The Smart Board & Property Manager Legal Guide: Tips to Avoid Major Repair Headaches and Heartbreak

Take advantage of the experience and wisdom of our trial team in What Every Condo and HOA Board Should Do Before Launching a Major Repair Project.

Video Transcript :

Alan Tannenbaum, Esq.:

All right. We're going to get started. I'm Alan Tannenbaum of Tannenbaum Scro Lemole & Kleinberg. We are construction lawyers with our major focus being on community associations. We do turnover claims for HOAs and condos. We take groups through turnover. We handle major repair projects, support them. The subject is near and dear to us. I've been personally advising associations for over 40 years on hopefully successfully undertaking major repair projects. And the tips that we're going to give you today arise from those experiences. We have several that are pending now. We're really in two categories. Either we're preparing a group to do a major repair project or they didn't call us, that we're trying to help clean up a project that didn't go well. We work in both specters.

Alan Tannenbaum, Esq.:

My partners, Salvatore Scro and Jon Lemole, the three of us are going to go topic by topic, take different topics as we go along. You have an outline that I think at one point was projected. I'm not sure if you're seeing that in front of you now. But we're going to go in somewhat of a logical order.

Alan Tannenbaum, Esq.:

We're going to hit the fine points. We're not going to get too far into the weeds. Really what this is going to help you to do is identify things that you should be thinking about if you're undertaking a major repair project. We don't have enough time within an hour to give you all the formula for effectively carrying it out successfully, but at least we'll give some of the issues to think about. So let's get started. I'm going to hand the program over for a few minutes to my partner, Salvatore Scro, who's going to cover the first topic, get the right expert. You're on Sal.

Salvatore Scro, Esq.:

All right. So good morning everyone. Thanks for joining us again. It's nice to be able to see everybody that showed up. Probably one of the most important things we're going to speak about today are not only things that you need to remember, but these are things that should be in writing and in the contract for repair. First off, I'm getting some feedback from somebody, and I don't know where. But anyway.

Salvatore Scro, Esq.:

First off, if the building's less than 10 years old, the board should consider and a manager would be wise to inform the board that a forensic inspection and possible investigation of the common element should be performed, or if there was repair work that's been performed within 10 years and a symptom of a defect has appeared. So you're going to want to do some investigation if you have to take on a repair. Regardless of the age of the building when there's a significant repair project to be undertaken, you got to know what's the first step. For us, we recommend it's to retain the services. There's a horn going out there if you can hear it. I don't know why. It's to retain the services of an appropriate expert, whether it be an architect, an engineer, or some other expert that would provide the necessary services of investigation of the area that needs to be repaired.

Salvatore Scro, Esq.:

So who should select that expert? Typically, our advice is always to retain a qualified forensic engineer, and for every building problem, there's an associated expert that's appropriate to investigate the issue and specify the appropriate repairs. Some engineering firms have experts on their staff who cover most of the issues that you may deal with. However, if they don't, there's specialty experts that can be called upon to supplement the review.

Salvatore Scro, Esq.:

The selection of the expert is something that should not be primarily based upon the cost. As one astronaut put it once when he was asked how he felt about to go up in the space shuttle, he said, "How would you feel being strapped into a rocket built by the lowest bidder?" So you really want to make sure that you're choosing the right expert and not just the lowest bidding expert. One of the things that people might say as well, "In an association we have to get bids and take that lowest bidder." That's not the case. And right now everybody's probably looking at me and maybe looking like that. In any event, you don't need to take the lowest bidder. Section 718.3026 of the Florida Condominium Act applies to that and that is not a requirement.

Salvatore Scro, Esq.:

As construction defect attorneys, we know certain matters require us to bring in various experts or consultants. We know we're not engineers. We're attorneys. We know what we may need to present as evidence to win a case on a construction defect claim, so we bring in the appropriate experts to provide the opinions to support the claim. Those experts do not know what of their opinion or investigation may fall short of providing adequate proof to win a case, so we guide them. Similarly, is the case with board members and association managers. They can recognize a problem they know there needs to be a repair. But to retain the right expert and know whether that expert has performed the appropriate investigation and obtain the proof necessary to support the claim, they should not take on that responsibility alone and they should consult with someone to identify who that expert they may want to retain it.

Alan Tannenbaum, Esq.:

Yeah, obviously, for board business judgment, one of the requirements for the protection of the board business judgment role is that the boards rely on appropriate experts. You may have people on the board who are former contractors and engineers and so forth. Not really a good idea to rely on in-house expertise in undertaking especially a major repair project. Besides the fact that those folks are not insured usually in Florida which could get them in personal issues. So Jon, Jon Lemole. Knowing fully the problems requiring correction, why is that an important step in having a successful repair project?

