Condo & HOA Law

Naples Daily News Q&A December 8, 2019 – What are our options when a contractor fails to finish remodel?

Q:  Our Association hired a contractor to remodel the clubhouse. When the contractor was fifty percent finished with the tile flooring, the contractor stopped for no reason and we can’t get the crew back to the property to finish the job. Half of the floor is concrete and the other half is tile. What are our options? – W.C., Naples

A: Unfortunately, the question is more common than you would think. The first part of the answer requires you to look at your contract. There is no default rule that all contracts can be terminated with or without cause, so you first must look to your contract. It is possible the contract requires you to make a written demand before you can terminate. It is possible you have to give the contractor 30 days to cure after you notify the contractor of the default. It is possible the contract provides that the contractor can pause work in the contractor’s discretion. It is also possible that you do not have any contractual provision and only signed an “estimate” or a “proposal” with no additional provisions.

Each of the above-described situations will require you to take a different approach to finishing your floors and clubhouse. First and foremost, however, is safety. If the floor is a safety or tripping hazard, the Association must take some action. Depending on the severity, this may be as little as deploying an “uneven floor” sign or it may require you to install a barrier to prevent owners and guests from walking onto a safety hazard.

Next, in a perfect world, you could demand the contractor promptly return, promptly finish the work, and do a great job. And in a perfect world, there would be no issues finishing the job. That being said, this perfect world scenario is often untenable. As a result, the next question is whether you are required to allow the contract an opportunity to cure the delay and finish the project. Again, your contract may require this opportunity to cure the default, but the most important advice in this article is that you should not hire another contractor or send a termination letter to the original contractor without first checking with your legal counsel. If you send that termination letter without following the contract, or without a clear breach of contract, you could be putting the Association in breach of the contract and exposing the Association to liability.

Assuming that you can terminate the contract without cause, or assuming you have cause to terminate the agreement, the next question is whether the Association can pursue the original contractor for the failure to perform. The answer is your lawyer’s favorite answer: it depends. If the original contractor breached the agreement and you have to pay someone else more the finish the same scope of work, then you could have a cause of action against the original contractor for the difference. If you have a weak contractor or inability to conclusively prove a breach of contract, then you should determine whether it is simply more cost effective to move on with a new contractor.

So the lessons learned in this situation are generally: 1) reputation matters and there are a plethora of contractors with great reputations; 2) do not simply terminate a contract without ensuring that you have the legal right to do so; and 3) having a favorable contract at the very beginning can alleviate a lot of this stress.

Q:  I was working in our fitness center and the security guard told me I had to leave at 9:00 PM. The fitness center has always been open until 11:00 PM since the developer was in charge and I am paying dues to use the fitness center. Can the Board do this? – P.S., Bonita Springs

A: Most likely, yes. The fitness center is a common area and the Association has the responsibility to maintain and preserve the common areas. In your governing documents, there is also certainly a provision that the Association has the right to adopt reasonable rules and regulations concerning the operation of the common areas. Because the fitness center is a common area, this also means that the Board can change the rules at a regular Board meeting with only 48 hours’ notice.

In some communities, however, the documents require the Board to provide some special notice before changing rules, or before rules can be enforced. It is also possible that the original fitness center rules and hours were recorded and provide that a membership vote is required to change the fitness center rules. The above are exceptions to the rule, but it is possible that the Board was required to follow a heightened procedural hurdle to implement a change in the fitness center hours.

Q: Our homeowners association recently turned over from developer control, and we learned that the association has a 15-year contract to maintain the clubhouse elevator and the rates are not market rates. Can we terminate this contract now? – H.H., Marco Island

A: Possibly, but this question is very fact sensitive. First, it is important to note that the Association has the authority to enter into long term agreements provided the agreement satisfies the Board’s business judgment duty. The relevant statute is Section 720.309, Florida Statutes, which provides that “any grant or reservation made by any document, and any contract that has a term greater than 10 years, that is made by an association before control of the association is turned over to the members other than the developer, and that provides for the operation, maintenance, or management of the association or common areas, must be fair and reasonable.”

As you can see, your contract satisfies the elements of the statute because the term is longer than 10 years and the agreement provides for the maintenance of the common areas. The difficult part, however, is whether the agreement is “fair and reasonable”. In order to know this, you would have to know what market rates were at the time the agreement was signed, whether the Association was required to obtain bids for this service, and whether the other terms of the contract justify a deviation from market pricing. And even then, note that the statute does not provide the express right to terminate – meaning you may be required to file a lawsuit and obtain an order declaring that the contract is unfair and unreasonable.

Finally, note that the law in condominiums is very different. In a condominium, the statutes actually provide that the membership can terminate pre-turnover contracts without penalty and irrespective of whether the terms are fair and reasonable.

Published in the Naples Daily News on 12/08/2019


John C. Goede Esq. is co-founder and shareholder of the Law firm Goede, Adamczyk, DeBoest & Cross, PLLC.  T o ask questions about your issues for future columns, send your inquiry to: info@gadclaw.com.  The information provided herein is for informational purposes only and should not be construed as legal advice.  The publication of this article does not create an attorney-client relationship between the reader and Goede, Adamczyk, DeBoest & Cross, PLLC or any of our attorneys.  Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein.  The hiring of an attorney is a decision that should not be based solely on advertisements or this column.

 

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