How Should We Handle This Contractor Dispute?
Contractor disputes are among the most consequential and frequently mishandled situations self-managed HOA boards face. The instinct to resolve them informally — through conversations and good faith — is understandable, but informal handling of significant disputes typically results in weaker documentation, worse leverage, and more expensive outcomes. This guide covers how to identify the dispute type, build the documentation foundation, and select the right escalation path.
- Four types of contractor disputes — and how the escalation path differs for each
- Documentation — what the board needs before sending any demand
- Contractor Dispute Gate — interactive tool returning an escalation recommendation
- Mechanic's lien exposure — timelines and how to protect against them
- Common dispute handling mistakes
- Contractor dispute checklist
Four types of contractor disputes
The contractor completed the scope but the work failed, is substandard, or does not meet the contract specifications. The board's remedy: cure demand allowing the contractor to fix it, third-party cure billed back to the contractor, or damages for diminished value.
The contractor stopped work before completing the contracted scope. The board's remedy: written demand for completion with a deadline, engagement of a replacement contractor at the original contractor's expense, and recovery of cost differential through the contract's remedies.
The contractor invoiced an amount the board contests — unauthorized change orders, charges for work not performed, rates that differ from the contract. The board's remedy: written invoice dispute, withhold of the contested amount, and documentation demand from the contractor.
The contractor failed to meet the contract timeline causing measurable harm. The board's remedy: written delay notice, damages calculation based on actual costs caused by the delay, or liquidated damages if the contract specifies a per-day rate.
Contractor Dispute Gate
Answer three questions about this dispute. The gate returns a recommended escalation path.
Mechanic's lien exposure
In most states, contractors, subcontractors, and material suppliers who are not paid for work on a property have a statutory right to file a mechanic's lien against that property. For HOA common areas, this means a lien can be filed against the common element that received the work — clouding the title and creating financial exposure for the association.
Contractors typically must file within 60–150 days of completing work or the last day they provided labor or materials, depending on state. Subcontractors have their own separate deadlines that may be shorter than the general contractor's.
Many states require subcontractors and suppliers to send preliminary notices to the property owner early in the project — preserving their right to file a lien. The HOA may receive these notices even when it has no direct contract with the sender.
Require conditional lien waivers from the general contractor (and from all listed subcontractors/suppliers) before each progress payment. Require an unconditional final lien waiver from all parties before releasing final payment.
Contact the HOA attorney immediately. Strict deadlines apply to challenging a lien, bonding over it, or negotiating a release. Missing those deadlines can convert an improper lien into an enforceable one.