Running a homeowners association (HOA) is a significant undertaking, especially if your community has a large membership or multiple amenities. From handling maintenance to finances to legal issues to conflict resolution, the board is responsible for overseeing it all. Self-managed HOAs maintain direct control over all facets of the association. However, many associations employ the assistance of a property management company to handle day-to-day operations and serve as a trusted resource for the board.
In doing so, it is essential to have an HOA management contract in place that clearly defines the terms of the agreement as well as responsibilities and expectations of the property manager and the HOA. This agreement should not leave room for interpretation which can become a source of conflict and liability. Kuester Management Group partners with HOAs across Charlotte NC, Huntersville NC, Wilmington NC, Myrtle Beach SC, and Fort Mill SC to develop comprehensive property management contracts aligned with the association’s specific needs. Here are some general guidelines to keep in mind when creating an HOA management agreement.
What Should Be Included in an HOA Management Agreement?
The contract is the foundation for your relationship with the property manager. It details exactly what each party’s role is and serves as a legally binding agreement. Before the board signs any paperwork, it it a good idea to have an attorney review first to confirm that everything is fair, compliant, and enforceable.
The Basics
Legal parties. The management agreement should start with a section that lists who is entering into the agreement and the date. Typically this is the property management company, who may be referred to thereafter as the Agent, and the homeowners association, referred to as the Association.
Duration of the contract. Specify the exact dates when the contract will go into effect, and when it will end. A standard term is one year, after which the agreement can be renewed, extended, or terminated.
Payment and fees. This includes how much the HOA will pay the management company, along with the schedule for those payments. In addition, it should also encompass any additional charges that may occur. For instance, anything the property manager is asked to do outside of the agreed upon scope of services, or for costs related to mailing notices or communications to homeowners, copying records, or dealing with litigation.
Insurance and Liability. It is common to require that the management company have appropriate insurance and liability coverage in place. This protects them in the event of injury, accident, or other claims. There should be language specifying what is covered and what the association is held liable for versus what the property manager is held liable for.
Termination. Under what circumstances can the HOA management company terminate the contract? What about if the HOA wants to terminate it? Determine what these terms are, what process should be followed, how much notice should be given, and if there are any associated fees for ending the contract early.
Scope of Services
This is a major portion of the contract. The HOA wants to ensure that it clearly outlines exactly what is expected of the management company and what their role entails. Often the agreed upon service include things such as administrative tasks, financial management, rule enforcement, vendor management, and member communication. However, each of these areas should be further broken down into specific duties or responsibilities.
Examples of contracted services could be:
- Inspecting the grounds on a set schedule to note maintenance needs, potential hazards, violations, etc.
- Managing vendor contracts and verifying that projects or services are completed as agreed upon.
- Obtaining bids for projects, repairs, or services.
- Assisting the board in developing the annual budget.
- Collecting member dues, following up on delinquencies, and updating financial records.
- Preparing and distributing violation notices based on the association’s governing documents.
- Reconciling financial accounts and generating monthly reports.
- Responding to emergency calls from homeowners.
- Sending out newsletters, meeting notices, or other correspondences.
- Organizing and attending board meetings.
The exact responsibilities are determined by your homeowners association’s needs and preferences. Work with the HOA management company to flesh out these details and decide what the property manager will handle and what the HOA will take care of itself.
The management agreement should also include a section on how changes or amendments to the contract will be made. If the association decides it needs to adjust the level of service in the middle of the contract term, what is the process that should be followed? How will that affect pricing?
Another section that should not be overlooked involves conflict or dispute resolution. If either the Agent or the Association has a problem with the other, how will this be addressed? What steps will be taken if a mutually agreeable solution cannot be reached in a timely manner? What if the complaint involves legal matters? The board should make sure there is a a process for mediation or arbitration in place.
Finalizing the Property Management Agreement
Once the agreement has been created, the board should have its legal team review to check for any gaps, inconsistencies, ambiguity, or potential risks to the association. The time to make clarifications or corrections is before everything is finalized. After that is done, the last section of the contract should be a section for approvals. This should include signatures from the HOA board, the management company, and any witnesses, along with a spot for the date. Both parties should retain signed copies of the agreement for their records and reference.
