We get asked all sorts of questions during management interviews. But, one of the most common questions that homeowners ask us is if we would be willing to use their current service provider for the maintenance needed around the property.
For instance, many homeowners have been using the same pool guy for years or they just love their landscaper and they want to keep those relationships even after they have started renting their home.
Our answer to that question is, “Yes. IF the contractor is willing to meet our requirements.” While the guy who mows your lawn and trims the hedges might be a terrific person – when we hire a third-party contractor there are some requirements they must meet:
- They must first provide us with proof that they are properly licensed with the Nevada State Contractor’s Board (NSCB), and sign our Independent Contractor Agreement (ICA) which includes a code of conduct, and a set of requirements of what I expect from them in way of behavior while on the job.
- The next step is that they must carry a general liability policy with endorsements that state their policy will be primary, and our/your insurance will be secondary and non-contributing to any claim.
- Worker’s Compensation Insurance is also a requirement and the mom and pop operation normally doesn’t have this insurance because, they will not be allowed as sole proprietor to make a claim against it.
- A waiver for the sole proprietor can be used for the worker’s compensation policy.
If you are leasing out the property, you must follow State Law with regards to the use of licensed contractors. Essentially, any work needed that is in excess of $500 must be done by a licensed contractor if the home is being readied for lease or sale.
Licensed plumbers, electricians, or HVAC contractors must be used regardless of the dollar amount. If you hire us to manage the property, we already have screened all the contractors we use and have copies of insurance certificates and licenses on file.
Consider the following scenarios –
Owner Mike hires landscaper Jeff to maintain the landscaping and his rental property. Mike has known Jeff since he went to high school with Mike’s eldest son. Jeff’s business has grown and he now has two neighbor boys helping him out.
While mowing owner Mike’s lawn on Saturday, the lawn mower Jeff’s helper is using hits a rock and shatters the blade. Part of the blade flies across the street and hits the neighbor’s child and she is rushed to the hospital. The remaining part of the blade severed Jeff’s helper’s right foot just below the ankle. Naturally, this wasn’t just any helper, Jeff’s helper was the all-star place kicker for the local high school and was on his way to college on a full scholarship because of his right foot.
Not too worry though, as Jeff’s general liability insurance will cover the costs on the child across the street, and his worker’s comp policy will cover the place kicker’s foot being reattached.
The problem happens when you discover that Larry doesn’t have insurance – leaving all of the costs for your homeowner’s policy to cover. You file a claim and, when the insurance company discovers that you aren’t living in the house and that it is a rental, the efficacy of your policy comes into question.
Since the home is a rental and you are earning income from it – the insurance company may consider it a business and could stipulate that you have a different policy type. Chances are that your current policy limits are not enough to cover the problem created by Larry and you are liable because you hired him.
Regardless of the relationship that you have with your current service providers – once you begin to rent your home out and start working with a property management company – it is absolutely necessary that each contractor that is on your property doing work be properly licensed and insured.
If you have further questions, please feel free to call us.