HOA board of directors are used to dealing with contracts for any type of goods or services needed by the association. Contracts are a standard practice so that both parties understand their specific roles and duties. That’s why a legitimate contract between you and your HOA management company is important too. From daily duties to payment terms, you want everything in your HOA management contract to be clear and fair.
Why Do You Need an HOA Management Contract?
As an HOA board member, you might come across some management companies that offer “no contract services” but involve a signed agreement. These types of agreements most likely do not provide important terms — which can really hurt your community in the long run.
An HOA management contract is very important. It’s a legal document that states your expectations. The contract should have a clear outline of the services that you expect from the HOA management company.
The HOA contract also contains other important details such as the terms of service. It will specify the beginning and end of the contract, as well as provisions for continuing, exiting, or terminating the partnership between association and management company.
A good HOA management agreement will also detail the number of visits, inspections, and meetings from the manager, as well as fees for additional services.
Should the HOA management company fail to deliver, the management contract will provide the association with protection. That’s why it’s important not only to have a well-written contract but for the HOA board to also carefully look over all the details before signing the contract.
HOA Management Contract: What Should Be Included?
Now that you know the importance of an HOA agreement or a property management contract, it’s time to delve into the specific sections. Keep in mind that contracts will vary substantially, but these are some key points to look out for.
Terms of Service
The HOA management contract should outline the terms of service. When does the contract take into effect and until when? This section should also include a termination policy applicable to both parties. One party may choose to terminate services if there is a valid reason. There will be some restrictions, though, such as a 30-day written notice.
Services, Duties, and Fees
Any basic HOA management contract will have a section outlining the services and duties to be performed by an HOA manager and how much the association has to pay the management company annually and/or monthly.
HOA agreements will have a base management fee that corresponds to a list of services. Make sure to ask how much the management company will be charging for additional services.
Some companies will have a higher management fee but will provide more comprehensive services. Be wary of companies that offer lower fees but have hidden charges. These may end up costing you more in the long run. As such, make sure to cover all bases when it comes to services and fees —before signing the contract.
Responsibilities of the Association
An HOA management company will not do everything for your association. In most cases, the HOA board will still retain some responsibilities. Clearly outline the board’s responsibilities in the HOA management contract. This will prevent any misunderstandings or confusion as to who really is in charge of a specific task.
Liability is also a basic part of the HOA management contract. This section can also be called the Hold Harmless Clause. This protects the management company against liability, as long as they acted in the best interests of the association.
For example, they will not be held liable if the contractor they hire causes damage to association property. However, this clause will not protect HOA management in cases where they were negligent or fraudulent.
The HOA board should also make sure there is a Reasonable Care Clause. This means HOA management should still perform due diligence when carrying out their responsibilities — like when hiring a third-party.
The HOA management contract may also have a provision for litigation expenses. It states that the association will be responsible for legal expenses should HOA management become involved in a lawsuit. This assures HOA managers that they can do their duties without fear of getting sued.
Services Included in the HOA Management Contract
Management services will depend on the needs of your community as well as its resources. Nevertheless, here are some services that you can expect an HOA management company to perform.
Maintenance of Common Areas: HOA managers will regularly visit common areas, contract with vendors for maintenance and repairs of common areas, purchase parts/equipment needed for common areas, evaluable long-term maintenance needs, and recruit personnel.
Accounting and Financial Management: An HOA manager’s responsibilities may include assisting the board with the annual budget, obtain a reserve study, collect HOA dues and assessments, monitor the association’s bank accounts and balances, send HOA invoices, send delinquency notices, prepare financial documents, prepare vendor payments, and so on.
Insurance: The board can delegate insurance tasks to their HOA manager including recommending insurance companies, preparing insurance bid proposals, placing appropriate insurance coverages, and processing insurance claims.
Administrative Services: HOA managers also handle day-to-day administrative tasks such as answering phone calls and emails, following up on homeowner complaints and requests, enforcing HOA rules, scheduling HOA board meetings, and so on.
Conflict Resolution: An HOA manager is also helpful when it comes to resolving conflicts, especially if it’s between board members, or between a board member and homeowner. Having expertise such as conflict resolution skills means they will able to deescalate conflicts and preventing lawsuits.
Having an HOA Management Contract Is Just Good Business
They say that running a homeowners association is just like running a business. And so, if you want your HOA to be successful, you have to have good business practices — such as having an HOA management contract.
An HOA management company is supposed to make the board’s lives much easier. But if you don’t have a contract — or one that is not clear and fair—it will only lead to more problems for the association. Having a management contract means you’ll be able to cover all bases as well as protect the members of your community from costly mistakes and disappointments.