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HOA Management Blog

At The Hignell Companies we have been providing professional management services for California Homeowner Association Boards for nearly 30 years. We love sharing our knowledge and perspective. Give us a call at 530-419-6032 if you have any questions.

Things a HOA Board Should Consider Before Signing a Contract

May 27, 2013 at 8:00 AM / by HOA Manager

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We’ve all heard the term “read the small print before signing on the dotted line” but how often do we really do this? An HOA Board will be considering and entering into contracts on a regular basis and it’s not uncommon for otherwise cautious people to become jaded by the terms and conditions and just quickly glance over the documents.

A contract in its very basic form is an agreement between two parties that provides what each will and will not do. Common contracts in a homeowners association include equipment leases, landscape and building maintenance, contractors performing repairs, financial and banking documents, and other kinds of business transactions. It’s important for HOA Board members to understand what the contract says, which is often difficult to do when it’s buried among the legalese, industry jargon and fine print.

Here is a list of some general things to consider when reviewing a contract:

Identify the Parties

Use the complete name of businesses or individuals involved in the contract to avoid any kind of confusion. Also identify any specific offices of HOA Board members that will be overseeing the project or vendor the contract refers to.

Fill in All the Blanks

Make sure you look over the contract carefully for any empty blanks. Any items that are left blank could potentially be filled in by someone else without your knowledge. You don’t want any surprises!

Schedule Dates and Deadlines

Keep an updated calendar of important dates and deadlines that the contract requires to be done. Maybe a contract with a financial institution requires the HOA Board to submit an annual report. Some vendors may refer to automatic renewals in their contracts. If this is the case you want to make a special note in case you are unhappy with the service being provided and want to cancel, or if you’re renewing under the same terms as the original agreement.

Indemnification Provisions

The “hold harmless and indemnification” provisions are when you agree to not hold the other party responsible for liability that may incur or agree to protect the other party from liability or loss. Have the HOA Board member you assign to negotiate the terms settle on the same kind of indemnification for the Association.

Negotiate

The first thing to remember is that anytime you have a contract it’s a starting point and not necessarily the finished product. You have the opportunity to discuss the terms of just about any agreement. You want to find the best scenario and so does the other guy, so it never hurts to ask. Have one of your HOA Board members who is a good negotiator be responsible for the task of discussing the terms.

Termination

If the service isn’t working for you, you want to know you have a way out. Be sure to review the causes for termination and make sure the contract works to your benefit, so if you do have to terminate you won’t have headaches like courts and fees to deal with.

 

These are just a few general things for an HOA Board to consider when entering into a contract. It’s also a good idea to read through existing contracts again too. Be sure to read through the entire contract, no matter how boring it is, and thoroughly understand the rights and responsibilities of the Association – sometimes they can be scattered throughout the contract. Then, you can sign on the dotted line.

Topics: HOA Management, HOA Board, HOA Documents and Contracts