Jon Lemole, Esq.:

One of the things that we see frequently in our practice is a failure of the association to understand what are the effects of a problem that they're having that they're repairing. Let's take an example. Let's suppose you have leaks around the windows in your building. So you bring in a contractor and they verify that, "Well, we need to make some repairs to the ceiling around the windows," or, "there's some flashing issues that need to be addressed." And a lot of times that's where the inquiry and the investigation ends.

Jon Lemole, Esq.:

And as probably a lot of you know, and I'm going to share a screen here, water doesn't always ... You don't know where water goes. Water sometimes winds up in very interesting places in your building. So if you're having an issue that you need to repair that's based upon water intrusion, one of the first things that any decision maker should do in that situation is think about, "Well, how do I fully delineate where this problem may have wound up. It may not just be confined to the area where I see it, where I patently observe it."

Jon Lemole, Esq.:

I'm showing you a picture here where there were observable leaks around these windows. And also, you can't see it up here, but there was also some water intrusion that was observable up on the roof to wall transitions. So if you're seeing that and you're making a decision, "Okay, we've got to repair the windows, maybe we've got some roof repairs that we need to do to control this," you may think you fixed the problem. And in fact, you haven't, because when we took a look at this building and did some forensic evaluation, you have water migrating down through these windows and along this corner and it's creating a situation where the entire framing down here at a much lower level is completely rotted out. I'll give you another even better picture.

Jon Lemole, Esq.:

This is a situation where we had observable leaks in the roof up here. Oh, I'm sorry. To get back to that. The initial reaction would be, "Well, we've got to bring in a roofer and we've got to make some roofing repairs." And if you just ignored, if you just did that and you didn't investigate where this water may have wound up any further, you would have missed all of this framing damage underneath. And you've literally got a situation here where the interior, the building structure is rotted away as a result of water migrating.

Jon Lemole, Esq.:

The takeaway is that when you're faced with a repair issue, you've got a condition, you think you may know where, what the repair is, you may have a contractor who's coming and saying, "I know exactly what needs to be done here." Don't stop your inquiry there. Talk to general counsel, talk to a construction lawyer, and think about bringing the right experts in, as Sal said, to take a look and see where the problems may really have wound up, so that you're not just repairing the observable condition but you're also going to take the steps to repair what that observable condition has caused. Because repairing the observable condition may just be half of the story.

Jon Lemole, Esq.:

That's why we say know fully the problems requiring correction. It's not always obvious, and you may have to do a little bit of digging, but don't neglect that very important step because you may not be doing ... You may be solving a problem that is just putting a band-aid over a much bigger issue that you're going to find three, four, five years down the road. It's going to get much worse. It's going to create a very significant financial burden on the association.

Alan Tannenbaum, Esq.:

So failed roofing projects keep our team very busy. I've seen a few recently. There's a lot of roofing companies that are selling roof overlay products. No need to tear off your current roof and go down to the roof structure. We could merely put this product as an overlay over your existing roof. And there's not proper forensics done of the condition of the underlying roof, the insulation underneath and so forth. And putting a new roofing product over an overlay that is not in good shape is generally not a good idea, and we've seen it over and over. So that's an instance where have you really understood what your roofing problem is in order to determine what's the appropriate step, what's appropriate roofing system to put on your roof, and really from a pricing standpoint there's a lot of groups that are going for those overlays and it's really not correcting the underlying problem. So we have seen that.

Alan Tannenbaum, Esq.:

All right. Engineering proposals. I'm going to cover this topic. It's really a pet peeve of mine because a lot of times a group comes to us, say, "We would like your help in drafting the contract with our repair contractor for this major repair project," and I say, "Well, what about your engineer?" "We already have the engineer." "Have you signed a proposal with the engineer?" And usually we get, "Yes, we've signed it." Groups are not looking carefully at the engineering contracts, and there's some members of the engineering community who are not very happy with us and pointing this out. But several years ago, really bolstered by their insurance companies, engineers started to put general conditions into their engineering proposals. Sometimes they're on the back of their form. Sometimes it's an attachment.

Alan Tannenbaum, Esq.:

So what are some of the typical clauses in engineering contracts to be wary of? One of the most important ones is limitation of liability clause which say for instance that the limit of the engineer's responsibility if they screw something up is the amount that they've been paid or some fairly modest dollar amount. I've seen $50,000. I've seen $100,000. So you're hiring an engineer who may have a million dollar professional liability policy and too many groups of shiny contracts that have a limitation of liability clause of a much lower level, and we end up when we're asked we negotiate with the engineers to at least increase their limitation of liability level to the level of their insurance coverage, which I think is a fair compromise.

