Legal Question in Construction Law in California

I'm on Board of small HOA in CA. We hired a waterproofing-decking contractor to repair and resurface decks on our complex of buildings, which had not been redone in over 20 years, a couple were in bad shape and leaking but most showed minor damage, no emergency repairs needed. We got a quote for $67,000 total, then only AFTER they tore apart the 2 badly damaged ones AND quite a few more did they disclose that due to conditions that had not been apparent, the Over-Charge would now come to a total of $320,000, 5X more than the original quote! This was in early Feb., rainy season in SoCal, we were over a barrel and had to let them finish the job, couldn't leave raw decks exposed. They had only completed the 1st half of buildings so we stopped them there to get new quotes. We don't even have that much in our reserves, they knocked off some of the price but to finish the job would still use up our whole reserves of $295,000 and we have other critical work to do. We do not want to tax owners with a Special Assessment. - They did repair some collateral damage and we're scheduled for a "final walk-through" this week. -- As a Board member I want to investigate recourse, other Board members are inclined to just pay up: if this were my private house I'd definitely sue them, they can't just "bankrupt" people, and as HOA Board we have a fiscal responsibility.

What recourse do we have?

Asked on 3/24/18, 11:27 am

1 Answer from Attorneys

Gary Redenbacher Redenbacher & Brown, LLP

Unless the contract stated that the contractor would be responsible for hidden problems, the contractor is not responsible to do the hidden work for the original quoted price. While some construction contracts try to hold a contractor responsible for hidden conditions, this is rare and even a mildly sophisticated contractor will not agree to such clauses. At the same time, it is true that once hidden conditions are discovered, the contractor has leverage over the owner. There are ways to control the additional costs from hidden conditions so they are reasonable but I suspect no such clauses were in your contract. The alternative is to pay someone to weather proof as best as possible and get other quotes for the additional work, but this causes problems as well - trying to coordinate the new contractor with the old, scheduling, delays, etc. Plus, the old contractor will ask that he not be held responsible for leaks because he is not going to trust the new contractor.

Bottom line is that the HOA will be receiving value from the work performed by the contractor and the law will not ask a contractor to perform work for free that his contract does not cover. I suppose you could always hope for a rogue judgment (a sympathetic jury) that ignores the law, but I would not counsel that choice. The contractor is not "bankrupting" you. He is asking to be paid for work performed. Whether the price is reasonable is another matter. It appears that he was at least willing to negotiate to a lower fee. A special assessment appears to be imminent.

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Answered on 3/24/18, 11:57 am

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