Ask an Expert: The Risk of Unlicensed Roofers | All Property Management

Q&A: I’m a brand-new board member of a condo unit in Hawaii. We need some patchwork done on a pitch and tar roof. A unit owner has offered to do the work for a much-reduced rate, plus the cost of materials, which would save us a bundle… but he’s not a licensed contractor. The board voted to have him do it because if we had to hire a licensed roofing company, we’d need a special assessment. I voted no. Is this even legal?

–Honolulu, Hawaii

Unlicensed roofers? Ladders? Pitch and tar? Bad idea. Make sure that your association has your director’s and officer’s liability insurance premiums paid up, because that’s just the beginning of the precautions you’d need to take before using unlicensed roofers.

Let’s set aside the question about whether it’s legal for a moment and think through the process: What happens if this unlicensed roofer’s assistant falls down the ladder carrying a bucket of tar and gets scalded or hurts his neck? Well, that starts the beginning of a pretty ugly process.

The guy hasn’t bothered to go get a contractor’s license, but he’s acting as a contractor. If he doesn’t think that getting a license is important (and posting the bond that goes with it), what else is he not going to find important?

Do you think he carries worker’s compensation insurance to protect himself and his workers?

If he doesn’t carry worker’s compensation insurance, and someone gets hurt, that someone is going to dial a worker’s compensation attorney by the end of the day. When he discovers that there’s no worker’s compensation insurance to protect the employee, do you think your resident is going to be able to write a check to make it go away?

Probably not. If your residents were that flush, your board wouldn’t be wincing at a much-needed special assessment or dues increase.

Now, think this through a bit further: If your roofer hasn’t bothered to get licensed, do you think he’s going to provide the proper scaffolding, safety harnesses, barriers, or tie-offs? How much experience does he have? Is he even up on the current OSHA safety standards and other laws and regulations specific to roofing?

So the plaintiff’s attorney will work his way through the liability chain and come to your association–which is now on record as knowingly hiring unlicensed roofers. He’ll use the discovery process to subpoena the minutes of your board of directors’ meeting, as well as all emails and correspondence about it, and he’ll nail your association to the wall.

If your residents think an assessment for a roofing job is expensive, just wait till they see this one!

According to an OSHA report using data from 2007, the average cost of a roofer’s claim arising from a fall from a ladder or scaffolding was $68,000. The average cost of a roofer’s fall from elevation was $106,000–and that was a decade ago.

And that’s simply working out the fairly narrow risk of an injured worker. What if someone else gets hurt? What if he causes damage to the roof?

Think he carries general contractors’ liability insurance?

Think he carries construction defect insurance?

Sure, your association may carry some insurance–but when that insurance company sees that your association deliberately hired unlicensed roofers in violation of Hawaii law, do you think they might contest your claim?

I’d also advise you to check your bylaws carefully: Most professionally drafted condo association bylaws and other governing documents contain language prohibiting unlicensed contractors from working on common areas. If this is true, your association is likely in violation of its own bylaws, which is part of your contract with the association members. If the board is acting in violation of the bylaws, your association–and every single one of your members–has a cause of action to go after the board of directors for damages.

In my view, your fellow board members were grossly negligent–criminally so–in knowingly allowing unlicensed roofers to set foot on a worksite. In fact, your board specifically selected them.

Is this a matter of a close relationship between the roofer and one or more board members? If he’s a family member, that could also raise some serious conflict of interest issues. Maybe some board members should have recused themselves.

Now, let’s proceed to Hawaii law: If the total value of the job will be less than $1000 (very unusual for roofing jobs!), and there’s no building permit required, there’s no crime committed. If the total cost of the labor and materials together exceeds $1000, a contractor’s license is required.

Here’s a quarterly report of Hawaii enforcement activities against unlicensed contracting from 2011.

But even if the job is less than $1000, and there’s no legal requirement to have a license, the risk management, insurance, and liability issues don’t go away.

It also takes a licensed contractor to sign a building permit. Now, in your case, it’s probably not needed: Certain re-roofing projects, in which you’re resurfacing the roof with the same material, don’t require a building permit in Hawaii. But if you’re not an expert, get a licensed contractor in on the process right away.

One more issue: Hawaii has a state contractors’ recovery fund. Each year, Hawaii’s community of licensed contractors pays into a fund that protects consumers against the costs of jobs that go wrong. This fund provides up to $12,500 in potential protection per contract, at no cost to you. But you don’t get to file a claim with the contractors’ recovery fund if you didn’t hire a licensed contractor.

Going forward, it’s a good idea to check with state authorities and verify that every contractor has a current license (call 808-587-3222). I’d also have each contractor who sets foot on your property provide a certificate of insurance prior to issuing a contract, and have your day-to-day business manager double-check the status prior to work beginning.

For more information on hiring unlicensed roofers and other contractors, see this brochure from the Hawaii Regulated Industries Complaints Office.

Good luck!

Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.