puts the contractor on notice that you are not being arbitrary/capricious about the changes, that there is a third element involved who also has to give their blessing.

 

[OldShooter]

Any competently-written contract will specify what the vendor must deliver. I would simply specify that the vendor must deliver a final result that is approved by the HOA, with final payment contingent. It's not wise for you to put yourself in the middle, taking that risk, when it's a risk that the vendor controls.

This is just Contracts 101, not anything unique to this situation. Always include detailed performance requirements, never tell the vendor how to do the job.

 

[NateW]

Our HOA not only authorizes projects and approves designs, it also imposes insurance and licensing requirements on contractors. I make that clear upfront, and ask the contractor to include language in the contract that final payment is conditioned on HOA approval. I’ve done multiple projects and contractors have always cooperated. All of them have worked with HOAs previously, which I found helpful.

Thank you MichaelB. Once I select a contractor I'll make sure they have insurance.

I think the way my HOA works is they just approve the plans, so there would be no final inspection of the work. With that in mind, my plan is to not give the contractor any money until the HOA approves the application with plans, and then pay half before work begins and when the job is completed to my satisfaction, pay the other half. Is that approach reasonable?

 

[NateW]

This, of course. But also write in the contract that approval is contingent upon the HOA (here it would the the Architectural Review Committee) approving the plans. That also puts the contractor on notice that you are not being arbitrary/capricious about the changes, that there is a third element involved who also has to give their blessing.

Thanks Walt34. It's the Architectural Review Board within the HOA that reviews the plans in my case too. I take it the half up front payment should be after plan/application approval.

 

[OldShooter]

... I think the way my HOA works is they just approve the plans, so there would be no final inspection of the work. With that in mind, my plan is to not give the contractor any money until the HOA approves the application with plans, and then pay half before work begins and when the job is completed to my satisfaction, pay the other half ...

Just watch carefully to make sure you are not keeping any risk that you should offload to the contractor. Along those lines, be sure to get signed lien waivers from any subcontractors he may use and from his materials supplier(s). If you pay him and the doesn't pay them, they can come after you with a lien. That is why the document is called a lien waiver. Watch the trucks that come and note the company names to match with the lien waivers he gives you.

 

[Sunset]

50% payment up front is a lot.
Hopefully you know this contractor does not have a reputation for taking down payments and then not getting to the work for a long time...

 

[eytonxav]

All jobs should have specifications whether coming from you and/or the HOA and you want the contractor to warrant conformance with such specs and sound building practices, including HOA requirements, and final payment should be contingent on satisfactory completion of work in accordance with the specs and statement of work. Licensing, bonding and insurance (including workmens comp) are to protect you and are appropriate when hiring most contractors for this type of project and its good that your HOA requires that. If they cannot provide workmen's comp, I would want an indemnity to prevent their workers from suing you in the event they are injured on your premise.

 

[NateW]

Any competently-written contract will specify what the vendor must deliver. I would simply specify that the vendor must deliver a final result that is approved by the HOA, with final payment contingent. It's not wise for you to put yourself in the middle, taking that risk, when it's a risk that the vendor controls.

This is just Contracts 101, not anything unique to this situation. Always include detailed performance requirements, never tell the vendor how to do the job.

Thank you Old shooter. That's a great point about including proper detail in the contract. As it is now, two of the estimates simply state "Install stairs on existing deck" with no other description. That needs to change. The selected contractor will also have to pull a permit. That should probably be noted too, as the work must be to code.

Funny you should mention performance-based requirements (as opposed to design-specific ones). In my previous w*rk life I was a (ANSI) standards developer for 30 years supporting various indistry technical committees. Performance-based standards is the way to go.

 

[OldShooter]

Thank you Old shooter. That's a great point about including proper detail in the contract. As it is now, two of the estimates simply state "Install stairs on existing deck" with no other description. That needs to change. The selected contractor will also have to pull a permit. That should probably be noted too, as the work must be to code.

Funny you should mention performance-based requirements (as opposed to design-specific ones). In my previous w*rk life I was a (ANSI) standards developer for 30 years supporting various indistry technical committees. Performance-based standards is the way to go.

In my entire career, I never once got to the end of a project and said "Gee, we planned that too carefully."

 

[pb4uski]

I rarely pay upfront.