Alan Tannenbaum, Esq.:

But there's other things. There's venue clauses. Sometimes they want the venue in the county where they're headquartered. It may be different than where your project is. And sometimes you have a contractor who submits a contract that has a venue for any dispute, and yet a third county. Those have to be appropriately aligned. Prevailing party attorneys' fees clauses are important too.

Alan Tannenbaum, Esq.:

We suggest, I mean, you can do your own internal review, but when you're handed an engineering proposal, especially on a major project, look at the fine print, look at the conditions. You can even run them by us and we'll take a look at them. The engineers would reluctantly agree to renegotiate those and take some of those clauses out, so just be wary of that.

Alan Tannenbaum, Esq.:

So I'm going to give the program back to my partner Salvatore Scro, and he's going to tell you why having detailed and on target plans and specifications are important for a successful project.

Salvatore Scro, Esq.:

Okay. Let me just ... I had a screen up there with a shot for you, but I want to ... Okay. Sorry about my guy there, but here's the issue that you have. If you don't have detailed plans and specifications, all right, the problem is that there's going to be requests for information, there's going to be different questions that arise during the case of the project. So you want to know initially what the detailed plans and specifications are so that you can get the proper bid for the project. They tend to be generic. Your engineering firm that prepares a plan, you should urge them to make sure that they have detailed specifications. And it's also good to have those plans reviewed by a construction consultant because the contractors are the ones that actually do the work.

Salvatore Scro, Esq.:

What happens is if you don't have that done, a lot of times the original contract is the little one and the change order is what causes the grief and the expense. Many times the contractors that perform the work as I said will not have very detailed plans available to them, and the contractors, they'll construct their work based upon what they believe should be done in accordance with the building codes. And we find a lot of times that those contractors' interpretation of the building code is not always on point, or they may possibly assume that if the plans did not call for certain work to be performed, then it was not necessary that it be performed. So supervision of the project not just by the owner rep. That role will be discussed later on. But by the general contractor and subcontractors or possibly the design professional you retained is key.

Salvatore Scro, Esq.:

The staff of the general contractor and some contractors are not always of the same experience. Subs bring in laborers to do that what they may be told, but are they doing it correctly? You need someone to be sure that they're being supervised, and that the person supervising them has knowledge so that they know whether or not they're performing the job correctly, another contract term that should be included in the contract.

Salvatore Scro, Esq.:

You really don't want to end up with a situation where your plans are not detailed and the left hand does not know what the right hand is doing. You do want to make sure you have those detailed plans and specifications.

Alan Tannenbaum, Esq.:

All right. Jon Lemole, let's talk about repair contract preparation.

Jon Lemole, Esq.:

And here we're talking about the contract with the contractor, and this is really where rubber meets the road in your repair project. I look at my role in reviewing repair contracts as involving two big areas, other areas besides those two big areas, but the two big areas are how do we ensure that the project gets completed in a timely fashion for the association. We'll discuss that a little bit later in this program. And then what happens when things go wrong, because they will go wrong.

Jon Lemole, Esq.:

I've not seen very many projects that go off without a hitch. And I'm looking at the chat. For example Alice, and I'm going to get to your question, you're talking about a situation where you had a balcony reconstruction and now you're seeing some cracks in the work of the contract. And what do you do about that? What's your recourse? So when I look at a contract from a contractor, and I see them ... I've looked at contracts that are page long and I've looked at contracts that are 50 pages or 60 pages long. There's no right answer as to the how many pages that this contract should be. It's what's right for the project. But, there are certain things that are key that we want to do to protect an association when things go wrong.

Jon Lemole, Esq.:

There's a lot of ways that contractors try and skew that in their favor. Alan and Sal talked about indemnification, limits of liability clauses, and sometimes we'll see that. Where you can sue this contractor? What kind of forum you have to bring your claim? Are you allowed to bring your claim in circuit court or do you have to go through arbitration? Contractors seem to like this idea of having claims brought to arbitration. We're not a fan. To tell you right now, we don't like that, and we would always try to reserve, negotiate that out of a contract. We've seen contracts where the contractors had the right to assign their work to somebody completely different and the work ... So you have somebody showing up to do the work that you don't even know who they are. So you want to address all of these issues to make sure that when things go wrong, that you've got effective recourse against the contractor in the place that you want to have that dispute heard. And for us, that's always circuit court.

Jon Lemole, Esq.:

One of the other things that we frequently see is dispute resolution procedures within the contract, in other words when things arise, sometimes you get these convoluted things where the first has to be brought to the architect and the architect has to make a decision, and then if the architect makes a decision that nobody likes, then we have to bring in a couple other people, a panel of people to figure out what the right path is, and all these complex different ways that the contractor tries to make it where you put roadblocks up to you folks, your association, having quick and significant recourse against that contract.

