Tuesday, September 8, 2009

Better think twice before you sign that contract......

As a volunteer board member, you are probably not an expert (even if you think you are) on contracts involving painting, concrete restoration, elevators, roofs, management, accounting, security gates or any of the many projects your association may face. For this reason, experts should be called in such as attorneys, engineers, accountants or other consultants to help in the negotiation process for these types of specialized contracts.

Many times, it isn't what a contract says that creates a problem as much as what it doesn't say. This is especially true when it comes to:


-Liquidated damages for contractor delays

-Indemnification language

-Insurance coverage

Depending on the type of contract, the contractor may provide specifications or an outline of duties and responsibilities. However, for more extensive and expensive projects, an engineer or consultant should e brought in at the planning stages to provide specifications that are then put out to bid.

Be sure to bid out your projects when required by law. All types of association boards MUST obtain competitive bids for the following types of contracts:

1. Any contract that is not to be fully performed within 1 year after it is executed; and

2. Any contract for the purchase, lease or renting of materials or equipment or for the provision of services which requires payment by the association in the aggregate that exceeds 5% of the total annual association budget.

It is important to remember that the board is NOT required to accept the lowest competitive bid received.

The board does NOT have to obtain competitive bids for the following contracts:

1. Contracts with employees of the association;

2. Contracts for an attorney, accountant, architect, community association manager, timeshare management firm, engineer or landscape architect;

3. The business entity with which the association wishes to do business is the only source of supply within the association's county; and

4. The products and services supplied by the contract are needed in an emergency.

If a contractor is requiring half or more than half of the contract sum up front it is a warning sign!! Refusing to allow you to retain a cushion at the end to ensure that the work is completed to your satisfaction is another warning sign.

Beware of the incredible, one-sided, one-page "quick" contract that is presented to you. The only thing it will do is keep your attorney very busy down the road!

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