One of the sessions I attended at the CCAL Community Association Law Conference last week was the Essentials of Community Association Contracts. Entire sessions could surely be filled discussing each kind of contract that community associations commonly enter into, including management agreements, maintenance contracts, and construction contracts, but this course gave a great overview of various considerations for each kind of contract. Here are a few of the considerations that apply to many different types of contracts, and that board and management committee members should keep in mind before signing:
– There are advantages and disadvantages to arbitration clauses. Advantages include lower cost (sometimes) and greater flexibility, and disadvantages include limited discovery and limited grounds for appeal. So, it is important to consider these advantages and disadvantages as they pertain to every situation, and to not simply agree to an arbitration clause.
– Define your terms carefully and clearly, including when the contract will be completed, when payment will be made, when warranties begin to run, etc.
– Be sure that the terms of your contracts, especially management agreements, are consistent with your governing documents. For example, be familiar with any limits on the length of the engagement and the process for terminating the manager or management company that are set forth in your governing documents, and be sure the contract is consistent with these provisions.
– Be sure that you satisfy any necessary preliminary requirements before entering into a contract. For example, before entering into a construction contract, get membership approval and/or zoning approval, if necessary.