Contracts for Homeowners Association Management

What are HOA Management Contracts?

There is a lot of responsibility and work involved in running an HOA, and some boards decide against taking it all on themselves. Instead, they hire a management company. Choosing a third party HOA manager allows the association to delegate some of its duties out to other companies that are more equipped to handle the dealings of an HOA. It’s important to pick the right company to manage your homeowner’s association as they’ll be handling both large and small responsibilities on behalf of the community. There are several factors to think about when choosing an HOA management company, so read on to learn about what you should be looking for (and avoiding) before making a decision.

Choosing the Right Management Company

One of your first responsibilities in searching for a homeowners association management company is to ask around for references. Make sure the management company you hire has a proven track record. You want to know they can get the job done. Having a trusted company will help the board, and the community can rest easy knowing they’re in good hands.

There are several items to consider when hiring a management company. Knowing how much work they’ll need to put in is essential. Make sure their – and your! – expectations are reasonable. HOA management companies don’t like surprises. Like an extra service that you want to add after the fact, just like you don’t want to be surprised by an extra fee down the road. Make sure that you are clear and upfront with your Homeowners association management company.

Also, understand what a management company includes in their scope of work. Will, the manager, focus on administrative tasks alone, or will they talk to the homeowners? If you have specific requirements, such as visits per month, they need to know that at the beginning. Do you have some areas or projects that need help? Check to see if the manager has experience in these types of projects.

If you’re comparing prices, make sure the services you’re comparing are the same. Otherwise, one company might be cheaper because you’re not getting as much service from them. Ask other HOAs whom they are currently using that management company’s services how they like working with the company. Always be sure to check their references.

Who Needs a Management Contract?

Does the association even need one? Some managers offer a “no-contract” deal with you — but not having a contract could cause you a lot more trouble down the road. Both you and the manager need to understand the expectations and the scope of work both parties expect to see to completion. Both of you also must know how (and when) the manager will be paid. The contract should be clear and fair to both parties.

Without a contract in place, the manager could quickly increase its prices at any given moment, or the company could charge you for a service that you didn’t discuss upfront. If you fail as an HOA to establish the outline of work and pay in writing. Then you’re technically obligated to pay the management company for their services at whatever price they name. 

Should something go wrong, and there is no contract in place, the members themselves could take legal action against the HOA for failing in its fiduciary duty. Protect yourself and your members by making sure you have a valid, enforceable contract in place.

The Outline of a Management Contract

Several HOA contract templates can be found with a simple Google search. Your association will likely need to tailor these contracts to suit your community’s needs. The documents have to work with your CC&Rs (Covenants, Conditions, and Restrictions), as well as all applicable laws. Dependable and reliable HOA management contracts should cover the following eight topics: 

  • The appointment of the management company.
  • Employees of the manager. Management companies themselves are contractors, not employees of the HOA.
  • The manager’s duties. From financial recordkeeping to property management, the management company often runs the member meetings and handles much day to day business. They collect dues and assessments and should handle non-payments as well. They take care of finding auditors for the books and make sure the financials are correct.
  • A good contract should cover the association’s duties, such as providing funds, plans, and records. The contract should have the name of the person on the HOA who will be the manager’s contact with them.
  • Contracts should identify all of the management company’s services. If there are any extra services, how will they be billed?
  • The terms of the agreement. This section also covers the termination clause, which describes how the agreement can be terminated. Usually, the term of service is for a year, though certainly, the HOA can keep renewing the contract if they like the services. Often, contracts state that either one of you can end the agreement after 30 or 60 days with no fee or penalty. After that period, the policies and fees should be specified in the contract.
  • Liability. Insurance policies for both the association and the manager are detailed here. The manager may be able to find or advise on reasonable insurance for the HOA.
  • General provisions, covering the scope of the contract itself. For example, are there any elements that will void the contract? Any conflicts of interest should be noted here are as well.

Conclusion

An HOA may decide to contract out specific management tasks. There are many items to consider when hiring a third-party management company. Once you have selected a fit company, developing a thorough and detailed contract between the management company and the HOA is important. It protects both the company and the homeowners from any issues down the line. A good management company is valuable and benefits the way you run your community, so do your due diligence when hiring a company to help your neighborhood.