By Jay Romano
Most people would understandably be upset if their baby sitter hired someone else to put the children to bed. But should similar concerns arise when a contractor who is hired to make repairs to a building hires a subcontractor to do some of the work?
“For some co-op and condo boards, the term subcontractor is a dirty word,” said Stephen Varone, president of RAND Engineering and Architecture in Manhattan. “The feeling is so pervasive that the contractors play this macho game where none will admit they subcontract work even though most do.”
When Subs Are Called For
Indeed, Mr. Varone said, many co-op and condo boards insist the contractors they hire handle the entire job themselves without using subcontractors. But there are times, he said, when hiring subcontractors is not only appropriate but advisable.
There are times when hiring Subcontractors is not only appropriate but advisable.
“You can hire a general contractor to renovate a kitchen or bathroom,” Mr. Varone said. “But do you really want to force that contractor to use his own employees to do intricate specialty tile work, or do you want to allow him to hire specialists?”
C. Jaye Berger, a Manhattan lawyer who specializes in construction law, said that while co-op and condo boards are often skittish about contractors who use subcontractors—and while such concerns are sometimes legitimate—”it’s O.K. to have subcontractors as long as you know who they are and appropriate precautions are taken.”
Insurance Concerns
Ms. Berger explained that one of the most common concerns involves insurance coverage. In most cases, she said, a contractor hired by a co-op or condo board, or by a careful home or apartment owner, will be asked to produce proof of liability and workers’ compensation insurance. Such insurance, she said, insulates the building owner from liability in case a worker or someone else is injured. But what happens if a properly insured general contractor hires a subcontractor who may not be adequately insured?
“It creates a bigger risk factor for the building owner,” she said, adding that if a subcontractor does not have insurance coverage to contribute to a potential settlement, the owner and the general contractor may have to pay more than their fair share.
Lien Risks
Another risk relates to the potential for liens against the building. Ms. Berger explained that when a contractor performs work on a building, that contractor is legally entitled to file a mechanic’s lien if he hasn’t been paid. Usually, she said, general contractors agree to provide a waiver of lien when paid. But that does not prevent a subcontractor from filing its own mechanic’s lien.
“If the general contractor doesn’t pay the subcontractor, the sub can file a lien against the building,” she said, adding that while an owner cannot be required to pay twice, it is costly to hire a lawyer.
Dennis Greenstein, a Manhattan co-op and condominium lawyer, said that the best way to deal with the issue of subcontractors is to address it directly. “You want to make sure that the subcontractors meet the same standards as the general contractor,” Mr. Greenstein said, adding that boards should make sure that subcontractors have insurance or that the general contractor’s insurance covers the subcontractors.
And when boards are asked to approve a renovation project by a shareholder or unit owner, the board should insist that the use of subcontractors be disclosed so the subcontractors themselves can be vetted.
“You can protect yourself,” Mr. Greenstein said. “But you have to have some tight language in the contract or the alteration agreement to do so.”
From The New York Times, July 11, 2004.