As a member of a Board of Directors one of your roles is to contract for goods and services for your association. This is an important role and you will find you deal with this on a regular basis. You might have contracts for purchasing materials or maintenance performed on your clubhouse or pool. One of the most important contracts you will review and sign is your management agreement. This will help establish the role of the management company and the duties they are responsible to perform. This contract also will establish the fees paid to the management company and at what time these fees are paid.
There are management companies in the marketplace today that claim “no contract” services. They have an agreement you sign but the contract provides for no exit strategy. Most Boards know this is dangerous, but some have not taken the time to consider how this could hurt their community in the future.
Not having the terms of service including starting, maintaining and exiting a service agreement can place an association at risk. Having the opportunity for a Board of Directors to exit a management agreement prior to the expiration of the management agreement is smart. It is recommended that a Board of Directors also not accept any penalties or charges to such an exit. Most management companies allow for a termination period (example 60 days). This will ensure a smooth transition and also serves an additional important purpose. Having a termination period protects the association as it would also apply to the management company. This will ensure that if a management company needs to exit the agreement for a community they can do so in the correct way and allow the Board of Directors time to consider new management options.
Other considerations within a management agreement could include: The number of meetings a representative would attend, the times a manager would visit the property for inspections, other charges and fees for services not covered in the general agreement and how the contract is renewed and when. The old saying is true, if something is too good to be true…it more than likely is! Be aware of companies that offer things like free postage or no services fees. In the end you are paying for these services in one way or another. For budgeting reasons it is smart to understand not only the base management fees but any additional fees the association might incur and how those can be included in your annual budget.
So having a clear, defined and easy to understand HOA Management agreement is smart! Not having all the items reviewed in this posting could be dangerous. Don’t fall for “no contract” or “leave when you want” promises. Ensuring that both the association and HOA Management Company are protected and the services and options covered within the contract and for what price is not only smart but a must. Contracts don’t have to be scary or bad when you understand the purpose and you work together with your vendor to ensure a fair and agreeable document that works for all.