RealManage Insight

5 Essentials for Any Service Contract at your HOA

by Marc Rodriguez, SVP Austin on Dec 15, 2020 8:30:00 AM

As board members of a Homeowners Association, it is your responsibility to ensure that maintenance and security services are provided in the community area. While it is possible for you to hire each service member individually, contracting third-party service providers to handle the work ensures quality service at less cost.However, choosing a third-party contractor for a job should not be a matter of calling for bids and selecting the lowest one; it involves signing a third-party service contract. The HOA typically handles very many service contracts, and any oversight in their writing may lead to massive losses to the association.

Here are a few things to take into consideration when writing service contracts.

1.  Is The Vendor Insured?

It is important to ensure that the vendor is properly insured before getting into a contract with them. Always verify that they have met at least the minimum accepted industry standards of insurance and that they have a certificate of insurance.

This ensures that the association is not liable for any sloppy work done by the contractor, or any injuries on the property during the project.

The vendor should have at least a Worker's Compensation insurance, in case their employee is injured, and a General Liability insurance for you to consider hiring them. Risky projects will require additional forms of insurance based on the risks involved.

As a precaution, ensure that the association is named as an additional insured and a certificate holder. This ensures that you are notified in case of any changes in the contractor's insurance status.

2.  The Vendor and Association Responsibilities

Outlining all the contractor's and association responsibilities reduces conflict between the parties. The responsibilities should outline all that the parties should do to fulfill the contract and timelines for the work and payments. You can also include other clauses like the time and days the contractor can work.

 Any penalties for not honoring the agreement should be included in the contract.

Ensure that the ways for terminating the contract, by any party or by mutual agreement, before project completion are stipulated.

One of the main causes of conflict between the contractors and the association is often compensation. Before the project commences, agree with the contractor on everything, including; when you should pay them, the mode of payment, and even the amount of work to be completed before payment.

3.  How to Resolve Disputes

There are bound to be disputes between you and the contractor, so as you write the service contract, include effective methods to resolve these disputes.

Agreeing on a dispute resolution formula before commencing ensures that all conflict is handled correctly during the contract period.

4.  The Work to Be Done

The work you are hiring the contractor to do should be detailed. Clarifying all the work to be done in the contract ensures that all parties sign the contract with a clear picture of what needs to be done. Pictures, maps, drawings, and anything used to complement the written contract should also be included.

5.  Warranty Details

In case the contractor is offering a warranty for the service provided, all the details of the warranty should be included in the contract. What the contract covers, how long the warranty contract is viable for, and how the contractor is to pay out the warranty should be clearly detailed.

Writing a Comprehensive Service Contract

Given the diverse nature of service contracts, the agreements are often insufficient and mostly lead to disputes between contractors and the Homeowners Association. When writing a service contract, make sure you include the above essentials to avoid future conflict.

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