One of the stated goals of a homeowners association is to oversee the upkeep of common areas in the community, such as clubhouses, pools, fitness rooms, and parks. When choosing contractors to maintain and repair community property it is imperative to choose a licensed contractor to perform the work. Unlicensed contractors put the homeowners association at risk for a myriad of problems that could arise.

Why Would an HOA Board Even Consider Unlicensed Contractors?

The general reason for hiring an unlicensed contractor to do work is because they are generally cheaper than licensed ones. These contractors don't pay licensing fees, pay bonds to protect their work and generally don't have liability or worker's compensation insurance. Their cheaper rates may not provide the Association with the best value for the money and may cost tons of dollars in the long run.

Basic Protections Afforded by a Licensed Contractor

A license ensures at least a minimal amount of competence in a contractor's field. This does not mean that any particular contractor will be the best at what they do but it does guarantee at least some level of proficiency. 

The licensed contractor provides an avenue of grievance in case something goes wrong. If a dispute arises, an arbitration proceeding can commence. This vehicle for solving an issue is generally much less time consuming and cheaper than litigation.

The state will have a database that shows complaints filed against a licensed contractor. This data can be searched and information can be obtained to show if the contractor is competent or not. The data will also show if a contractor has ever lost his license or been sanctioned.

Property Value Protection

Building and renovation projects generally require city, county or state permits to do the work. Unlicensed contractors may not obtain these permits leaving the homeowners association liable for any damages.

Protection from Injury to Contractor and Workers 

Licensed contractors are required to carry insurance to protect themselves and workers they hire. This protects the Association from being liable for injuries. Unlicensed contractors generally don't carry the proper insurance coverage. If someone gets hurt on the job for an unlicensed contractor the entity that hired that contractor would be liable for the worker's injuries.

Third Party Damages 

If other parties are damaged by actions of an unlicensed contractor whoever hired the contractor is liable for the damages. If the homeowners association is the hiring party they will be responsible for the contractor's actions during his employment.

Following are a few specific instances of unlicensed contractors causing issues:

• A homeowners association hired an unlicensed contractor to repair the central AC unit at the community clubhouse. Several weeks after the repair the AC unit caught fire doing $35,000 worth of damage. The contractor disappeared after the incident and the Association was left to pay for the damages.
   
• A homeowners association hired an unlicensed plumbing contractor to finish up some work on a park restroom to save money. On a routine inspection by the country on another matter it was discovered the plumbing work was not up to code. The Association was forced to fix the work and had to pay a hefty fine.
   
• A small roofing repair job was needed at a pavilion at the community center. The Association hired someone living in the neighborhood to do the job. A $1,500 repair turned into a $50,000 debacle when this unlicensed contractor fell off the roof and injured his back. 

Hiring unlicensed contractors leaves a homeowners association at great risk. There is no basic level of protection afforded the Association by using these people. Protect your assets by using licensed contracting firms.