How to Pick the Right HOA Vendors February 20, 2023
Pick HOA vendors that best fit the needs of your community. Sounds simple written like that, but selecting HOA contractors is not that straightforward. So, before you bring out the HOA vendor contracts, take a look at our tips on how to pick the best independent contractors for the job.
PICK HOA VENDORS THAT GET THE JOB DONE
If there is only one thing that all community associations, big or small, have in common, it’s the need to pick HOA vendors. They must all hire a vendor to perform work on their behalf at one point or another. That’s why it is very important for a homeowners or condo association to know how to properly select a vendor. It’s also crucial to know how to protect themselves in the process as well.
The members of an HOA’s board of directors have a legally binding obligation to make sound business decisions that are in the best interest of the entire community. This is known as their fiduciary duty and it includes making sound decisions when choosing a vendor.
HOA boards are faced with an impressive list of properties that they need to maintain. Hiring the wrong HOA vendor means that these properties and amenities will not be in good condition for long. When landscaping is subpar and the pool is too dirty to swim in, property values can take a nosedive. No HOA wants that, so it’s up to them to pick HOA vendors who can do these jobs:
THE JOBS YOU NEED TO PICK HOA VENDORS FOR
- Landscaping – covers lawn care, outdoor features, certain sports surfaces and artificial grass maintenance
- Bookkeeping and Financial Management – for your HOA bookkeeping needs
- Collections / Legal Financial – for collecting overdue fees, or closing feesfrom home resales with due HOA fees
- Engineering / Builder / Developer – for your major projects and repairs
- Debris Removal / Tree Service – for pruning mature trees, clearing fallen trees, and debris removal
- Cleaning / Janitorial – also covers some aspects of building and common area maintenance
- Security / Entrances / Fencing – for monitoring and enhancing the security of your association
- Plumbing / Backflow Testing – for maintenance and repair of plumbing and drainage systems
- Pressure Washing – for exterior cleaning and surface preparation
- Commercial Painting – for painting or repainting of building exteriors and interiors
- Roofing / Gutters – repair and replacement of roof and gutter systems
- Heating Plumbing / Cooling / Insulation / HVAC – for installation, maintenance and repair of the heating and AC systems in your common areas
- Pool Services and Maintenance / Waterproofing – for the maintenance and repair of pool systems, or for winterizing them
- Towing – for towing of stalled cars, or clearing accident sites
- Snow Removal – for clearing roads and sidewalks of accumulated snow or hail
That’s just a partial list of the common jobs you will need HOA vendors for. In fact, there’s a long list of jobs that an HOA will need on occasion, too. Anything from masonry restoration to emergency phone answering services, there’s an HOA vendor for that.
EMPLOYEE VS INDEPENDENT CONTRACTOR
Associations have two options when hiring someone to perform work for the community. One option is to hire an employee that is paid by the association. An example of this includes a full-time maintenance person or the manager of a self-managed association. Aside from very small, simple projects, there are few instances where this is advantageous for the HOA; what happens if the employee is sick or goes on vacation? There are other considerations as well. An association that uses an employee to perform work must withhold income, Social Security, Medicaid, and unemployment taxes. The HOA must also verify the legal residency status of any employee, not to mention background and referral checks. As you can see, this option has more cons than pros.
The other type of vendor is an independent contractor. When you think of a vendor for a community association, this type is what most people think of. Examples of independent contractors include landscapers, attorneys, and roofers. An association that hires an independent contractor must only file and provide a 1099 Form to the vendor.
Requiring less reporting to the IRS and less paperwork is a huge benefit to an HOA. Other benefits of hiring an independent contractor are that they also pose less of a liability to the association. Any contractor worth hiring will be licensed and insured so that any damages or injuries sustained on the property do not fall on the association.
Clearly, it is more advantageous for an HOA to engage in this type of business relationship.
CHECK YOUR GOVERNING DOCUMENTS AND BYLAWS
No matter what kind of vendor your association chooses to utilize, any work they will do should be put in writing. All of the basics, such as the work to be performed, the duration of the work performed, and the price the association will pay to the vendor will need to be on paper. This will eliminate any discrepancies between the association and the vendor.
The key to successful vendor selection is for your board of directors to be transparent throughout the entire process. Any job that requires a third-party vendor should receive at least three bids. Many states have laws that require multiple bids, so you could run the risk of breaking the law by hiring a vendor on the fly.
Besides complying with state law, receiving more than one or two bids will give you an idea of what kind of value you’re getting. This way, you can pick HOA vendors from a wider range of choices.
DON’T JUST SETTLE ON THE PRICE
When choosing a vendor to hire during this process, many boards make the mistake of automatically choosing the lowest bid. Instead of doing this, try to select the bid that offers the greatest value, even if it’s not the cheapest. That’s right, the cheapest bid isn’t always the best value. That’s why it’s important to carefully review all bids to see what they entail.
EXERCISE DUE DILIGENCE – ALWAYS VERIFY LICENSES, CREDENTIALS, AND INSURANCE
Make sure your potential vendors provide proof of being licensed and bonded, to ensure they are properly qualified. You don’t want to find out the hard way later on.
Even after you have selected a vendor, keep transparency, and organization priorities. It’s a good idea to keep the documentation from rejected bids because you never know when you will need to show proof of due diligence. It’s also worth mentioning that some HOAs never sign a contract without first running it through with their attorney.
This is an added precaution, but laws vary from state to state and new laws are always coming up every year. Thus, it’s always a good idea to have your attorney look at all contracts.
PICK HOA VENDORS THE RIGHT WAY EVERY TIME
Following these simple suggestions will help to ensure that you’re getting the best value for your money and that any job your HOA needs to handle will be completed in a timely and acceptable manner. Pick HOA vendors the right way: thoroughly, fairly, and from several candidates. It will save your HOA from a ton of headaches in the future, Now that you have the basics, get out there and pick a winner.