Handling Maintenance and Repairs In-House, Or Outsource?

In the wake of the recession and facing an uncertain economic climate on the heels of a tumultuous presidential election, condo, co-op, and HOA boards may instinctively want to pinch pennies where they can, especially when it comes to maintenance projects. If an association has a full-time, in-house maintenance staff – whether that be a super, multiple handymen, or a combination of the two—then that’s all the better when it comes time to doling out responsibility for fixing a creaky door or a wobbly banister rail. But some projects will necessarily fall outside the purview of a building’s staff of trusted workers, requiring a specialized outside contractor. The ability to recognize the line between small quick-fixes around a property and an endeavor that requires specific training is essential for board and management, lest an attempted cost-saving operation open the association up to unsafe conditions, property damage, or liability exposure. 

Manage Expectations

A qualified property manager can act as a board’s conscience when it’s considering whether to allocate funds to a maintenance project, or attempt a quicker fix in-house. A capable managing agent will have set criteria on hand as to the type of work that can be performed by staff safely and correctly, as opposed to something on a larger scale that demands a seasoned (not to mention licensed and fully-insured) professional.

Nicolas Marin, a property manager with Wesley Realty Group in Evanston, Illinois, lays out categories of factors that a board must consider when making a work-order decision:

Personnel: Does the in-house staff have the experience necessary to perform the task at hand? Who will supervise them during the work? Is there a possibility that inexperience on their part could exacerbate the existing problem? And if an association has limited staff in general, will attempting this task interfere with the daily operations of the property?

Tools, equipment and supplies: Does the association have everything necessary to perform the maintenance and repair properly? Some maintenance or repair may require specific tools or equipment that the association may not possess, in which case it will have to review whether purchasing those items represents an investment (in the case that it will see repeated use), or just an expense. Should the association procure said tool, is there an assurance that it will be used safely? 

Licenses/permits: Some types of maintenance and/or repair must be performed under license. A building or association should review these requirements at both the state and municipal level. If the in-house staff is not properly licensed, then the association should hire a licensed contractor to perform the work. If a permit is required, then the board should appoint a specific member to apply for that permit. 

OSHA standards: Under Occupational Safety and Health Administration (OSHA) rules, employers are responsible for providing a safe and healthy workplace for their employees. If the board of a co-op or condo is directing in-house staff to perform some maintenance or repair which require specific safety and health standards be met, the association must rise to the occasion. If staffers injure themselves and the board is found to have failed to adhere to proper OSHA standards, then the association will be held liable—at potentially devastating expense.

A Day’s Work

Rather than dispatching a handyperson to perform a job, finding that that person isn’t qualified to perform it, and only then bringing in an outside contractor, a board owes it to the association to have some set criteria as to what types of projects can be undertaken in-house and what cannot. Not only will this save time and money, but it can also help prevent injuries and property damage. 

“Plumbing is one area that many buildings try to ensure that their staff is qualified to handle,” says Thomas D. Kearns, a partner with Olshan Frome Wolosky LLP in Manhattan. “Plumbing issues arise regularly, and having skilled staff on-hand who can handle the basics is a real convenience and cost-saver. Areas that should generally be avoided include major exterior pointing projects, or anything involving electronics that are beyond the expertise of the staff. These days, thermostats, elevators and security systems all tend to be quite sophisticated.”

The obvious advantage of addressing an issue without bringing in a contractor is that an association would presumably utilize someone whom they’re already paying, thus there is no additional cost. Also, the association would theoretically have greater control over how the work is performed. The downside, as Edward J. Mackoul, president of Mackoul & Associates, an insurer with offices in New York and New Jersey, points out, is that “If the staff causes damage or injury, the association has nobody to whom they can transfer risk.” By contrast, “If they hire a contractor and dot their I’s and cross their T’s, were the association to be sued in the event of injury or damage caused by the contractor’s work, they could rely on that contractor’s insurance policy to provide them with coverage. With the staff doing the work, the association’s only recourse is its own insurance. Also, the staff may not possess the experience or the knowledge of an outside contractor who performs the type of work in question day in and day out.”

And, as Kelly C. Elmore, a principal with the law firm of Kovitz Shifrin Nesbit in Chicago notes, there are other disadvantages outside of liability when it comes to taking on a project in-house. “Staff members who are tasked with a large maintenance or repair project may neglect or otherwise be diverted from other important tasks or jobs within the association,” she says. “This may have some unintended consequences for the association, and create further issues. In addition, there may be certain liability risks associated with a specific maintenance or repair project, and the association should ensure that the job is included in the scope of work that the particular employee is trained in and authorized to perform.” Echoing Mackoul’s comments, she adds that “Requesting that an employee perform a job or task outside his or her scope of work could also have certain insurance and other legal consequences for the association.”

