Q: We have taken control of our large HOA from the developer. We have yet to hire a property manager. We have a stack of contracts with vendors and we do not know what to do with them or which vendors we can terminate. What is your suggestion on how we should handle this?
A: As you mention, a qualified property manager will be able to manage your contracts and relationships with vendors. In the interim, I would suggest that the new Board appoint a small committee to review each of the contracts with the association’s legal counsel. Obviously, the price charged by each vendor is an important consideration, but you also want to pay close attention to the renewal and termination provisions. If the contract automatically renews, you want to flag the renewal dates so that the association avoids getting stuck with a vendor you are not happy with. Further, if the association needs to terminate in the middle of an agreement, there could be an expensive termination fee. Also, the Board or committee should highlight which contracts and services are subjective to competitive bid. Certain types of contracts must go out for bid if it involves the association spending more than 10 percent of the association’s annual budget. The Board does not have to choose the lowest bid, and going with the cheapest option is not always the best for the community. Finally, the association should make sure that each vendor is licensed and contractually obligated to provide adequate insurance coverage. If the association hires a vendor that is not qualified or insured and performs in a negligent manner, the association could be responsible for any damage or injuries.