Read More »" /> The Devil is in the Details. Randal Pentiuk; Pentiuk; Couvreur & Kobiljak P.C. | National Cooperative Law Center - Part 4

The Devil is in the Details

Rule #5: Make sure the vendor gets the permits and pays the fees. The local government may have codes and ordinances that mandate inspections, permits and fees.  For example, installing furnaces and hot water heaters may trigger sych requirements.  The vendor ought to bear the responsibility of interfacing with the municipality. After all, it is the vendor’s work that is being inspected. Knowing these requirements at the commencement of the job and shifting them to the vendor is much preferred to chasing the vendor after the fact.

Rule #6: If the project involves construction of any kind, beware of the construction lien act and require evidence of payment to subcontractors and suppliers before you pay the general contractor. Most states give subcontractors and material suppliers the legal right to place a lien on the property of a customer if they do not get paid. Therefore, it is imperative to follow the strict requirements of your State’s construction lien laws. Among the most important requirement is to withhold payment to the general contractor until and unless you obtain sworn statements from the subcontractors and suppliers that they have, in fact, been paid.

One Cooperative learned this lesson the hard way. Assuming that the Manager knew this law and would follow it proved to be a disaster. He did not know the requirements and went ahead and paid the contractor in full. Sure enough, the subcontractors were never paid and so they placed a lien on the Cooperative’s property and began to foreclose. The general contractor happened to file bankruptcy, so the Cooperative ended up paying for the work twice – once to the general contractor and a second time to the subcontractors and suppliers. Litigation to recover from the general contractor has proven unfruitful to date, and the Manager is presently being sued by the Board in an attempt to recover from him.

This is a complex area of law and the Cooperative Attorney must be involved. In the case cited above, the Attorney was not involved and the results have been disastrous.

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