HOA Boards often find themselves entering into vendor contracts for landscaping, pool maintenance, security, gate maintenance, and more. However, not all contracts are created equal. That’s why we’re about to offer tips to help you separate the good ones from the bad.
The Makings of a Great Contract
Much work and thought goes into building a clearly-defined and fair contract. So, when you consider vendor contracts, make sure they include these parts:
- Scope of Work
Before looking into possible vendors, it’s good practice for your board to identify what, exactly, the HOA needs from the vendor. That way, when you look at the contract, you’ll know instantly if the scope of work describes the services your community needs.
Double check that that the contract meets your board’s quality requirements, describes the amount of resources and materials needed, and states how often the services will take place. How, when, and where will the work be completed? For example, a landscaping contract should contain the number of times the vendor will be on-site, whether flower and mulch replacements are included (and, if so, how often the replacements will be made), and when irrigation inspections will be completed.
- Specific Time Frame
Vendor contracts should include the start and end date of any and all services. For construction contracts (such as a project to replace the park playground), the work schedule, including the beginning and ending date of the project, should be clearly stated in the contract.
- Price Sheet
Any materials or other items that the vendor purchases should be listed on the contract, along with any additional costs. You should know exactly what you’re paying for, and why!
- Exhibits
Some contracts will list additional documents that apply to the agreement. If a vendor contract lists any exhibits, make sure that copies of these documents are included with the contract.
- HOA’s Name and Vendor’s Name
Every party involved in the contract should be named on the contract. This will help make sure that the vendor cannot deny that your HOA is the contracted party for your specific services, or deny any of the services promised to your association in the contract. Your HOA’s name will be printed on the same document as the detailed scope of work.
- Signature Blocks and Dates
If your HOA is the only party required to sign the contract, you have a problem! If the vendor won’t sign the contract, you shouldn’t either. Both parties need to agree to the contract’s requirements for the contract to be fair and effective. Signatures and dates will create a clear time frame and reference point for the agreement.
- Service Price
Check that the vendor’s price is clearly listed on the contract, tax included. You don’t want to agree to a $3,000.00 contract only to receive a bill that is more than what you thought you agreed to, and far beyond the HOA’s budget!
- Professional Appearance
Examine the appearance of the contract. It should be error-free and printed on company letterhead with clean formatting. If a document is typed up quickly and includes handwritten sections, this is a warning sign that the contract isn’t trustworthy.
Additional Tips for Vendor Contracts
Beyond checking that the contract contains all the necessary items listed above, you can further examine the company you would like to contract with, and their service offer, in order to protect your HOA. Consider the following tips:
- Check that the vendor has the needed insurance coverage. Does the vendor have employee compensation insurance? Liability insurance? Don’t enter into a contract with a vendor if you could be held responsible for missing employee wages or damages.
- Review service costs, and make sure that these are in line with the HOA annual budget. The price you are paying should match the value and quality of the services delivered. Also, remember to account for pricing increases agreed to in the service contract.
- Consider longer contract terms with more care. In some cases, such as with landscaping contracts, longer terms can limit your options. If a vendor’s work quality slips after the first year, you won’t be able to reconsider the service if you’ve agreed to a five-year contract, especially if the conditions of the contract are unclear.
- Make sure you receive an executed copy of the contract. You need to keep a copy of the signed contract on file. This way, you have the conditions of the agreement you made at your fingertips, and can better ensure that the vendor delivers what was promised.
Entering into contracts may seem like everyday business for an HOA board of directors, but practicing caution can keep your board from being involved in some pretty hairy situations. Going into vendor proposals with a clear idea of what you want from a vendor, examining each contract before you sign it, and following up on service will help your HOA run efficiently and without added stress for the board.
