Tips for HOA Directors Regarding Contracting on Behalf of the Association

Acting through its board of directors, homeowners associations are responsible for properly maintaining the common areas of a common interest development. Proper maintenance of the common areas necessitates contracting for materials and services that are provided by third party vendors and service providers. Because the ramifications of retaining the wrong vendor or service provider or not properly documenting the terms of a contract for materials and services can be very costly to a homeowners association, association directors must be aware of basic procedures that should be followed in connection with entering into contracts that are binding upon their homeowners association.

Planning

Absent a need for emergency repairs to address a condition that requires immediate attention, association directors should anticipate and plan for repairs well in advance of when they are needed. Having an up-to-date reserve study will facilitate such planning by making the directors aware of the common area components that must be maintained and the anticipated costs associated with such maintenance. Advance planning of a major project will minimize the risk of having to impose emergency or special assessments on association members to make needed repairs or replacements of common area components and will enable the association to properly obtain bids, evaluate contractors and enter into appropriately negotiated contracts.

Bidding

Before retaining a contractor, bids should be obtained from at least three different contractors who are licensed to provide the required services. The bids that are obtained should clearly specify the scope of the services to be provided and the material that will be required. Without a clear specification of the services and the materials it is impossible to compare bids and make intelligent decisions about who to retain. While it is natural for association directors to be motivated to save money and hire companies that provide the lowest bids, a decision that is based solely on the amount of the bid can end up being extremely costly to the association. When evaluating bids, association directors should meet the contractor and obtain information about their experience and credentials that should be investigated and verified.