Jon Lemole, Esq.:

So getting back to Alice's question, what do you do, we've got a problem. The answer is I don't know, I'd have to look at your contract. But presumably you have some remedies in there. And if you've had a lawyer look at that contract and make sure that they've done all they can do to protect the interests of the association, then you should have very effective recourse against that contractor. But without looking at the contract I can't know because that's what controls everything. It is the most important thing in your project as far as I'm concerned, is have that contract reviewed by counsel.

Alan Tannenbaum, Esq.:

What a lot of engineers typically do is and architects too is that they will put a form industry contract in the bid documents. Those contracts are pretty sophisticated contracts, they're very thorough contracts, but they have provisions embedded in them that are not particularly helpful to associations, and they're not really aligned for a repair project in Florida. I've often said that these form agreements, they're great if you're building a 50-story high-rise in Manhattan, but they're not particularly designed for a re-roofing project in Florida or a balcony repair project.

Alan Tannenbaum, Esq.:

So what we do many times is that we see those form contracts, we do addendums to them to clear up some issues. They generally don't have prevailing party attorney's fees clauses. There's other issues that need to be cleaned up in them. So we do that. But be wary of that.

Alan Tannenbaum, Esq.:

All right. What I have next on the agenda is selecting the owner's representative. I'm talking about a major repair project. The engineers never understand this. Why does the owner need an owner's representative? That's what we're there for. I've been doing this long enough to know that everybody who you bring onto your property needs to be watched and overseen. The engineers are not there all the time. If they were, you would be paying a fortune for project management. They're usually only there at limited amounts of time. You have people coming to your project all the time.

Alan Tannenbaum, Esq.:

What some groups do is say, "Well, that's what our manager is for." I know there's some managers there might be already shaking your head that we already have enough on our plate, we're not construction experts, we're not here to oversee a major repair project, plus the repair project gives them extra workload anyway, managing parking and renters and funding the project budget and so forth. We are great believers on a major repair project associations bring in a outside owner's representative. Could be a retired contractor. There are owners representatives who exist out there on a consulting basis, to really watch the job, handle the communication. They don't make decisions. They will confer back with the board on a major decision that needs to be made, but it's a third ear to be there, to be looking over things.

Alan Tannenbaum, Esq.:

Engineers miss things. Contractors miss things. Sometimes you have subs showing up. There's no project superintendent there. What are they doing today? We are a great believer in having owners representatives, usually an outside party. We're talking about a major repair project will generally save a lot of headache. Now, I've seen some groups say, "Well, we got this retired contractor on the board." Perfect. That'll be our owner's representative. The project starts in January. This board member's doing a bang-up job, keeping things in order, and come Easter he's heading back up to Michigan for the summer and who's overseeing the project through the summer months? Usually that's generally a bad idea. And again, volunteer owners representatives can end up being more trouble than they're worth.

Alan Tannenbaum, Esq.:

All right. Sal, carefully vet bidders and qualify the repair team. Why is that important for a successful project?

Salvatore Scro, Esq.:

All right. So you have different projects, different repairs. You want to choose the appropriate contractor for the job. When you have an idea of who that contractor is that you may want to select, you want to ask for references relative to the work that you're proposing and you want to interview them. You want to speak with them. Be sure that they specify who their superintendents are, who the subcontractors they may want to bring out to the job.

Salvatore Scro, Esq.:

When you interview them, you want to get references from them, you want to know what projects they may have done, take a look at those projects, see how they've turned out. Also, you want to see how busy they are. You want to make sure that they can devote the time they need to to your project. So it's important in the contract that maybe you put in required days, hours on the job, required number of personnel that they'll have on the job, the laborers to do the work, make sure that they have the materials.

Salvatore Scro, Esq.:

You also want to know if they have the funds necessary to provide the materials for the job. If they're asking you for money upfront, then that's something you need to consider. Are they well enough off to handle your project or are they taking your money and buying materials for a different project? If you do give them money upfront, you want to make sure that you allocate that money to the materials that you're going to use for that project.

Salvatore Scro, Esq.:

And find out who they're going to be bringing on the project. Not just their own staff. A lot of times general contractors don't even have any of the laborers to do the work. They subcontract everything out. So you may want to check with the attorney handling your contract, whether they have any knowledge about the general contract or the subcontractors that may be considered for the project.

Salvatore Scro, Esq.:

Construction defect attorneys sue contractors. That's what we do. Not because we love to sue contractors, but because they're the ones that created the defective condition causing the problem for our clients. So we do have experience with these different contractors and subcontractors. And while anybody can have a day, a bad day sometimes, a bad day over and over again is something to be cautious of.

