As the leader in the community management industry, we are constantly striving to find ways to serve our clients more effectively. We know that maintaining your associations through the management of multiple vendors is critical to that service. We have a duty to you, as our clients, to ensure that we do everything within our power to look out for your best interest. This includes ensuring that all vendors who provide service for CMA-managed associations meet predetermined minimum requirements (especially adequate insurance and licensing).
After careful evaluation, CMA has contracted with VIVE Vendor Compliance and Management (“VIVE”) to automate our vendor credentialing process. VIVE is a company dedicated to managing vendor requirements including credentialing vendors, reviewing documents such as insurance certificates, licenses and W-9s. By leveraging VIVE’s platform, we are able to provide greater financial security to your association by minimizing your risk and liability. VIVE’s automated vendor portal and intuitive online registration process will streamline vendor interactions, allowing vendors and CMA to centrally track in an accurate and timely manner all important documents, including contracts, proof of insurance and W-9s. This vendor credentialing process is the standard in the multifamily industry. As most CMA vendors have been working in the multifamily space for years, they will be familiar with this credentialing process.
We work directly with your vendors to begin their registration. While we do not expect disruption to your level of service, we know it is important for you to be aware of these changes. Thank you for allowing us the opportunity to help you achieve the vision for your community as much of which is accomplished and made possible through vendor partners.
CMA will continue to bring the latest tools and practices to the community association industry and affiliated professionals. We are offering VIVE to our communities at no additional cost to our associations in an effort to add more value to our already robust service offerings. VIVE simplifies the process of screening and tracking vendors for all managed properties.
Should you as a Board member have general questions about this program, please contact Rhodes Collier at 404.835.9242 or email Rhodes here.
Hidden Cost of Exemptions
Introduction
Every Homeowners Association (HOA) Board will at some point hire a third party (vendor) to perform certain tasks on behalf of the HOA or to furnish services to the HOA and its members. In doing so, an HOA may be exposed to liability brought about by the vendor’s actions and/or the terms of the vendor contracts. Because such liability may substantially impact the financial interests of the HOA and its members, HOA Boards of Directors and community managers must understand how to properly protect the HOA when hiring a vendor. Credentialing services like those provided by VIVE Vendor Compliance and Management (“VIVE”) transfer the risk exposure back to the vendor.
Before making the decision of exempting or waiving a vendor from being credentialed, there are several items to consider when contracting with a vendor to perform services:
Licensed, Bonded and Insured Vendors
Unlicensed vendors are rarely bonded or properly insured. This increases the HOA’s risk exposure, therefore opening up the HOA to a severe financial risk in the event of property damage or injury. For example, when you hire a licensed general contractor, the general contractor and their insurance carriers are the primary payers in the event something goes awry on the job. If that general contractor is not licensed and insured to handle the project, the HOA is general contractor!
If an unlicensed contractor breaks a sewer line, the HOA is responsible. If a worker gets hurt and can’t work for two years, and there’s no workers compensation coverage in place, the HOA is on the hook for that worker’s medical bills and lost wages.
An HOA that hires an unlicensed or uninsured vendor also subjects itself to potential liability for unpaid wage or worker’s compensation claims brought by the vendors’ employees.
The issue of lapsed coverage is also important here because there are many instances of vendors cancelling their policies during the coverage year with no notification provided to the HOA. Studies have shown that over 45% of vendors have had a lapse in one or more of their policies in the past two years.
Past Financial Practices
Hiring vendors with questionable financial practices (bankruptcies, liens, and judgments) can also place the HOA in the precarious position should the vendor not be able to complete the job due to lack of capital or simply walks away from the job after receiving the first payment.
It’s the Law
The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals, threats to national security, foreign policy or the economy of the United States.
Sanctioned organizations, companies, and individuals are listed on the Special Designated Nationals and Blocked Persons (SDN) list and other government watch lists. Most are unaware that that they are breaking laws by doing business with people or organizations on these lists and don’t check their vendors against them. As a result of this, many companies and non-profits, large and small, are fined for inadvertently transacting business with U.S. sanctioned organizations. Companies who are slapped with fines, many in the hundreds of thousands and even multi-million dollar range, usually had no idea that their vendor was on one of these lists.
Hidden Dangers with Friends and Family
Hiring friends as contractors doesn’t make the liability and risk issues go away. Everyone can enter an arrangement with the best of intentions, but when your buddy falls off the ladder and files a claim with their insurance company, they may well pay the claim and then go after you in subrogation proceedings (the area of law in which insurance companies fight to get reimbursed after paying their customers’ claims).
In one California case, Mendoza v. Brodeur, a homeowner asked his neighbor to do some work for him on his home. But the neighbor got hurt on the job. The homeowner thought he was hiring an independent contractor who had his own insurance. The court rejected that reasoning and found instead that the homeowner was the neighbor’s employer and therefore should have had workers compensation coverage in place to cover the possibility of injury on the job. Since worker’s compensation wasn’t there, the homeowner has to cover the costs personally.
Closing
There are scenarios where exempting/waiving a vendor from going through the credentialing process makes sense. But exceptions made blindly, without understanding the impact of the vendor’s failed criteria, greatly increases the HOA risk exposure and inevitable financial loss.
Should you as a Board member have general questions about this program, please contact Rhodes Collier at 404.835.9242 or email Rhodes here.
