Firing HOA Vendors | How to End Contractual Agreements
The primary purpose of an HOA is to manage, maintain, and repair common areas. This often requires contracts with 3rd party vendors for services such as landscaping, plumbing, and painting. Vendor contracts are a large responsibility of HOA boards. While board members cycle off, the signed vendor contracts remain, leaving new board members with limited options for firing poorly performing vendors. Firing HOA vendors is a possible but rather complex process. Here are a few steps for boards unhappy with, and wanting to end, contractual agreements with vendors.
Try Improving Vendor Communication
When an HOA board and association members become unhappy with a vendor, there is a chance that what the HOA expects—and what the vendor thinks is acceptable—are two entirely different things. After all, the vendor contract was probably agreed to by a different board. Try communicating with the vendor to review expectations and service performance before taking legal action. Better communication and understanding on both sides may lead to necessary improvements and changes.
Review the Contract
For a vendor contract to be valid and enforceable, it must have what lawyers call "essential elements of contract" in place. The essential elements are defined by state law and address such matters as work specifications and the service agreement.
Ask your legal counsel to review the contract for a termination provision. Such a provision may allow for termination with cause due to poor performance. An ideal contract allows for termination without cause, with 30 days prior notice.
Document Vendor Performance
Without mutual assent, terminating a valid vendor contract isn't easy. Documentation of a vendor's poor performance is an association's best defense in the event of a vendor lawsuit. Should a vendor sue an association for breach of contract, the association is in a better position to counter sue, using documented proof including photos, videos, along with dates and times.
It is important that those serving on the board understand the legal and financial implications of vendor contracts. Boards can take a more proactive approach to prevent future problems with vendor contracts with the following steps:
1. Detailing contract specifications, such as terms of payment, the scope of work, and steps necessary to alter, amend, or terminate the contract.
2. Limit contracts to one-year terms and avoid automatic renewal. Upon the fulfillment of the one year term, consider a month-to-month contract, depending upon the association's satisfaction with a vendor's performance.
3. Confirm a vendor's insurance and license information. Don't assume the vendor has these necessary items; demand proof before signing any contracts.
HOA board members have important decisions to make, they are volunteers, and they have their own careers and personal lives. By implementing these 6 tips on preparing HOA vendor bids and evaluating responses, the board will avoid future stress and time dealing with frustrating vendor contracts.
Seeking the advice of the association's legal counsel for vendor contracts is always a good idea. Contracts are binding documents that boards must take seriously. Legal input regarding contract specifics and possible ramifications help to provide the board, and association members, with a better peace-of-mind when it comes to vendor management.
HOA members deserve to enjoy access to common areas that are well maintained and safe. When a vendor fails to provide service as outlined in the contract, board members must make changes. At RealManage, our professional team understands the challenges HOA boards face in dealing with subpar vendors.
As an HOA and condominium property management company, we provide guidance to help boards foster great vendor relationships. To learn more about RealManage and how we can help your board to create a successful association, contact us today.