An HOA vendor contract plays a crucial role in safeguarding an association from potential liability and damages. Not all HOA boards know the first thing about these contracts and what should go into them.
A homeowners association is responsible for maintaining and enhancing property values. To do that, an HOA must hire vendors to complete different types of work, from maintenance and repairs to cleaning and landscaping. Hiring vendors, though, shouldn’t be based on purely verbal agreements. It’s important to have a written one, too.
An HOA vendor contract is exactly that – a legally binding, written agreement between an HOA and a vendor. It outlines the terms and conditions of the partnership and the services that come with it. It details a number of things, including the scope of work, payment terms, and other pertinent details.
Having a homeowners association vendor contract in place accomplishes several things. It sets clear expectations for both parties, establishes protocols for dispute resolution, defines the penalties for breaches, and addresses potential contingencies that may arise over the course of the agreement.
Contracts contain crucial information that sets the tone for the entire partnership. At the very least, HOA vendor contracts should include the details below.
The contract should clearly identify the parties involved by name. In this case, those parties are the HOA and the vendor. The contract should also specify the date of effectivity.
The contract must define the services that the vendor will provide. The scope of work should be detailed and comprehensive, including any specific tasks, deliverables, and milestones. This will eliminate any confusion or gray areas that could cause conflict.
It’s important to establish a timeline for completing work, outlining deadlines and milestones as applicable. Vendors will often try to lock you in for multiple years, which may work in your favor in terms of care and cost. However, if it’s a new partnership, it’s best to start with a shorter term so that you can terminate the contract if the performance is unsatisfactory.
The contract should clearly state the pricing structure for the services rendered, including any additional fees or charges that may apply. It should also reflect the price sheet for any materials involved in the project. Price is a major factor for most HOAs, so this is where the bulk of your HOA vendor contract negotiation will come into play.
The contract should specify the payment terms, including the frequency of payments, methods of payment, and any penalties for late payments.
Attach any relevant documents or exhibits that supplement the main contract, such as specifications, drawings, and schedules.
The contract should outline any warranties or guarantees that the vendor will provide. These warranties typically concern the quality of the vendor's work or materials.
It’s paramount that you require the vendor to maintain appropriate insurance coverage. The contract should reflect any additional insurance on the vendor’s policies. Review the contract for any insurance exclusions that would create problems for your HOA. Furthermore, it’s best to ask the vendor for the Certificates of Insurance.
Your HOA vendor contract must also reflect the vendor’s commitment to complying with all applicable laws, regulations, and industry standards throughout the contract’s duration. This will help protect your association from liability.
The contract should outline any necessary building permits and specify whether the vendor is responsible for obtaining them.
The vendor contract must clarify each party's liability and responsibility for any damages, losses, or claims arising from the performance of the contract.
It’s normal for your partnership and needs to evolve, requiring changes to the original contract. As such, your contract should establish procedures for making amendments or modifications. This includes requirements for obtaining written consent from both parties.
The HOA vendor contract should define the circumstances under which either party may terminate the contract. It should detail notice periods and any applicable termination fees.
Finally, the contract should display the signatures of both parties or their representatives.
Here are some additional tips when crafting and negotiating your vendor contract:
An HOA vendor contract is vital for maintaining efficiency and protecting the association’s assets. With proper negotiation and guidance, your HOA board can preserve the association’s interests and deliver services as promised.
Vanguard Management Group offers HOA management services, including vendor coordination. Call us today at 813-930-8036 or contact us online to learn more!