An outside vendor is referred to as a ‘contractor’ for good reason – there’s an ample amount of paperwork that must be signed before a job can commence. “I do a lot of contracts for roofing projects, siding projects, snow removal, landscaping and those types of services,” says John E. Shaffer, an associate with the law firm of Marcus, Errico, Emmer & Brooks in Braintree, Massachusetts. “I actually feel that clients don’t involve an attorney as much as they should, as these documents really should be reviewed. All of those services come with potential liabilities, and it’s our job to protect an association and its unit owners. Anyone doing anything on an association’s behalf is a potential source of liability. Bad things can happen - even if someone is just mowing the lawn.” 

So, given that utilizing an on-site employee avoids much of the legal paperwork associated with a contractor, it’s imperative that an association ensure that any work being done by staff is well within its means, or else those precious pennies saved may quickly turn into a substantial debt.

Insure Success

Given that nearly every pro interviewed for this piece stressed the importance of insurance when it comes to using in-house staff for maintenance and repair work, it’s worth delving further into those specific requirements.

“If a building staff member is doing work for the association, they do not need their own insurance coverage,” says Mackoul. “In the event they were to be injured on the job, the association’s workers’ compensation coverage would provide benefits. In the event the staff member caused damage or injury to someone and were sued, the association’s general liability coverage would respond and defend them.” That’s straightforward enough, but Mackoul adds a crucial caveat: “The issue is when a staff member is working for a resident, and is being paid directly by that resident-as-employer. Once a staff member is being compensated by someone other than the association, that staff member is not working for the association at that time. Were they then to be injured, they could conceivably be ineligible for workers’ compensation benefits. And if they were to cause damage or injury and were sued, they would not be covered under the association’s general liability policy, as they may not be considered an employee at the time they caused the damage or injury.”

So boards and staff alike have to be wary when a resident approaches with a request or complaint that would require work to be done to their unit. “Realistically, if something doesn’t fall into what is the association’s responsibility - such as hanging cabinets in someone’s unit, for example - then the in-house staff should not do it, especially if it’s something that the staff is not explicitly qualified to do,” says Mackoul. “In the event the work isn’t done right, or causes damage or injury, the association is going to be responsible for fixing it - or responding to a lawsuit by the unhappy resident. Poor claim history is the single biggest reason why insurance premiums increase. The resident should hire their own contractor to perform the work, and make sure that they have insurance in place, naming them, the association and property manager as additional insureds. If a staff member is going to be doing work for a resident for which they will be paid, then that staffer should maintain their own workers’ compensation and general liability insurance. If they’re being paid and are uninsured, that’s the equivalent of allowing an uninsured contractor to do work in the building.” 

While it may seem financially preferable to let someone who professes knowledge of a particular repair handle it at little cost, the risk of injury or damage more often than not cancels out those savings, and then some. A wise board will consult with their property manager or even an attorney before deploying a staffer to tackle any job that may be outside their normal range of function. Not doing so can have dire financial and legal consequences for the entire community.        

Mike Odenthal is a staff writer and reporter for The Cooperator. 

Read More...

Related Articles

Q&A: Using an Unlicensed and Uninsured Shareholder as Your Contractor

Q&A: Using an Unlicensed and Uninsured Shareholder as Your Contractor

Your Chief Engineer

A Look at Building Maintenance Professionals

Before You Hire a Landscape Architect...

What Should Your Board Know?

Plumbing Practices

Make Sure Your Pipes Are On Point

All About Reserve Studies

A Crucial Aspect of Community Administration

Do It Yourself…Or Not?

When To Call a Pro!

 

Comments

  • I have always paid my maintenance but my requests for certain necessary and covered maintenance have gone unfulfilled. To make matters worse the property manager sent me a letter stating that certain maintenance repairs were done; (but-in fact they were never actually done!). I notified the property manager of this, in writing, I brought this up publicly our annual board meeting, at which the board members expressed a lack of awareness of this situation despite my prior written notice to them. (All correspondence to the board must be sent to the management company where the property manger then forwards it to the board) I suggested that we need a procedure in place requiring shareholder verification of claims/reports that certain maintenance work has actually been done, before the board authorizes payment and/or inclusion of that work into our operating (maintenance) budget- obviously to avoid paying for or budgeting for work that isn't actually done. Our maintenance costs are always increasing. It has been almost a year now and the verification procedure was never put in place, nor have I received any correspondence correcting or withdrawing the letter. The property manager merely repeats that she has only written what the maintenance supervisor said. The board has not responded. And the work still hasn't been done. On another unfulfilled maintenance issue brought to the attention of management and a board member, the board member refused to look at photos/videos of unrepaired damage stating that the maintenance supervisor says he fixed it, and I'm just telling you what he said. Out of 220 units, I have no idea how many other such unverified records may have been submitted and paid for; in that as a rule, shareholders are not issued any letters or record of maintenance work done in their unit. Is there any law or standard of accounting practices co-ops must follow requiring shareholder verification of claims that certain maintenance work was completed in their unit, prior to submission for payment/inclusion in the maintenance budget? If not there should be. I don't want to go the route of withholding maintenance. If there is not, I would be interested in knowing whether or not this publication would consider organizing an on-line petition for co-op shareholders to sign if in favor of having the opportunity to verify claims of maintenance work done in their unit. Please let me know. Thank you