Some best practice tips when appointing contractors

Industry News, Investors, Journal, Property Management, Property Market, Sellers,  Principals,  Property Managers

A key part of a property manager’s role is to appoint contractors to perform maintenance or repair works at rental properties on behalf of their lessor clients.

However, property managers can be held responsible for financial loss, property damage and/or personal injury in the event that the contractors appointed by them do not carry out the work adequately or in a timely manner.

The Contractor Appointment Form EF017 (the CA Form), which is available on Realworks, provides an excellent framework for engaging contractors. However, simply having a completed CA Form will not prevent claims from being brought against property managers.

In this article, we consider some best practice tips which property managers can adopt to protect themselves against the risk of a claim and, if necessary, deflect any liability for claims back onto the contractor.

Determine whether a contractor is suitable

Property managers cannot be expected to hold the requisite skill and expertise to determine the quality of a contractor’s work. Nonetheless, claims can still be brought against a property manager for damage which may occur as a result of the contractor’s poor workmanship.

In order to defend a property manager’s position against this type of claim, he or she will need to demonstrate that they took reasonable steps to protect against such an outcome. In order to do this, a property manager will generally need to demonstrate that the contractor was suitably qualified, licensed, insured and that it practiced safe systems of work. This information will be required to prove that a property manager could expect the contractor to carry out the work to a sufficiently high standard.

Property managers should ensure that all new contractors complete the CA Form and provide copies of all supporting documents to show that they hold the necessary trade qualifications, current licenses and registration, and appropriate insurance cover.

It is prudent for property managers to personally sight contractor’s original documents in order to satisfy themselves that any copies provided are legitimate. Copies should then be kept on file or on a central database. Where the appointment of a contractor is intended to be ongoing, a bring up system should be implemented to ensure that all licenses or registrations are kept up-to-date. Where licenses or registrations have expired or are restricted, an alternative contractor should be engaged.

In addition to clarifying the contractor’s suitability, property managers should also clarify precisely who will be completing the relevant works. If, for example, an apprentice will be performing the work, it is imperative that their work is adequately supervised and signed off by a licensed and qualified supervisor.

For more major works, it may also be appropriate for the property manager to request written references from the contractor’s previous clients and/or inspect those works prior to appointing the contractor.

Safety assessments

By engaging a contractor to carry out work on a property, a property manager may be assuming the role of dutyholder under the Work Health and Safety Act 2011 (Qld) (WHSA). The duties under the WHSA cannot be contracted out of or delegated to someone else.

Prior to the commencement of any high-risk construction works, property managers should request copies of the contractor’s Job Safety and Environment Assessment (often referred to as a JSA or JSEA) and Safe Work Method Statement (SWMS) for the works.

The JSEA provides an overview of the potential hazards and risks identified in the workplace, for example, overhead powerlines, traffic hazards and the like. In turn, the SWMS sets out a method of work to respond to the identified risks in order to minimize or eliminate the risk.

Insurance

Contractors are obliged to hold insurance policies pursuant to the Workers’ Compensation and Rehabilitation Act 2003 (Qld) and the Queensland Building and Construction Commission Act 1991 (Qld).

Prior to appointing a contractor, property managers should ask for documentary evidence that the contractor has a current workers compensation insurance policy in place. This policy will provide cover in respect of injuries sustained by the contractor and/or their employees where they may be exposed to unsafe systems of work.

Some contractors must also hold current professional indemnity, public liability, construction, and/or home warranty insurance policies.

When considering a contractor’s insurances, property managers should turn their minds to what each policy may cover, and whether or not the limit of indemnity available under each policy is adequate, having regard to the nature and extent of the works to be carried out.

Contractual indemnities

The CA Form includes warranty and indemnity clauses in favour of the property manager and their lessor clients. By signing the CA Form, contractors provide warranties as to the standard of their work and agree to indemnify the property manager and/or lessor against liability arising directly or indirectly from the contractor’s performance or non-performance of the work (provided the liability does not arise as a result of any conduct on the part of the property manager or lessor).

The warranty and indemnity clauses can be relied upon by property managers and lessors to deflect defective work claims onto contractors who have failed in their obligation to carry out works to an appropriate and safe standard.

Work orders and quotes

When instructing a contractor to carry out works at a rental property, property managers should use the Contractor Work Order (CWO) available on Realworks (EF017a). The use of a CWO minimizes disputes arising out of the scope or methodology of the works to be carried out by the contractor. Property managers should take care to complete the section entitled “Directions to Contractor” in detail, setting out exactly what is required of the contractor.

Further, a contractor should be required to provide a written quotation prior to carrying out any works. Property managers should refrain from providing contractors with instructions to complete the works until the lessor has considered the written quotation and has given written permission to proceed with the quoted works.

Where domestic building works are anticipated to exceed $3,300 (and not exceed $19,999) the contractor must enter into a Level 1 contract in the form approved by the Queensland Building and Construction Commission (QBCC). For works costing $20,000 or more, the QBCC Level 2 contract is recommended.  For repairs of any value arising from natural disasters, the QBCC Natural Disaster Repairs contract is appropriate.

Upon receiving written approval to commence work, a contractor will be required to perform the works in a timely manner, according to all applicable laws and to the standard expected of a reasonably competent contractor.

After the works are completed, property managers should request a detailed invoice from the contractor, and should retain the invoice on file. In many circumstances, it will be necessary to inspect the works upon completion. It may also be appropriate to take photographs prior to, and following completion of the works and preserve these on file.

The contractor is obliged to remedy any defects or omissions in the workmanship at no cost to the property manager or lessor. It should also be noted that the CA Form states that liability for payment of the contractor’s charges rests solely with the lessor.

Conclusion

Property managers should ensure that all contractors appointed by them are appropriately qualified, licensed and insured and are able to carry out the works to an appropriate standard. The CA and CWA Forms available on Realworks should always be used when appointing contractors, as they contain valuable protections in deflecting liability onto the contractor for any damage, injury or substandard works.

YOU MAY ALSO LIKE

Subscribe