Contract with Management Company

Started by TomC14 • 8 replies • 600 views

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TomC14 (Colorado)
Posts: 15

Posted:

We have a one-year contract with our management company.....automatically renewable each year. There is an "out clause", so it can be terminated by either party with proper notice, etc........but is an automatically renewed one-year contract "normal"? What are other approaches used out there?

BillH10 (Texas)
Posts: 1,217

Posted:

Very normal. I have seen two year contracts to provide stability for both parties but most contracts also contain a 30 or 60 day termination clause which renders the one or two year period moot.

TomC14 (Colorado)
Posts: 15

Posted:

Quote:

Posted By BillH10 on 08/10/2019 2:29 PM
Very normal. I have seen two year contracts to provide stability for both parties but most contracts also contain a 30 or 60 day termination clause which renders the one or two year period moot.

Thanks...........I thought that might be the case. The "automatic renewal" concerned me, but the termination clause offsets that.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Our contract has automatically renewed since 2007. I don't see an issue with this unless it goes on too long. In our case, our needs have changed and the contract has never been updated. In addition, we have no way of knowing if we are paying a fair and reasonable fee since we've just let it renew for 12 years and blindly agree to any annual rate increases. We are in the process of sending out an RFP for competitive bids so that we can compare price/services of multiple vendors.

BillH10 (Texas)
Posts: 1,217

Posted:

John makes a good point. We review the contract with the Boards annually, about the time we begin the budget planning cycle. We have a 'what's working/what's not/what might you wish to change' discussion and we share with them any changes to the base contract monthly amount and changes to the schedule which depicts other charges--office supplies, hourly rates for services not included in the contract, etc.

SheliaH (Indiana)
Posts: 6,964

Posted:

John and Bill have given you good advice. When I was on the board and we had a monthly newsletter, we also sent out an annual survey to our homeowners asking them to rate the property manager's performance, and if there was a low rating to explain why. Some of the answers indicated there was a misunderstanding as to what the property manager did vs. the board, so we would clarify that when the results were published.

I've noticed you've asked several questions about property managers, vendors, etc., in other posts. That's fine, but you might also want to see if there's a local chapter of the Community Association Institute in your area. This is a national organization of HOAs, property managers and other vendors who serve HOAs and they have excellent education materials (books, webinars, etc.) on a variety of HOA subjects and best practices. Go to the website and look around - you can purchase some of those materials and learn best practices. The local chapter, if you have one, may even sponsor seminars you can attend in person - a great way to meet other HOA board members and exchange information.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

TomC14 (Colorado)
Posts: 15

Posted:

Quote:

Posted By SheliaH on 08/11/2019 5:40 AM
John and Bill have given you good advice. When I was on the board and we had a monthly newsletter, we also sent out an annual survey to our homeowners asking them to rate the property manager's performance, and if there was a low rating to explain why. Some of the answers indicated there was a misunderstanding as to what the property manager did vs. the board, so we would clarify that when the results were published.

I've noticed you've asked several questions about property managers, vendors, etc., in other posts. That's fine, but you might also want to see if there's a local chapter of the Community Association Institute in your area. This is a national organization of HOAs, property managers and other vendors who serve HOAs and they have excellent education materials (books, webinars, etc.) on a variety of HOA subjects and best practices. Go to the website and look around - you can purchase some of those materials and learn best practices. The local chapter, if you have one, may even sponsor seminars you can attend in person - a great way to meet other HOA board members and exchange information.

I'm currently working through the CAI workshop and the "tool kit" that comes with it. I'm a new board member, with a long background in business management and accounting, now retired. I've read all our governing documents and reviewed our contracts with the management company and our major contractor so I'm in the "discovery mode" right now. The local chapter of CAI is 2 hours away, but I intend to get involved there after I get through the workshop material and finish my due diligence on the financials, reserves, etc. Thanks for the insights.

KerryL1 (California)
Posts: 14,550

Posted:

Kudos to you, Tom, for actively becoming a good director. You're in a really important process and are seeing that there's a lot to learn.

The CAI Toolkit helped me a lot when I was a new director.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By KerryL1 on 08/12/2019 7:26 AM
Kudos to you, Tom, for actively becoming a good director. You're in a really important process and are seeing that there's a lot to learn.

The CAI Toolkit helped me a lot when I was a new director.

When you're ready, you might look at applying to become a Gold Star Community. Great learning experience for me to see how independent professionals assessed our community.

Sikubali jukumu. Read all posts at your own risk.

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