Who Has Final Approval in HOA Contract Negotiations?
When multiple people get involved in contract negotiations with a service provider, the waters become murky. It’s difficult to keep everyone in the loop and get the necessary input, so negotiations can become lengthy trials of patience. Having a single point person makes it easier to clarify the service(s) needed, reach agreement and establish a reporting schedule. However, the HOA Board should retain oversight for reviewing the contract before final approval since the association is held accountable.
It’s not always a question of whether the HOA point person is honest, although it’s possible to have a rogue Board member. Many contracts are confusing because of terminology and service definitions. After the contract is signed, the Board loses a lot of leverage. Thus, the Board needs an opportunity to review the pending contract to ensure that the services and terms listed meet the homeowner association needs.
Most HOA Boards have multiple service and contract agreements, and various Board members manage contracts within their scope of responsibility. Sometimes the point person signs a contract on behalf of the association, and then the Board discovers problems. Perhaps there is a rogue Board member. Or, the point person may have missed a critical piece of information. Establishing contract guidelines can help the Board avoid entering into a contract that is not in the best interest of the association.
There are various ways to maintain control of contracts. Some HOA Boards prohibit any Board member from signing a contract without approval. This is an excellent way to prevent fraudulent behavior within the association. The point person still handles vendor negotiation, but the final contract is presented to the Board for approval.
Another option is to add parameters for specific services, i.e., the point person can sign if it is less than $2500. You may also want to include the scope of work in the parameters. Because vendors often use their own contracts, it’s important to attach the scope of work from the association to avoid misunderstandings.
A third option is to have a management company handle contract negotiation at the Board’s direction. At Wise Property Solutions, we have a variety of local and regional vendors that excel in community service. If you are located in Johnson City, we may have someone within the city limits to service your pool. When it’s more cost-effective to have someone in East Tennessee provide a service to our client associations in Knoxville, Kingsport and Johnson City, we’ll choose a regional vendor. This is also a good way save money while receiving high-quality service from vendors.
Although your HOA Board may prefer to retain contract approval rights, it’s important for all Board members to understand that the point person is the vendor contact. Other Board members may provide input or discuss the scope of work in a meeting. But, you should ensure that any communication to the vendor is through the point person and vice versa. This simplifies the contract process for the vendor, the point person and the HOA Board.
There are many ways to select vendors and handle contract negotiations. Point persons, contract parameters, management company, etc. It’s up to your Board to choose what works best for your homeowner association.
Wise Property Solutions is East Tennessee’s only Accredited Association Management Company (AAMC®). As the region’s leader in community association management, the firm is committed to the industry’s best practices and continuing professional development. Wise Property Solutions’ certified and highly trained property managers empower well-organized and efficient communities. The firm maintains offices in both Knoxville and the Tri-Cities.
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