Salvatore Scro, Esq.:

Also, you want to make sure in the contract terms that the subcontractors that they use are subject to your approval, and that you have the opportunity to accept or reject the subcontractor. The same thing with maybe the personnel that are supervising the project. So it's important that you know the viability of the contractor that you're using, who the subs are that they may use, put in there what the minimum hours are, and also find out what they do to prepare for the project, what they do during the project. Do they do the cleanup every day? How are they going to store their materials? All these things are important things that you need to look at when you're seeking out the right contractor.

Alan Tannenbaum, Esq.:

When you get references, call them because I think there's an assumption that if somebody gives you a list of references that they all had good experiences with your company. Not always true. Or they may say, "They ended up doing a great job but they assigned Tony to the job as the superintendent. We hated Tony. And they gave us a much better guy. You should really ask for that guy, would be the better superintendent." So you will learn things about the job. So it's really great to call those references, find out what their experiences are, what tactics did they use to get the best performance out of that contractor. So call your references.

Alan Tannenbaum, Esq.:

Jon, let's talk about draw schedules. Why is that important to a successful job, to have a balanced draw schedule?

Jon Lemole, Esq.:

Okay. Folks, I want you to remember two things. And if you remember these two things, you're going to be way ahead of the game. Number one, your project is not your contractor's only project. They have multiple projects going at the same time. Number two, they're probably not staffed to do all of the projects that they have going at the same time. Every morning whoever's making the decision, whether it's the owner of that contracting firm or some scheduling people or supervisors or management folks, they have to make a decision as to how they're going to staff the projects that they currently, the multiple projects that they have going at any one time. They've got to put their people in the right places. They've got to order materials and make all of these decisions about staffing, supplies, things like that. Those decisions like for any business are going to be made upon the issue of where they're going to get the most bang for their buck, where are they at risk.

Jon Lemole, Esq.:

So if they don't have any risk on your project because you've paid them more than they've provided in value, likelihood is that they're not going to be putting too much of an emphasis or a priority on getting to your project versus a project where they've got more value in the job than they've gotten paid. And I can't tell you how many times we see associations just accept whatever draw schedule they get in the contract that they're presented with by a contractor. And by and large the contractor has come up with that draw schedule knowing full well that they want to make sure that they have as little risk and they're not financially behind in that project.

Jon Lemole, Esq.:

A lot of these folks have it down to the science. They know how long it's going to take them to get supplies. They know what kind of credit terms they have with their supply suppliers and material suppliers. So they're looking to create a draw schedule that's favorable to them. And when they have a draw schedule that's favorable to them, that is a golden opportunity for your project to get delayed and not be completed on time, and perhaps not even on budget.

Jon Lemole, Esq.:

So a good construction lawyer who's really familiar with these concepts of risk and contractor risk is going to look at that draw schedule and say, "Okay, I want to make sure that my client, his association gets this job done on time. So I want to make sure that this contractor, every morning when he wakes up, he's looking at my project and saying, 'Man, I got to get people out there because I got to get that next draw payment because I don't want to be upside down at any point in time on this deal.'" And that's essentially it. It's a very simple risk reward calculation that needs to be made, but what you're presented with by the contractor is very rarely ever going to be in your favor. And you can address that. You need to address it, and it's one of the most effective ways to make sure your project gets completed on time.

Alan Tannenbaum, Esq.:

Be very careful about deposits. What we try to negotiate for associations is the first payment made to the contractor is after there's some work has been completed and the first draw request is made. Deposits, I've seen some contractors take the position that what you've handed them the deposit is part of their profit on the job, they don't even use it for materials applied to your work. So be careful of deposits.

Alan Tannenbaum, Esq.:

All right. Sal, document the conditions before the work begins, why is that important?

Salvatore Scro, Esq.:

Okay. All right. So we're back. We left off here. But you want to ... This is a really simple topic and a quick topic. You're going to have work done to your buildings, to your units. Maybe they have to go inside the units. There may be some heavy work being performed outside and percussion or something. So you have your interior unit. You may want to document the conditions, because especially if they have pictures on the wall, if they have valuables, if people have to go into their units, you want to ask your owners to go in and just document the conditions. You want to document the conditions outside. There's two reasons.

Salvatore Scro, Esq.:

One is for the protection of the association in the event there's damage to property of an owner, whether it be inside their unit, outside their unit, vehicles, whatever. Also, it's important to document the conditions so that when you identify a problem that the contractor doesn't say, "Oh, that happened before." You want to make sure you let them know, "Hey, I have a document of the conditions and here was a problem."

