(Written by Jack Milarch – NMHBA EVP/CEO – Originally published in the October 2008 Housing Journal)

The New Reason to Pay Attention to Code Compliance

Now, Can You Prove That Was Code Compliant?

I want to use this article as a follow-up to the article I wrote in the August issue of the Housing Journal.

That article was an introduction to the new code compliance bond requirement for all licensed contractors, which will begin July of 2009. In conversations about the new bond since then, we usually get down to talking about contractors’ concerns that the bond carrier might pay out because the contractor can’t prove they followed the building code. From everything I have heard about how these bonds work, this fear is well founded. The bottom line for the new bond is that if you are challenged on a feature or detail that was your contribution to a construction project, you must be able to prove that what you did met the minimum building code requirement at the time you did the work. If you can’t prove that, your $10,000 code bond might be at risk.

Last month I wrote what probably was an inappropriately irreverent observation about some manufacturers’ specifications. My friends at ParexLahabra Inc./El Rey Stucco visited to say they were concerned that my comments might be taken as another reason to ignore installation instructions. If I left that impression with anyone, that wasn’t my intention, and in fact my opinion is just the opposite. Most products we use in modern construction come with installation instructions that must be understood and followed. (There are a few exceptions, such as lumber and concrete, but the code treatment of that is another article for another day.) While following manufacturer’s directions is always important, the new twist is that you must not only follow the instructions, but later, and I am talking about up to ten years later, you must be able to prove it.

How can you fulfill this expectation? I have heard construction liability experts say that, at a minimum, contractors who accomplish any work on a particular job should keep separate records of each job, by address and customer, noting materials that were installed. This is particularly true of contractors who may use similar products but different brands or types of similar products on different job sites. If it is your billing system that captures this information you should be sure your records retention practices recognize this use of these documents in addition to their use as a billing statement to get payment.

For general contractors, the experts I’ve heard talking about this subject recommend a separate record for each property which captures information on each subcontractor who worked on the site, including the materials they installed and especially details of any substitutions. (Experts also recommend that any contractor who engages another “sub” to work on the job keep copies of general liability and workers’ compensation certificates on coverages which were in effect at the time that job was done, in the same file. While this is not a “code bond” issue, it is good practice from a general liability point of view).

I know none of us likes the fact that our industry has come to this, but this is where CID’s new code bond brings us. My coverage of these issues here is very rudimentary at best and I suggest that before the new code bond becomes a reality for your business you should buy some of your attorney’s time for another chat about how this impacts your particular business.

On another related issue, and as President Randy Crowder mentions in his article printed nearby, we have met twice with representatives of the NM Attorney General’s office regarding their desire for even more consumer protection than is offered by the new code bond. Their idea is to create a “recovery fund” which would be available to customers of contractors for the reimbursement of lost money due to fraud, misrepresentation, contract disputes, and similar non-code related issues. Your association leadership is studying this proposal and has scheduled another meeting with the AG’s people for them to give us more details, but as you can imagine, the decision on whether to simply oppose them or help them craft such a program is difficult and will require much more discussion at future NMHBA meetings. We will report on this in upcoming Housing Journals.