F does not do the work, the Association will have to take certain steps to protect the Association.


The first thing XYZ needs to address is getting the work done. After all, it wanted F Concrete and Metal to fix an issue the Association was experiencing. Since F is in default of its obligations, XYZ is free to utilize a new contractor to get the work done. It will have to pay the new contractor to perform the work. The difference in the project cost between F and the new contractor is added to the Association’s damages.


Finding a new contractor is often the easy part. Getting the Association’s money ba


ack can be


much more difficult. Assuming the contractor does not willingly repay the Association for its down payment and the difference in cost to perform the work, , the Association will have to sue F to ha


obtain compensation. The case shoulld be pretty


ave a chance to y


straightforward. The Association will have to be represented by an attorney in the case, which means that it will incur attorneys’ fees. It can only recover those attorneys’ fees from F if the contract says that it can. To avoid paying attorneys’ fees in a situation where it cannot recover its fees, the Association may ask its attorney if they can proceed on a contingency agreement (the attorney only gets paid if it collects).


Assuming the Association obtains a judgment, it has to collect on it. There are several things that can get in the way, including whether the contractor has any


e contractor has any


assets. If the contractor is a large entity with lots of clients, employees or equipment, the Association will likely be able to collect on its judgment. If the contractor is a single employee company, it likely has little to no assets that the Association can seize to satisfy its judgment. In the case of a small corporation, the contractor would often rather dissolve the company and create a new one than pay the Association back its $5000. This is because it can create a new corporation for less than $500.00 or one-tenth of the judgment the Association obtained.


The next issue involves the contractor’s corporate status. It is not unusual for a contractor to have “Inc.” or “Co.” in its name even though it was never incorporated. It is also not unusual for a contractor to continue to operate its business using a corporate name of an entity that has been dissolved. In either case, the contractor could be personally liable for the debt owed to the Association. This would allow the Association to freeze any personal banking accounts and seize personal assets. While these rights do not guarantee that the Association can or will collect, the debt will follow the contractor like any other judgment will.


How can the Association protect itself in the future? The Association should always have written contracts with its contractors. The contract should be more than just a work order/invoice. The Association can insist that an attorneys’ fees provision is put into the contract. While many


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community’s unique needs and develop custom solutions that bring your vision to life. Let our 35 years of condo management expertise put your mind at ease.


associations are worried about the contractor being able to recover its fees from them, an association’s obligation under a contract generally only requires it to make payment which is easy for it to do


o.


Additionally, the Association should do five h on the corporate status of


A


minutes of research ore entering into a contract.


the company befo the Illinois Se


t


IIt can search the contractor’s name on ecretary of State’s website.


t


If the name does not appear, it should ask the contractor what its legal name contractor is not a valid


is. If the


corporation, it may want to use a different contractor for the work.


it can have a fii


When a c ontractor goes AWOL and shirks its responsibilities, financial impact on an


association. Boards and managers can take small steps to help protect an association from such a situation. If they do so, they can avoid being fooled twice.


Contact us today: CondoMgmt@habitat.com MEMBER OF: A Publication of CAI-Illinois Chapter


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