Salvatore Scro, Esq.:

Don't be afraid to document not only the buildings but a lot of times pavement, sidewalks. We find a lot of times that pavement is damaged with the placement of heavy equipment. Sidewalks are damaged, are stained with certain paints or materials that they're using. But if you don't document those conditions, what happens is for example if this is the unit of one of your owners and the lamp that they got for $10 at Walmart now all of a sudden gets broken, the next thing you know is this is what their place looked like and this is what they want to be reimbursed for. So you want to make sure that you document the conditions to protect the association.

Salvatore Scro, Esq.:

Take photos, dates of the photos if you have date stamps. If you don't have date stamps, you want to have some evidence of when the photo was taken, where it was taken. Make sure you take wide-angle views of things so that when you have to zoom in on certain things, you can identify where they are. But you do want to have proof of existing condition so that if there's trouble, you know what the condition was and what was damaged.

Alan Tannenbaum, Esq.:

All right. I'm going to spend just a few minutes on payment and performance bonds. A payment bond assures that your general contractor pays their subcontractors and suppliers. That's what the payment bond is for. Performance bond protects you if midstream in the project general contractor goes out of business and you have somebody to complete the project or otherwise defaults, you have somebody to step in and complete the project or pay you to complete the project. They're very important protections on major repair jobs, but there's a hidden value to especially the performance bond because the general contractor never wants an owner to have contact with their surety.

Alan Tannenbaum, Esq.:

So if a general contractor is starting five jobs at once and two of them are bonded jobs and three of them not, they're going to have a tendency to put their best people and give their best attention to the jobs that are bonded because the last thing they want is their surety contacted for a claim to be made against the bond which can result in either the bond capacity for that contractor for the following year to be reduced or the bond premiums to go up in cost which could affect the business that they're able to take on in the subsequent year. Contractors do pay more attention to their jobs that have bonds because they don't want that type of owner contact, they don't want any claims against those bonds.

Alan Tannenbaum, Esq.:

One of the things in requiring bonds is some of your contractors who are financially insecure and not bondable, you can strike them off your list because they say, "Well, we're not able, we're not bondable, we're not able to get a bond for a job like this," and then you know you're dealing with people who are qualified financially because one of the prerequisites for securing a bond is you've proven to your surety that you're a company that's financially run has appropriate reserves in order to qualify for bonding.

Alan Tannenbaum, Esq.:

One of the things you'll find if let's say you get three bids and it's a bondable job where you're requiring a bond, you may get different premiums quoted because usually the owner pays the premium, and all of a sudden one contractor will say, "Well, our premium's $7,500," and another one, "It's $4,500." And that's usually because the one that's $7,500 probably had some claims against their bond or maybe they're not as financially secure. And we've gone back to contractors and say, "We're happy to pay the $4,500 worth of your bond, but you're going to have to pick up the other 3,000 because your bond premium is too high relative to these other contractors." So keep that in mind.

Alan Tannenbaum, Esq.:

But it ends up being an incentive for the contractor to pay their subs and suppliers and to complete the job. That's kind of the incidental impact. I mean, I would have to say that part of the answer as to why to have a construction lawyer as part of your team is when they know that a firm like ours is involved, they actually tend to pay greater attention to that job and make sure it comes out right because they know you have a construction lawyer as part of your team. That's another incidental impact of our involvement like would be a performance and payment bond.

Alan Tannenbaum, Esq.:

Jon, keeping regular job minutes and confirming understandings in writing in a timely fashion, why would that be important?

Jon Lemole, Esq.:

And this will be pretty quick. I think it goes, it's obvious, somewhat obvious, goes without saying. But like Sal's discussion about documenting things prior to the start of the job, it's equally important that as the job is progressing, that you document things that are happening on a routine basis. Even if there's nothing that is unusual going on, it's always best practice to have a routine job inspection. Your owner's rep should be meeting with the contractors and inspecting the work that's been done so far and documenting that. But certainly, if there's problems or if there's things that need to be changed, that should always, always, always be put in writing.

Jon Lemole, Esq.:

I'll give you an example of where not doing that became a little bit of a problem. We overcame it, but we had a case a little while back. It was a mid-rise condominium building and it was a re-roofing project. And about a third of the way through the re-roofing project there was a very, very big rain event and the contractor hadn't tied in the new with the old roofing very, very effectively and they had a pretty large flooding problem. And where we had some problems was the failure to have really good documentation about what type of remedial work that contractor needed to do in order to fully ensure that there were not other problem areas with the roof that had already been put down, because again, as you know, water can travel in very different directions.

