Important Things to Know About Entering Into Contracts on Behalf of a Homeowners Association

In the course of operating a homeowners association there are many types of contracts that are entered into in the name of the association. Examples of entering into contracts on behalf of HOA are management agreements, agreements with professionals such as lawyers and accountants or reserve study providers, and agreements with contractors who perform work on association property. Frequently, the association becomes bound to the terms of a contract by the acts of one or two officers or a property manager acting without proper authority or authorization. This is because the vendor, acting in reliance on the signature(s), provides products or services called for under the terms of the contract. In some instances, the association can be bound to a contract that was not even signed if there was partial performance by the vendor and the association accepted the benefits of the contract. This can result in the association becoming liable for performance under a contract that contains provisions which are not in the best interests of the association.