Establishing A Contracting Policy For Your HOA

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Your HOA should have a policy in place for vendor contracts; find out what should be included.

Your homeowners association (HOA) likely has a number of policies on everything from pets to parking. But do you have a policy for contracting with vendors? You should. Such a policy ensures that contracts are awarded in a consistent manner and are fair and beneficial to both parties.

So what should be in your contracting policy? You’ll want your policy to be thorough, but to provide enough room for you to negotiate and work with a vendor. In your policy, be sure to include:

  1. The bidding process. Clearly state when multiple bids are required for a job and the minimum number of bids needed.
  2. Length of the contract. Your policy needs to include the maximum length of time your HOA can be contracted with any one vendor.
  3. Renewal terms. Determine if your HOA can renew a contract once it has ended and how. Will you require more bids? Will renewed contracts be shorter in length?
  4. Termination clause. Your policy needs to include a termination clause that enables your HOA to end a contract if there is a breach.
  5. Insurance and licensure. Include in your policy the type of insurance and licenses needed by any vendor your HOA contracts with. You’ll also want to be sure that your HOA is listed as an “additional insured” under your vendor’s contract, which means that your HOA is included in your vendor’s insurance policy for the length of your contract.
  6. Scope of work and warranty. Your policy should require detailed specifications of the services and materials being provided as well as when documentation is needed by professionals, such as an engineer. Be sure to also include a clause on when warranties are expected—and for how long—for services and materials.
  7. Vendor exclusions. Determine whether or not your HOA can contract with vendors who are also homeowners or are in any way affiliated with a board member, and clearly state that in your policy.
  8. Communicating to your homeowners. Be sure to include a clause on how the bidding process and awarded contract will be communicated to your homeowners. Also include when in the process this information will be communicated so homeowners know what to expect.

Once your HOA ha its new contracting policy drafted, you may want to consider having an attorney review it to make certain that the contract is fair, but that the HOA’s rights are maximized.

Source: Association Times, Denver Post, HOA-Law.com
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