Jon Lemole, Esq.:

So what happened was this roof got finished and what was discovered subsequently is that there were still some really very wet and moist areas underneath this roof that continued to exist. There's a lot of water trapped under this new membrane. We did a great job. We got a great result for that association. But one of the things that I personally wish I had as a lawyer was much better documentation by the people involved in that project of the type of work that should have been done in order to fully delineate that. We had a lot of wrangling with the roofer as to what that they did what they were required to do, that they fully delineated it, they didn't know where this water was coming from. It certainly wasn't from this rain event. And if we had really good records and minutes on the aftermath of that, it would have made the case a very ... a whole lot easier to deal with.

Jon Lemole, Esq.:

So the takeaway is routinely get out there, document the job, keep minutes, circulate them. If there's things that you and the contractor are going to agree to do, make sure it's in writing. Don't ever assume that we all know what's going to happen. Put it in writing and make sure that everybody confirms that understanding.

Jon Lemole, Esq.:

One other quick reason for that, is if you do find yourself in a dispute and you end up in litigation, one of the things that you want to do is tie that contractor's insurance carrier into this litigation because that's where the checks are going to get written to settle. And a lot of times the CGL carrier only has responsibility for consequential damages. In other words, they don't insure the contractor to repair the work that they did, but they do insure the contractor for damages that their work caused to other areas. So if you do have a problem, documenting what other damages that problem may have caused, other consequential damages, may be key in helping ensure that their carrier comes to the table and that you're not dealing with an LLC that's not adequately funded so that you get a judgment which you may never collect.

Alan Tannenbaum, Esq.:

So at the end of the day when you've had a meeting at the site with the contractor and they made certain promises, doesn't have to be too fancy. We're talking about job minutes. You could just shoot out an email that says, "We had this meeting today and this is what you agreed to," it could be a time, it could be something that's included in the contract. It's not going to be an extra. You confirm it and you can just say at the end, "If I have not properly summarized our discussion today, let us know," and if you get no response, that should be sufficient.

Alan Tannenbaum, Esq.:

Sal, nipping issues in the bud, why would that be important for a successful project?

Salvatore Scro, Esq.:

Okay. Before I touch on that, I did see a question come up that was where do you find an owner's rep. And that's interesting, because you can look for an owner's rep whether it be a contractor could be an owner's rep, an engineer, architect could be an owner's rep. It could be a board member or it could be an association manager. I've had cases where I've had association managers handle the matter and they've done an outstanding job, but they know what their limitations are. They know when to ask questions. They know who to go to to find out if they need additional assistance. So owner's reps, I know Alan can touch on this some more later on, but I just wanted to mention that, because I saw that question. You want somebody who's knowledgeable in what to look for and when to know that they need more assistance as well.

Salvatore Scro, Esq.:

As far as nipping issues in the bud, this is important, especially if you have multiple buildings that work is going to be repeated over and over again, then you want to address what if there's an issue right away so that it doesn't repeat itself over and over again. Usually around the first draw request when the work is completed for that first draw request, you'll have an inspection to make sure the work is performed properly. That's when you need to let the contractor know if there's a problem, and you need to be strong about that. Again, owner's reps are key with that as well because some of them just look and approve and others are very diligent and tough to deal with, and that's a good thing. I've seen both, and the ones that are tough, they may give the people a hard time but they know they mean business and they're going to be on their toes from then on.

Salvatore Scro, Esq.:

I remember when I was young, my parents were building a house and my father was pretty involved in the plans, and he asked for rooms to be insulated on the interior. This is up in Syracuse, New York. We didn't just want the insulation outside but he wanted rooms to be soundproof so that you don't hear noises going through the house. The sheetrock was up, the drywall was up. He went in and he said, "Is the insulation in there?" And they said, "Yeah, it's in there." He said, "Put a hole in the wall," and they said, "We can't do that." He said, "If it's there, I'll pay for it. If it's not there, then you didn't do your job." They put a hole in the wall and there was nothing there, so they had to rip out all the drywall and do it over again. So you need to make sure that those things are done right away.

Salvatore Scro, Esq.:

Most of the contractors are capable of doing good work if you keep them on their toes. Make sure they keep good accounting records so that you know what materials were used so you're not paying for materials that were on another job. So have details of what was used, what materials went into the project. Don't just accept what they say. You want to really scrutinize the job and the accounting, things like that. I actually learned from that at a young age.

Salvatore Scro, Esq.:

The first home I bought, I think I was 23 years old. I bought a home. It was a new town home and I went in, I walked down the carpet and didn't feel the same. So I went and at my closing I said, "The pad isn't right." Well actually before the closing. So they ripped out all the carpet on the two floors, they put a new pad in. I went back in. It still didn't feel right so I went to the model, I lifted up the vent, I ripped out a piece of the pad in that unit. I went to the mine and I ripped it out. One was a quarter, one was a half inch. And the general contractor said, "Well, the subcontractor, that was his fault." I said, "Well, I know it's not my fault. So it's either done or it's not." So they ripped it all out again and put in the new pad.

