Successfully running a homeowners’ association (HOA) is a group effort. To maintain a well-functioning community, it takes an engaged board, involved homeowners, and a team of trusted professional advisors and vendors. Professional service providers play a big part in the stability of your association. The right vendor partnership can increase efficiency and optimize spending, while the wrong relationship can cause project setbacks and financial loss.
That’s why it’s so important to be careful in who you decide to do business with—verify credentials, call references, and, most importantly, review every detail in the service contract before signing on the dotted line. Contracts can be lengthy and confusing. Make sure to involve your association lawyer, take your time, and ask the following questions. By thoroughly examining negotiated services, you’re not only protecting your association, but also everyone within it.
Nine Questions to Ask Before Signing a Vendor Contract
Don’t rush to sign a service contract. Pay special attention to the fine print, check it against your governing documents and ask questions.
- What Are the Contract Terms?
Make sure the contract terms for payments and billing procedures are spelled out and all parties understand them. If you have questions about the terms, contact your HOA attorney to clear up any confusion.
- How Does the Vendor Handle Your Changes to Agreed-Upon Services?
The contract should detail how the changes will be approved, who approves them, when they will be executed, and when the vendor gets paid for the changes.
- What Are the Response Times and Timelines for Services?
The contract must always contain start and completion dates for work or timeframes for completing specific services, such as legal reviews or reserve studies. The contract may also include penalties for the HOA and the vendor, should either party have setbacks, like a delay in starting a project or responding to a time-sensitive call or task. Additionally, notice and timeline details about either party terminating the contract should be clearly specified.
- Who Is the Point of Contact?
Who does the vendor contact if it has questions for the HOA? Who does the HOA contact if it has questions for the vendor? The contract needs to state the contact person for both sides and an address, phone number, and email address, if applicable.
- Does the Vendor Have Insurance?
Confirm the contract outlines the vendor's insurance coverage. It’s best practice for the vendor to list the HOA as an additional insured party and certificate holder so that the insurance company can notify the HOA should the insurance status change.
- What’s Included in the Price?
Guarantee the contract clearly and thoroughly itemizes everything that’s included in the cost of services. This might include the price for a basic level of service and any extra fees for add-ons. Identify any charges for overtime work and supply changes. Understand what you have to pay for and how much. Similarly, know if and how you’ll be reimbursed should alternate goods or services be used.
- What Is the Vendor's Warranty Policy?
Ideally, the vendor will provide a warranty for its work. Look for warranty details, like what the warranty covers, when the vendor will perform the warranty work, whether the vendor requires photos, manufacturer warranty information, and how you need to communicate warranty claims to the vendor.
- How Does the Vendor Handle Disputes?
Check that the contract has a clause pertaining to disputes, including the location of the dispute action, who assumes legal fees and costs, and whether the dispute is handled through arbitration or litigation.
- What Responsibilities Does the Vendor Have?
Make sure the contract details the vendor's responsibilities and the HOA's responsibilities. This may include a minimum number of workers or equipment that is required to be on the job. It may also include certain times and days that the work must take place or certain preparation that the association needs to perform prior to the contractor starting their work.
How to Choose the Right Vendor for Your Community
Contractors and vendors vary in skill, workforce, work ethic, and speed. It’s important to thoroughly vet each and every candidate. Read our ebook, "8 Steps to Choosing the Right Vendors for Your Community," for a complete guide on how to choose the perfect vendor for your community.