D.I.Why Not? Performing Maintenance In-House vs. Outsourcing

D.I.Why Not?

Amid moments of economic uncertainty, a condominium, cooperative, or homeowner’s association may instinctively want to pinch pennies when it can, especially in regard to maintenance projects. Should an association have a full-time, in-house maintenance staff – whether that consists of a super, multiple handymen, or any incarnation thereof – then that’s all the better when it comes time to doling out responsibility for fixing a creaky door or a squeaky step. But some projects will necessarily fall outside the purview of a building’s stable of trusted workers, thus requiring a specialized outside contractor. The ability to recognize the line between small aesthetic quick fixes around the 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 serious losses due to liability issues.

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. The best sort of managing agent would have set criteria on hand as to the type of work that can be passably performed by staff, as opposed to something on a larger scale that demands a seasoned professional.

Nicolas Marin, a property manager formerly 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 their naivete may exacerbate the existing problem? In a scenario where 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? Some maintenance or repair may require specific tools that the association may not possess, in which case it will have to review whether purchasing that tool could be an investment (in the case that it will see repeated use). Should the association procure said tool, is there an assurance that it will be used safely? 

• Licenses/permits: Much maintenance and/or repair must be performed under license. An association should review the requirements at both a 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 OSHA, employers are responsible for providing a safe and healthy workplace. If the board is directing in-house staff to perform some maintenance or repair that require specific standards be met, the association must rise to the occasion. If a staffer injures themselves and the board had failed to review proper OSHA standards prior to commencement of work, then the association may be held liable.

A Day’s Work

Rather than dispatching a handyperson to perform a job and only then bringing in an outside contractor if that task proves too daunting for on-site personnel, a board owes it to the association to have some ground rules as to what types of projects can be undertaken in-house and what cannot, lest someone accrue property damage or--even worse--get injured.

“Plumbing is one area that many buildings try to ensure that their staff is qualified to handle,” says Thomas D. Kearns, a partner with the law firm Olshan Frome Wolosky LLP in New York. “Plumbing issues arise regularly, and having skilled staff on-hand that 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 also have greater control as to how the work is performed. The downside, as Edward J. Mackoul,  President of Mackoul Risk Solutions, which has locations 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. If they were to 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 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. 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. 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 attorney with Marcus, Errico, Emmer & Brooks, which has offices in Massachusetts and New Hampshire. “I actually feel as if clients do not 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

As proper insurance has been a running theme thus far in regard to whether or not a job can be sourced locally, it’s worth delving further into the specific requirements thereof. 

“If a building staff member is doing work for the association, they do not need their own insurance coverage,” says Mackoul. “In the event that they were 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. The issue is when a staff member is working for a resident, and is being paid directly by that 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.”

Per the above, 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, then the in-house staff should not do it, especially if it’s something that the staff is not 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 for work for a resident for which they will be paid, then that staffer should maintain their own workers’ compensation insurance and general liability insurance as, if they are 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 nullifies any savings and then some. A board is well-advised to consult with a property manager or even an attorney before attempting to deploy a staffer to engage in any endeavor that may be outside their normal range of function, lest the consequences prove dire.

Mike Odenthal is a writer for The Chicagoland Cooperator.

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