Salvatore Scro, Esq.:

If you let them know you mean business and you have certain protections in the contract, which is why it's important to have all your repair contracts reviewed by an attorney because we would look at those contracts, we would look at what the possible pitfalls are, what it may be that happens throughout the course of the project that may cause you trouble and put in protections in there that you have the right to inspect and to require inspections and changes if it wasn't done appropriately.

Alan Tannenbaum, Esq.:

All right. The last subject which I'll handle in two minutes is final payment job close out, really crucial. That's the last time you're holding money that the contractor would like, especially if you have retainers it could be a substantial amount of money, that's when you have leverage to get items corrected, to make sure the finances are in appropriate form, to make sure you get all your warranties. One that I've seen, one thing I've seen in project is really project exhaustion, where you've had a board member, owner has been dealing with this repair project for a long time, they're exhausted at the end of the job, and there's got to be a burst of energy while you still hold that final payment to make sure that you get documentation all your lien releases, things get corrected.

Alan Tannenbaum, Esq.:

I'm a great believer in punch lists being done before the contractor has all their money because getting a contractor back to do punch list work is very difficult when they've been paid or there's only a small amount of money that is there.

Alan Tannenbaum, Esq.:

All right. Let me answer a couple questions. Does the engineer or the contractor get the required permits? It's generally the obligation of the contractor to pull the permit. That's who the building department is going to want to see. Who pays for performance to payment bond? That's generally an owner obligation to pay for that bond, but I've seen owners say and negotiating the contract that require the contractor do it, but generally it's an owner obligation. When is arbitration an acceptable option? We don't as a whole like arbitration for owners, generally because the people who are on arbitration boards for construction cases are generally contractors, engineers, architects, construction lawyers. There's no managers or condo board members on typical national arbitration boards.

Alan Tannenbaum, Esq.:

The other thing that you don't have is full discovery rights and you don't have third party practice. A lot of times if something goes wrong, you need to have other parties in the forum, a dispute resolution besides the contractor. Arbitration has great limitations on that. So we generally strike those clauses and go for circuit court for owners.

Jon Lemole, Esq.:

And Alan, it never ... usually it's often said that arbitration is cheaper, and I don't think that's the case. For example, the filing fees for the American Arbitration Association for example are very high. There's a barrier built in at least from the contractor's perspective because when you're looking at a $10,000 or $12,000 or $15,000 filing fee at the AAA, that's a lot of money.

Alan Tannenbaum, Esq.:

So think about it, and Jon's correct, think about it for circuit court, you may have a $400 or $500 filing fee. AAA arbitration, it could be $15,000. And then the judge is getting a salary paid by the state of Florida to administer your case. If you have a three member AAA arbitration panel, you're paying generally half the cost of some very high hourly rates for those arbitrators to review your case and eventually decide it. So actually is not in the end even administratively a procedure that is inexpensive.

Alan Tannenbaum, Esq.:

We've taken up our hour. You could see that we hit some highlights of issues that would need to be ferreted out in greater detail which we can't do today. Hopefully we gave you some food for thought. If you have additional questions, and some of the questions we didn't get to, we will answer them. Hopefully this has been helpful kind of general orientation.

Alan Tannenbaum, Esq.:

The next session we're going to hold in April is going to be on what to include in a good repair contract. We're going to get into the weeds of repair contract, what provisions should be in there, what provisions you should be wary of. We're going to do a full session on that topic, and we're going to carry on every month with these sessions as long as there's a demand and there was a great group of folks came today. There's an evaluation form that's anonymous that you can fill out. Let me see if there's any other questions before we go. Somebody, Michael asked a question about a restoration project. That's something that we can handle offline. We're happy to answer that question for you.

Alan Tannenbaum, Esq.:

I hope this was helpful for everybody, got a little bit of orientation. We have offices in Orlando in St. Pete, Sarasota and Fort Myers. We handle the I-4 corridor and from Hernando County down to Naples. If you're managing a project in Miami, I'll send it to a good construction lawyer down there, but we stay away from the south Florida market for our services. That's allowed me to still be practicing law after 40 years that I got out of south Florida as a lawyer 1983.

Alan Tannenbaum, Esq.:

Thanks everybody for attending, and again, we'll be in touch offline for anybody whose questions we didn't answer. Michelle Colbert will let you know about the video being available because she did record this. So have a great day. Thank you.

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