Being a member of your HOA board means that you are taking an active role in making sure your community runs well. Some of your responsibilities include general property upkeep issues, such as pool service arrangements, lawn maintenance, gate operations, and other various projects. Association projects typically require the approval of HOA board members, and their time is spent reviewing bids, proposals, contracts, hiring vendors, and managing agreements. Learning about and executing these duties add to the already difficult role, especially if you have limited prior experience with such tasks, not to mention the time commitment.
Managing vendor agreements is commonly one of the most challenging parts of the job for HOA board members, and just one misstep can lead to wasted money and/or a job that is incomplete. But, we are here to help provide you with some tips for managing your vendor agreements. This is also an area where having a management company will help you organize and executive projects.
There are four major components to managing vendor agreements. Review each of them and be on your way to a less stressful, more manageable community.
What to Review with the Rest of Your HOA Board:
Because board members are bound by legal mandates in regards to the proper way to accept vendor proposals, consult your state regulations and CC&Rs to adhere to the recommended guidelines. Start by reviewing each complete proposal.
As you review each of the completed vendor proposals, review the details and anticipate questions you may be asked by other board members and possibly even residents. “How much will it cost?” or “How long will it take?” will likely be common questions. If you are asked a question, and you don’t know the answer, make a note and communicate with the vendor in order to provide an answer.
Basic bid solicitations require a general description of the work that needs to be completed, often called a scope of work. This description should also include the relevant number and measurements. For example, if you are planning to install speed bumps in your community, specify the number of speed bumps that need to be installed, a general area where they need to be, and the size of the speed bumps. This way, each vendor can provide an accurate proposal based on your detailed description of the work. Not providing this detailed information could give you bids that vary greatly on their cost or estimate of time and could cause additional issues later on.
There are also specific assurances and licenses that are necessary when reviewing vendor proposals. Certification, licenses, bonds, and insurance that are required by your specific CC&Rs need to be factored in. Also, when the contractor comes to your community to perform the work they’ve been hired to do, an outside contractor may need to be provided with your HOA’s certification for association and management insurance. It’s also important to ask for the contractor’s tax ID number; this information is necessary in order for them to get paid. Make sure this documentation is gathered from each vendor to ensure they maintain proper certifications to perform the work.
As HOA board members, you may consider taking on the role of supervising common area maintenance if you don’t currently work with a homeowners association management company. Each vendor that is new to your community should be asked about their previous experience working with homeowners associations. Consider making a job checklist to help you ensure that all requirements are being met. It may include things like:
– Are they starting the work on time?
– Are they cleaning up after each work session?
– Are they correcting any errors that may be identified, either by the board or the vendor?
– Would you give this vendor a recommendation for projects in the future?
These are important questions to be mindful of when supervising projects.
Finding a Good Contractor:
Now that you’ve received the detailed bids for the work, each bid needs to be reviewed carefully. Making a selection is not a casual responsibility. Some vendor approvals may come based upon a recommendation from the HOA management company or a trustworthy resident. But, it’s your job to practice due diligence and investigate each vendor and proposal properly. However, keep the job in perspective and consider the scope of work that needs to be done, as well as the recommendation.
Finding a contractor that will perform the desired work at a reasonable price can be difficult, so utilize your HOA management company for references. Take a look at online reviews and ask for references to determine if there are any outstanding complaints against a particular vendor. Following the warning signs can save you from dealing with inexperienced, disorganized, or financially compromised contractors. These contractors may never deliver, perform poorly, or not keep to their budgets, rather than provide the quality, in-budget results of professionals.
First impressions can make a big impact, even with contractors. Properly maintained tools and equipment are a good indication of the type of job you may receive. The employees should also look neat and professional and make homeowners feel safe and confident in the work that is provided.
Beware of an exceedingly low bid. Don’t let a low price offer blind you to what may not be there. A bid that is far lower than others may indicate a contractor with less experience doing the actual task at hand or someone who doesn’t intend to finish the job. Or, you may have run into a disreputable contractor who is providing a lower bid in order to get the job and then adds extra fees halfway through the project.
Watch out for strategic bidding practices, such as the ‘limited time offer’. Many states give homeowners three days to cancel a home improvement contract without obligation after signing it as a way to protect you from making a poor, rushed decision. Because small contractors rarely stockpile materials for high-volume projects, there may not be any additional discounts based on ‘bulk’ inventory.
And just because the cost looks right, what about payment options? As a general rule of thumb, don’t use a contractor asking for more than 20% up front. Some projects will require a larger initial payment to cover the cost of materials, such as cabinets and tile. This principle doesn’t apply to materials like roofing and lumber, which contractors typically purchase with at least 30 days to pay.
Last, but not least, don’t select a contractor that allows a cash-only option. This is a huge red flag in regards to limiting your financial recourse should any problems arise, but the contractor is likely not operating a legitimate business with proper documentation, including taxes and insurance.
Reviewing the Contractor’s Insurance:
Because contractors are often hired to do a variety of jobs within the community, ensuring each one has proper insurance is essential. Landscaping, pool maintenance, and common area repairs are going to be performed on a regular basis. Accidents happen, and if someone were to get injured doing their job, it’s important to protect your community from potential lawsuits by each contractor providing its own insurance.
Review the insurance policy of each contractor to make sure it covers potential damages incurred during their job. Also verify that the contract contains a guarantee by the contractor and that their insurance will protect the association’s assets should circumstances arise. This will protect your HOA and relieve them of liability; consult with your HOA management company before hiring any contractor, and they can assist you with verifying that the proper insurance is represented.
In addition, the insurance policy needs to be in place prior to the work being started. Check the date on the policy, and do not allow the contractor to begin prior to that date. Verify the amount of coverage and that the contractor’s name matches the one listed on the policy documents. Because some contractors are known to operate under different names, you may not be covered if this information isn’t accurate.
Protect your community by inspecting all aspects of the contractor’s insurance policy so that you will not be left liable for any damage caused by the contractor.
Choosing a Contractor:
Competition is known to drive down the price, so any bid you get with the competition will be lower than a bid you get without it. Have your HOA management company look into multiple contractors to help you get the best work for your HOA’s budget. Keep track of your expectations with each of your vendors; you should set and require that your standards be met.
Once all of these things are done, you can prepare a comparison chart to be presented to the board, including bids, references, and qualifications. When working with the community management association, they will present this information to the board and provide the necessary recommendations to select the right vendor for the job. Ultimately, the decision is up to you in choosing the best vendor for your community based on all of the evidence gathered. Be sure to send a courtesy letter or email to any vendors you don’t select in order to maintain a professional relationship with them for future projects.
Reviewing and familiarizing yourself with these guidelines will help ensure that you find the right contractor for you whether you’re looking to make updates to your personal home within the HOA or to common area projects commissioned by your HOA’s Board of Directors – facilitating a vendor agreement that works for both sides of the improvement will maximize the quality outcome of the project.