Management Contracts for HOAs – What is Typically Included

Items Commonly Addressed in Management Contracts 

or Employment Agreements / Job Descriptions

Note: The following items will not apply to all management contracts and situations. Some items will be more applicable to management company contracts.

A. Clear Designation of Parties

1. Name of corporate / personal entities

2. Disclosure of any management relationship with developer

3. Disclosure of any management relationship with subcontractors

4. Appointment of board liaison to management

B. Term

1. Length of term

2. Automatic renewals

3. Cancellation with or without cause

4. 30 / 60 / 90 day notice of cancellation

5. Corrective provisions

C. Compensation

1. Specified contract fees or employee salary and benefits

2. Extra services or expenses to be charged separately and how much

3. When payment is expected

D. Association Governing Documents

1. Management responsibility for knowledge of the Master Deed / CC&Rs / Declaration, bylaws, rules and regulations, and architectural standards of the association

2. Responsibility for enforcing document provisions

3. Responsibility for complying with Federal, State, and Municipal requirements

E. Professional Responsibilities

1. Responsibility for acting as liaison to attorneys, accountants, engineers, insurance brokers, and other professional advisors

2. Circumstances under which management activities cease and other professionals are contracted

3. Stipulation for management to act in a reasonable manner exercising proper business judgment

4. Appointment of management as agent

F. Annual Budget / Audit

1. Preparation of annual budget

2. Obligation of management to work with independent CPA selected by board to conduct annual audit

3. Whether or not an audit will be conducted upon termination and, if so, who will pay for it

G. Accounting

1. Basis for accounting – cash, accrual, combination

2. Collection of fees

3. Notification of delinquent owners

4. Procedures beyond first notification of delinquent owners, including the circumstances under which legal counsel is used

5. Determination of legal counsel

6. Frequency of production for delinquency lists

7. Ability of management’s computer system to follow association’s collection policy

8. Obligation of management to produce a year-end trial balance

9. Compliance with applicable tax laws and regulations

H. Deposit of Funds

1. What types of accounts

2. What funds can be commingled, if any

3. Approval of bank

4. Whose names are on accounts

Common Management Provisions

I. Disbursements

1. Limitations on amount management may spend, without prior approval, in normal circumstances

2. Limitations on amount management may spend, without prior approval, in emergency circumstances

3. Authority of management to pay:

a. Employee salaries

b. Contractors

c. Taxes

d. Insurance premiums

e. Replacement fund deposits

f. Operating expenses

4. Review of invoices

a. Level of investigation required

b. Forms to be filed by management indicating approval of invoices for payment

5. Under what circumstances management will advance monies, if any

J. Fiscal Responsibility

1. Who is authorized to sign checks

2. How many signatures are required for what amounts

K. Investment of Association Monies

1. Compliance with association policies and procedures concerning investment of association monies

2. Procedures for investment decisions

3. Who investigates and decides on investment alternatives

L. Financial Records

1. Bank statements

2. General ledger reports

3. Delinquent account records

4. Investment records

5. Replacement fund records

6. Escrow fund records

7. Cash flow records

8. Periodic financial reports

9. Annual audit reports

10. Who receives what reports and how often

M.   Files and Office of the Association

1. Responsibility for ownership record changes

2. Custody of original association records

3. Form for acknowledging receipt of records from former management

4. Requirements for return of records upon termination of management

5. Association access to files stored by management

6. Facilities available for on-site manager / staff

7. Responsibility for association office upkeep

8. Level of cleanliness for association office

9. Office supplies and equipment

10. Ownership and responsibility for computer software

N. Association Insurance Program

1. Responsibility regarding review of association insurance coverage

2. Responsibility in the management of claims

3. When the board is to be advised of issues regarding insurance

4. Extent of management’s direct communication with insurance agent

5. Who determines adequate insurance coverages

O. Common Element / Area Maintenance

1. Responsibility for receiving and recording common element/ area service requests or complaints

2. Responsibility for site inspections

3. Frequency of site inspections

4. Requirements for site inspections

5. Responsibility for maintaining lists of contractors

a. Number of contractor names to maintain

b. Types of contractor names to maintain

6. Responsibility for writing bid specifications for each maintenance contractor

7. Responsibility for soliciting bids prior to expiration of an existing maintenance contract

8. Responsibility for development of preventive maintenance plan

P. Services to be Provided at Meetings

1. Who prepares agenda

2. Who prepares minutes

3. Who notifies owners of annual meeting

4. Who prepares proxies and ballots

5. Who counts votes at election

6. Information routinely provided by management prior to regular meetings

7. Time limits on management attendance at meetings

8. Management attendance at annual meetings

9. Secretarial services provided by management

10. Responsibility regarding committees

Q. Contractors / Employees

1. Who hires a contractor / employee

2. What names appear on contracts

3. Who can cancel a contract or terminate an employee and under what circumstances

4. Type of personnel from management company who will service the management contract

5. Number of full-time and part-time workers on site and when

6. Who carries workers’ compensation insurance for employees

R. Communication with Owners and Residents

1. Management’s responsibility to maintain a business-like relationship with all owners and communicate with them in a timely manner

2. Responsibility for informing residents of rules

3. Responsibility for informing residents of rules violations

4. Responsibility for production of newsletters

5. Responsibility for distribution of newsletters

S. Emergencies

  1. Management availability for emergency response

T. Locations

1. Distance from association site that management will maintain its offices

U. Manager Stipulations

1. Specification of off-site or on-site manager

2. Prohibition on hiring of company manager as an employee for a specified time period after completion of contract

3. Requirement for training, if any, and who pays for it

4. Manager’s personnel benefits, including holidays, sick days

5. Coverage during manager’s absence

6. How often the company may change managers

V. Indemnification of Parties

1. Indemnification of management

2. Indemnification of association

W. Insurance Coverage for Parties

1. Purchase of fidelity insurance and the terms under which it is carried

2. Purchase of liability insurance

X. Notices

Provisions for how notices are given, when they are effective, and where they are sent

YSuccessors and Assigns

Provisions for right to assign the contract to another; what persons / entities are bound by it; legal responsibility of persons who become successors or assigns

Z.  Captions

Provision that headings of each paragraph are not part of the paragraph and do not constitute content of the paragraph

  1. Definitions

Provision that words are as defined within the contract or agreement

  1. Severability

Provision that if any separate provision is deemed invalid, the rest of the contract or agreement still holds

  1. Applicable Law

Provision regarding which state statutes apply regarding interpretation and enforcement of provisions

  1. Entire Obligation

Provision that the written, signed contract or employment agreement constitutes the entire agreement between the parties

Provision that no other correspondence, communication, or documents are binding unless they are expressly referred to in the contract or agreement

  1. Counterparts

Provision that a copy of contract / agreement and the original are both originals

  1. Arbitration

Provision for handling contract / agreement disputes by means of arbitration or alternative dispute resolution as opposed to litigation

provided by CAI –