Management Company Contract

Is it standard or usual to find that contracts between HOAs and their management company appear to be rather slanted toward the management company with the company requiring the HOA to defend, hold harmless, and indemnify the company for just about anything except committing an illegality and breaking a law or statute? As a volunteer, Board Member, and homeowner, I would think that hiring a professional company would provide the HOA with professional services. If in the execution of those services errors are made, the professional company would take responsibility for its own mistakes rather than have the HOA hold them harmless. However, in reality is it the norm that the HOA does indeed hold the management company harmless, will defend the company, and will indemnify the company?

We prepare our own RFPs. In the case of our MC, we prepare our own Financial Operations Manual (FOM) (which deals with the responsibilities of anyone who potentially has access to our funds). When a contract is prepared, our RFP or FOM is converted into a Scope of Service document and incorporated into the contract.

We are finalizing a contract with a new MC now. We are using their standard contract, but incorporating our FOM by reference (where their standard contract only referred to our CC&Rs and Bylaws).

Their standard contract has an indemnification clause (we will hold them harmless for ...) and an additional insurance clause (we will have them added on our insurance policy as an additional insured). Because we think this is double coverage, we have asked them to strike the indemnification clause and accept the additional insured clause only.

They are also in a different state. So we are discussing their dispute resolution and choice of law clauses.

As Tim said, everyone wants to use their own docs, but that shouldn't mean that the terms aren't negotiable. Move on if you have to.

There is an indemnification clause such as you describe, Andy, in our 18-page contract (+ Exhibits) with our Mgmt. Co. (MC). The only change our HOA attorney made to this clause is that the clause only applies to third party claims and not to disputes between our HOA & the MC. Our HOA counsel read this contract very thoroughly and otherwise had several changes, deletions, etc.

I suspect that the reason is that the Board is responsible for the work of the MC. We, with Board action, direct our full-time onsite PM and her Assistant. Our bylaws give our Board the authority to delegate many tasks to an MC, but that does not relieve our Board of responsibility. for that reason, my hunch is that such a clause is common in MC contracts..

The next clause in ours is: except for Willful Misconduct, Gross Negligence, etc.

And, of course, Tim's right; don't agree to anything that isn't what you want or need. And the draft contract will indeed favor the vendor, MC or not.

I believe that NpS' HOA is self-managed and their MC only performs certain offsite functions (I may remember this wrong). But the point is that some HOA s that are very complex (Ours: twin high rises; big budgets) have different needs than other HOAs. The contracts will look very different.

But along with an HOA attorney vetting it if a really big contract, the Board also needs to look it over carefully. Our draft contract, for instance, stated that the PM will conduct a "regular" inspection from the roof to P-3. We changed it to "monthly inspection & report to the Board."