6 Tips for Better HOA Contract Writing
Maintaining a condominium complex or neighborhood is no small feat—there are landscapes to be preened, repairs to be made, beautification projects to be undergone, and more. To perform these tasks, your homeowners association (HOA) will need to hire contractors, skilled professionals who can keep your community clean, safe, and inviting. As their title implies, contractors work based on contracts, key documents that outline what they’ll do, how they’ll do it, and the amount they’ll charge for it. These agreements can make or break your HOA’s budget, homeowner satisfaction, and ability to function. At California HOA Collection Services, we help property managers, HOAs, and homeowners manage their money, handle legal issues, and optimize their operations. Read on to learn our top six tips for better HOA contract writing.
1. Describe the details of the work being done.
This may seem like an obvious point for contractor agreements, but it’s vital that your board members explain exactly what labor needs to be performed for your community. You may assume that your contractor understands what “landscaping” or “plumbing repair” entails, but this would be a mistake. Realty Times emphasizes the importance of “subject matter” in HOA contracts: “It is very important that [the product or service being provided] be spelled out clearly in such a way that the association knows exactly what is to be expected. For example, if you fail to specify that both sides of the fence are to be painted, the contractor may paint only the ‘front’ and then leave. If the contract doesn’t say what kind of paint or stain is to be used—the contractor may choose an inferior product than you would choose.” Formally making these specifications can also help you solicit and select the best bids for your HOA.
2. Watch out for potential additional costs.
As most HOAs know well, construction, renovation, remodeling, and home maintenance projects rarely go exactly as planned. Your contracts should include costs for contingencies so both parties understand what to expect. Otherwise, you could be overcharged for the tiniest modifications or surprised by hidden fees.
3. Understand who is liable for what.
Since a contractor agreement is a legal document, it’s important to consider liability. If someone gets injured in the construction process, who would be responsible for damages? How would you establish negligence? If the HOA’s funds are somehow insufficient to cover the cost of the work being performed, who is responsible? Establishing accountability ahead of time can save you many future legal and financial headaches.
4. Delineate a timeline for the project.
When your HOA hires a contractor, you probably want the work completed as soon as possible. However, you could be in trouble if you fail to spell this out in your contract. For example, landscaping work wouldn’t be particularly valuable if the contractor took a whole season to finish it. Even worse, a plumber who fails to expediently repair a leak could end up costing your HOA thousands. While delays (due to inclement weather, accidents, misunderstandings etc.) can occur, creating a comprehensive schedule for your contract can help you stay on track. Realty Times advises: “There should be some deadline which triggers a penalty, unless there is an agreed on extension for circumstances beyond the control of the parties…A penalty clause will protect against a contractor that takes on too many jobs and moves from job to job with empty promises of finishing ‘soon.’” When it comes to contracted community improvement work, timing is everything.
5. Have a plan for conflict resolution.
In an ideal world, every project would run smoothly and without incident. As any HOA board member knows, however, problems can arise with virtually any assignment. You and your contractor may disagree on the scope of the work, the way it’s being performed, how to handle last-minute cancellations, or other issues. Would you like a third-party mediator to intervene? Are you prepared to take your conflict to court? (If you do so and win, would you like the offending contractor to cover your legal expenses?) Putting certain provisions in place can help any disputes from being unnecessarily drawn out.
6. Clarify the termination terms.
Getting out of a contract is just as important as getting into one. Your agreement should include conditions for concluding or discontinuing a project. For example, many contracts become invalid after a certain number of days if the work hasn’t been performed. Similarly, you may have license to suspend your agreement if your contractor violates certain HOA standards. If the contract must be terminated, you may also wish to levy fees or other penalties against the offending party, so these should be defined in the document.
California HOA Collection Services Can Help
If your HOA is struggling to make collections, pay contractors, or manage day-to-day activities, we are here to assist you. Contact California HOA Collection Services today to learn more or schedule a consultation.