A major building rehabilitation for a large condominium community included impact-resistant replacement windows, at a six-figure cost for materials alone. The owners’ association advanced money to the contractor to buy the windows. When they were supposed to arrive, the contractor said they were delayed. As the delay dragged on, the association called the supplier, who said, “Those windows are occupying 50 percent of our warehouse. Come and get them.”
It turns out, explains Ramon C. Palacio, a partner with Association Law Group, PL, in Miami Beach, that “The contractor used the money for other people’s projects. The association had a contract, but the contractor was an owner-operator LLC (limited liability company). You can’t get blood from a rock.”
The association and the contractor haggled for a year and a half. Ultimately, the association agreed to pay for the windows again, this time directly to the supplier. The contractor agreed to install the windows without being paid for labor. “That didn’t go well, but the association had no choice,” Palacio says.
The second time around, the association required a performance bond. If the contractor had failed to perform, the bonding company would have been obligated to engage another contractor to finish the job at the contracted price, with the work guaranteed by the bonding company.
Including a bond in a contract costs up to three percent of the contract sum, for which the association pays. Jay Steven Levine, founder and shareholder attorney with the Jay Steven Levine Law Group in Boca Raton, recommends bonding for large jobs as an extra layer of performance protection but notes that “not every contractor is bondable or willing to be bonded.”