Vendor verification 101: what to require before signing a contract

A Florida HOA or COA board signs more vendor contracts than it signs anything else. Landscaping, pool service, elevator maintenance, roofing, painting, security, pest control, accounting, technology, insurance. The vendor relationship is the single most common source of association loss outside of fiduciary disputes — and almost every vendor loss is preventable at the contracting stage.

This article is the verification checklist your board should run before signing.

Why verification matters

When a vendor causes damage, walks off a job, or fails to perform, the association's legal recourse depends entirely on what was true about the vendor when you signed:

• Were they actually licensed for the work?
• Were they actually insured to the limits you needed?
• Were they actually solvent enough to pay a judgment?
• Were the names on the bid the real principals, or shell pass-throughs?

Verification is not paranoia. It is the floor of due diligence that the business-judgment defense (under Florida Statute 617.0830 and the chapter overlays) requires from a board.

Required verification, every vendor, every time

1. License verification

Every Florida trade license can be verified online at the Department of Business and Professional Regulation (myfloridalicense.com). Type the vendor's license number into the public search. Confirm:

• The license is current (not expired)
• The license is the right type for the scope of work
• The license is in good standing (no disciplinary actions)
• The name on the license matches the name on the bid

The license-number-on-the-letterhead trick is real. Some vendors put a license number on bid documents that belongs to a different company or to a former employee. Verify.

2. Certificate of insurance (COI)

Require a current COI before signing. Confirm:

• General liability coverage at minimum $1M per occurrence / $2M aggregate
• Workers' comp coverage (Florida law requires it for any business with four or more employees in construction)
• Auto coverage if the vendor will be on property with vehicles
• Property coverage / installation floater for vendors handling expensive materials on site
• The association is named as additional insured (not just a certificate holder)
• The policy effective dates cover the entire contract term

A COI is a snapshot. It documents coverage on the day it was issued. For multi-year contracts, require an updated COI at each renewal. Calendar the dates.

3. Bond, if applicable

For larger projects or contracts with payment-up-front terms, require a performance bond and / or a payment bond from a Florida-licensed surety. The bond is your protection if the vendor fails to perform or fails to pay subcontractors. For projects above ~$50,000 a bond is typically affordable; below that, the cost overhead is hard to justify.

4. References

Ask for three references from current or recent clients of similar size and type. Call them. Real calls, not just email confirmations. Ask:

• How long have they worked together?
• What was the scope?
• Any disputes? How were they resolved?
• Would they hire the vendor again?

Listen for hesitation. A reference who answers "yes, we'd hire them again" with a pause is not a confirming reference. Follow up.

5. Financial stability indicators

For larger or longer-term contracts, look at financial health:

• How long has the company been in business under its current name? (Florida's Sunbiz at search.sunbiz.org will tell you the entity history.)
• Are there active liens against the company in public records?
• Are there active lawsuits naming the company as a defendant?
• Has the company filed for bankruptcy or had a recent reorganization?

For very large contracts (anything over a year's assessment cycle), a Dun & Bradstreet report or audited financials are reasonable to request. Most vendors will not provide audited financials; the request itself filters out the marginal companies.

6. Principals and ownership

Find out who actually owns the company. Florida's Sunbiz lists registered officers and directors. For LLCs you may not see the members; if so, ask the bidder to disclose them in writing.

Cross-check the principals against:

• The board member roster (conflict of interest? — see Florida Statute 617.0832)
• Public criminal-records searches in Florida and any other state where the company operates
• Florida's licensee disciplinary database for the principal's individual licenses

7. Subcontracting and pass-throughs

Many vendors subcontract significant portions of the work. Ask explicitly:

• What portion of the work will be performed in-house vs. subcontracted?
• Who are the key subcontractors?
• Are they licensed and insured to the same standards?

A vendor that subcontracts 80% of the work without disclosing it is selling you a sales pitch, not a service. Find out before you sign.

Contract terms that matter

Verification only protects you if the contract preserves your rights. Required clauses:

• Indemnification. The vendor indemnifies the association against claims arising from the vendor's work.
• Insurance maintenance. The vendor must maintain the specified coverage throughout the contract term and provide renewal COIs at each renewal.
• Termination for convenience. The association can end the contract on reasonable notice (typically 30 days) with payment for work completed.
• Termination for cause. The association can end the contract immediately for material breach.
• Scope of work in writing. Detailed enough that disputes about "what was included" have a textual answer.
• Change-order procedure. Any change above a small dollar threshold requires written approval.
• Florida choice of law and venue. Disputes are governed by Florida law and venued in the county where the property sits.
• No automatic renewal beyond one year. Multi-year auto-renewal clauses lock associations into outdated terms and pricing. Negotiate them out.

The 30-minute rule

Doing this verification feels like overhead. It takes about 30 minutes per vendor — license check, COI review, three reference calls, Sunbiz lookup. Boards that skip it because "we trust this vendor" routinely discover, when the loss happens, that the vendor was uninsured for the type of loss, or that the license was held by a different entity, or that the principal had filed for bankruptcy six months earlier.

30 minutes is cheap. The lawsuit is not.

Common Elements articles are educational and not legal advice. Consult a licensed Florida attorney before making decisions that affect your association.