One of the most important jobs a Board is tasked with is to select vendors and award various contracts. From their association manager to landscapers, pool maintenance and asphalt contractors, to lawyers and painters, how these important contracts are developed and awarded is critical to the health and welfare of any community association. Thinking of your contractors and service providers as long term relationships rather than as disposable resources sets the stage for success. The longer the relationship, the stronger the bond, the better the knowledge of the community - its assets and problem areas, and the more negotiating power you have.
Condo Association Contract Types usually fall into one of three categories:
"Reoccurring" contracts: Management, bookkeeping, landscape and pool contracts fall into this category.
"Annual" contracts: An annual audit or review and/or tax preparation are examples of annual contracts. Your association attorney might fall into this category if you have an annual retainer contract.
"As needed" contracts: Repair or replacement of reserve components: painting, roofing, asphalt, sidewalks, siding, or major tree pruning are all potential examples in this category.
The most important step in the contracting process for Condo Associations is to develop specifications.
- What do you expect from the contractor or service provider?
- What is the detailed scope of the job?
- How are specifications developed for the contract and who is responsible?
- If the job is complex or no existing specifications exist, do you need the help of a
consultant (architect, contractor, attorney or construction manager) to develop them?
- What experience or licenses are required and/or appropriate for the job?
- How much money is the "right" amount to pay for the job; has it been budgeted?
- Who will oversee the service provider? How will you know if you got what you paid for?
- When or how often should you go out to bid for these services?
Here are some examples of how specifications can affect a Condo Association's contract:
In a painting contract for example, specifications should include detailed expectations for preparation, application and time frame for job completion. Professional prep includes anti-mildew power washing, removing loose and peeling paint, countersinking nail heads, priming new wood, caulking around doors and windows, sealing cracks, and removing and replacing any bad wood prior to painting. [Note: As long as the "bad wood" is minor trim, it is fine in the painting contract but what happens if the painters find a major section of dry rot? Are they capable of (and do you want them) handling this extraordinary level of repair and if so, what is their hourly rate?]
Materials to be used should be clearly stated in the request for proposals. Most paint specifications opt for conventional primers instead of a more advanced peel-stop sealer. A sealer delivers a more protective first coat than standard primers or paint which are not formulated to resist cracking and peeling. Does the bid include a sealer and one or two coats of paint? Is the brand, color, quality and finish of paint specified in the bid? Leaving out these details can result in dramatic differences in the bids you receive and you or your committee are then left trying to compare "apples and oranges".
In a management contract, you will want to specify the skill and/or experience level of the manager assigned to your account, the period of the contract, communication relationships, compensation, and the scope of work including such diverse things as records and file maintenance, meeting attendance, correspondence and communication expectations, coordination with the financial manager and maintenance providers, delinquency management, facilities management, contract administration, key maintenance, inspection criteria, reporting criteria, legal coordination, and budget management/preparation. Is financial management and reporting a part of the contract? Every reoccurring contract should include standard termination and indemnification clauses, as well as insurance requirements.
If you only need bookkeeping services for example, do you really want or need a CPA to do the work? In HOA's for example, a management firm may be asked to do the bookkeeping and prepare and submit financial statements as part of the management contract but what information do you want or need in a "financial statement"? How often are they prepared and submitted? Do you need a separate contract for an annual audit or review to be done by a CPA. Tax preparation is often included in the contract for an annual audit or review but taxes can also be prepared by a tax service (ideally one that is familiar with HOA tax law). Knowing what you are contracting for is critical in creating a viable set of specifications as well as in getting the best qualified vendors.
Typically included in a standard pool contract are testing and balancing the water chemistry, vacuuming, brushing the sides of the pool, emptying skimmer baskets, cleaning the filter as needed and checking to make sure that all the pool equipment is working efficiently. The contract should state the number of times the pool is serviced and who is responsible for maintaining the pool between visits. Things like maintaining the water level and checking/logging the chemical balance may be required by local health codes but not be part of the pool maintenance contract. Does the contract include the cost of the chemicals needed to maintain the water balance or are these billed separately? These chemicals can add up to hundreds of dollars over the course of a year so if this isn't specified the bids received can look very different. Some filtering systems are designed for annual cleaning instead of regular backwashing. This should be calendared and discussed with the vendor before the work is done if it is not part of the maintenance contract. Other treatments and services such as specific chemicals for algae prevention or setting up and servicing a salt-chlorine generator will be additional costs. Knowing how these additional services are proposed and approved can avoid future miscommunications.
Knowing when to hire an attorney is important. Some larger associations actually have an attorney on an annual retainer agreement. Others, perhaps most, only consider hiring an attorney when a problem arises. Often, like failing to do "preventive maintenance", it is then more expensive than if a consultation had happened earlier in the process.
HOA law is complex and differs considerably state to state. Associations today need to have a relationship with a lawyer with industry specific experience; ideally one who specializes in HOA law only. Even then, there are sub-specialties - structural defect litigation, conflict resolution and mediation services, and governing document (CC&R'd/By laws) development and revision are just three examples. It is important to get the right lawyer for the issue at hand and in this case, "specifications" might look like a simple list of questions and the results of an initial consultation. Depending on the scope of the problem, be prepared to pay for this consultation, however if the issue is large or extremely complicated, you can always ask attorneys to attend a board meeting for an interview.
Will they discuss the range of outcomes you can expect (rough estimate of length of time, cost for legal services, and size of the award if any). Is the case likely to be settled or will it go to trial? The factors on how a case is decided are many. Avoid anyone who promises you that you will win. Can they help you understand the strengths and weaknesses of your case? Board members can educate themselves on many issues by checking out condoassociation.com. This website is filled with helpful information, blogs and primers for board and managers alike.
In the case of a large law firm, who will be working on your case? Will this attorney be doing all of the research, case preparation, negotiation, and court work or will associates or paralegals be handling parts of it? If so, what will the fee arrangement be? How often will the attorney bill you? Is a retainer required?
Always clarify attorney fees and expenses in a written agreement. Expenses can include expert witness fees, filing fees, copying, messenger service, etc. - all costs which separate from the fee you pay the attorney for his/her time.
Last, is this a person who
- is organized?
- responds clearly, openly and directly to your questions?
- provides you with written background material on the matter at hand?
- you trust has your community's best interest at heart?
- is willing to work with you around financial agreements?
These diverse examples demonstrate that each type of contract requires a different and complete set of specifications.
So how do you find a good contractor or service provider? Of course the best way to look for them is through referrals. Use the association's existing network of trusted vendors for referrals. Ask your friends, neighbors or other association board members. Check with local HOA related professional organizations or associations such as your local chapter of CAI, ECHO, the Community Associations website or manager recruitng firms such as Adamen, Inc. to locate industry specific vendors and service providers, but remember, to advertise with many of these associations is out of the reach of smaller service providers who may provide more personalized service with a higher level of care. The internet is your friend here. Even if they don't advertise, most companies have websites these days.
Once you have your bids and have completed your reference checks, evaluate the bidders. Getting the lowest price should not be the criteria for awarding the bid. If you have some equally good candidates, you might want to set up individual interviews. You want someone with strong references, skill, knowledge, experience, ethics, dependability, and excellent communication. That may or may not be the vendor with the lowest bid. The highest bid isn't always the best company for the job either. Evaluate the whole picture and don't hire on price alone. If the price seems too good to be true, it usually is.