I once had someone building a garage for me and did agree to pay upfront for custom trusses that he was ordering for the project.... it was about 16% of his contract. He said that a customer had once stuck him for some custom materials.

Last spring, we were redoing our flooring and they wanted 50% upfront. I said no, and offered a $500 deposit (about 14%) and full payment upon completion... they said yes. If they had insisted on 50% I would have just moved to another vendor.

While I prefer to have payments follow the work, I don't mind some modest money upfront if there is good reason.... but 50% is ridiculous.

Beyond that, if it is important to you put it in the contract... project subject to HOA approval, requirement to follow HOA specs, insurance, retention, etc.

 

[Gotadimple]

A well-established contractor will willingly state their license and insurance info in the estimate, along with the other criteria relating to their work (i.e., warranty, guarantee). In the interim while you wait for your board approval, contact your state department of licensing and review this contractor's records - most are on line.

The state database may contain what they are licensed for, who holds their surety bond, and workers compensation insurance, and whether they have ever been fined and for what.

I generally look at this before I sign any contract. If they hold no construction license, we have no deal.

 

[davebarnes]

Here is the thing.
If the contractor stiffs you, you are out the money. His LLC will have done a BK.
If you stiff the contractor, he knows where you live. A mechanics' lien will soon follow.

 

[Aerides]

50% deposit is a lot, depending on the overall price. A $1500 job - eh 50% is probably enough to protect the vendor. But something more extensive I'd expect to see paid in stages or heavily weighted to the completion side.

I'm currently in a new pool contract. Dep. was maybe 5%, and then there are payments throughout at various milestones.

But yeah I'd never even ask for an estimate from someone who wasn't obviously licensed/insured. I check BBB as well.

 

[NateW]

Again, thank you everyone for all your great input. This is really helpful because I have little experience hiring contractors because I did almost all home maintenance and repair work up until now. It's great to know it's not out of line on my part to not pay half up front. Excellent points about looking up state contractor licensing info and possible citations, lien waivers, and contractor's insurance. I'll check for BBB membership and complaints too.

As for the scope of the work, from the estimates I received it appears the cost the fence and deck stairs will be about $10,000, so it's a decent size job. I still don't see how wooden stairs coming off a 10 foot above ground deck can cost about $5k to $6k, but that is what I'm being quoted for the stairs part. The fence will be about 140 feet, pressure treated lumber, 6 foot high, board on board with flat top and cap board, and includes 3 single gates. HOA rules state no prefabricated sections allowed, so hand built.

 

[pb4uski]

...I still don't see how wooden stairs coming off a 10 foot above ground deck can cost about $5k to $6k, but that is what I'm being quoted for the stairs part. The fence will be about 140 feet, pressure treated lumber, 6 foot high, board on board with flat top and cap board, and includes 3 single gates. HOA rules state no prefabricated sections allowed, so hand built.

Yeah, we added a stairway off our ~7' high deck in 2008 and it was less than $1k.... about 1/2 materials and 1/2 labor... just stringers, 2x6 for treds, 4x4 posts, railing... all pressure treated lumber... and metal ballusters. Only took about a day or perhaps a day and a half IIRC.

No prefabricated sections is silly... after it is installed how woudl they know? So if the contractor hand built sections at his shop and then assembled on site that would not be allowed? Silly... talk about form over substance.

 

[H2ODude]

I don't recall ever paying "up front" for anything I've done. Even when contracting for a house, subs were paid partials upon percent completion, just like contractors when working for a utility. I did buy major items like lumber and roofing, leaving the sub out of that risk.

Helped my son prep his previously rented house for his return from overseas. He needed a fence for his two dogs. No up front requirement from contractor. Can't recall HOA involvement, but city permit required. His side property line was in middle of 20' sewer easement. City refused to allow fence to go anywhere in. Next door neighbor had not gotten a permit and placed their fence right down the middle. So, since this was permitted and to be inspected, now there is his new fence 10' from the property line, basically a 10' dead space between two fences! He sold the place a year later and AFAIK city had not taken action yet against the illegally placed neighbors fence.

As former utility director, we allowed encroachments like this for anything like a removable fence (not birick walls or buildings) but it was explicit that the owner was at risk if it had to come down for maintenance. I think the policy he ran into was nuts. Looking at you Raleigh.