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Real Estate & Property Law: a View from the property line
How to Spot and Fix 15 Contractor Overbilling Errors
By William G. Gammon
The following list compiles PART ONE of 15 common invoicing errors and strategies for disputing, rectifying, or avoiding them altogether. [The remaining list will be distributed next week]:
(1) Invoice lacks description, or contains a vague work description. If you cannot determine exactly what was performed, then you cannot review whether or not the billing for these services was accurate. Instead, ask the contractor to re-submit a detailed invoice so that you can compare work order line items to billables. Beware of "miscellaneous" line item descriptors -- red flags for cost inflation and/or hidden charges -- and question these fees with your contractor directly.
(2) Work not authorized. Sometimes work will be performed without authorization or by a simple misunderstanding. Verify who gave authorization, if any, and correct any internal deficiencies in the chain-of-command for un-authorized work orders originating from the Association's staff or management company. If the contractor performed without authorization or under a mistaken assumption, then the Association will have to dispute that charge. The best way to proceed is for Associations to include a provision in their contracts stating that only authorized work will be compensated.
(3) Services not provided. Be careful for services billed, but not rendered. Be sure and question the contractor about any services that you feel may not have been completed or even attempted. You may not always win this argument if you cannot remember if the work was performed, or if there is no record of the work being done, but at least you put the contractor on notice that you are inspecting invoices closely for errors.
(4) Unnecessary work. Some working relationships allow for the contractor to make a determination of when and how work is to be performed on certain maintenance contracts. A better practice would be to include a clause in your contracts stipulating that written permission must be obtained prior to any cost-incurrence by the contractor so the Association can avoid paying for unnecessary work.
(5) Hours worked and/or number of workers not specified. Beware of padding on hours worked or number of laborers assigned to a project. The Association can keep an informal journal of hours worked and workers assigned and compare this with invoices to get a rough estimate on whether the billables are correct.
(6) Labor rate incorrect. Sometimes the invoice labor rate will be higher than quoted or negotiated. Be sure and dispute this rate with the contractor and justify your argument by citing the relevant provision in the services contract or bid proposal. Contracts should always specify the labor rate for services to be performed.
(7) Subcontractors billed, but not used. If the Association suspects that subcontracting work was billed but not performed, then question the contractor; get names and contact info for these sub-vendors and contact them directly to verify actual work performed, if any.
*Thanks to the Insider's Guide to Managing Community Associations for excerpts used in creating this article.
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