Property management companies can help steer HOA boards through the complicated and tedious steps involved in selecting the best vendor.
How to Hire and Fire HOA Vendors
How Important is Choosing the Right HOA Vendor?
Recruiting and hiring new vendor partners for an HOA vendor list is a vital responsibility of the property management company. Choosing vendors means fewer headaches for the HOA and a sense of calm for both the management company and the board that a quality vendor contractor will mean a job well done. On the other hand, without a fully-vetted vendor list, an HOA may be left in the precarious position of hiring less than qualified contractors. In this scenario, property managers must intervene to assist board members in finding the right vendor for the job. It can be a time-consuming endeavor,but it can also save a lot of future headaches and potential legal problems.
The property management company has the ability to introduce its HOAs to vendors with whom they have established long-standing relationships, but choosing a specific vendor / contractor should be done with care, as every HOA has specific needs, and one vendor that would fit a larger community may not be the right choice for a small condo complex. An HOA’s board of directors has a fiduciary duty to conduct business thoughtfully, with the best interest of the community in mind.
Choosing HOA Vendors to Fit the Property
Property managers may oversee several properties, so what process should they follow to select the appropriate vendor for the job? When choosing a vendor, the choice made isn't just a matter of the partner with whom the management company has the best relationship, but the one best suited for the job. As an example, a commercial landscaping contractor accustomed to grooming acres of lawn and trimming dozens of trees would not be an appropriate landscaper for a 14 unit condo complex with no lawn and a handful of trees. Larger contractors require more expansive jobs to cover overhead; smaller companies may have far fewer employees, less equipment, and far less overhead as a result.
This is not to say the smaller company is less qualified to do the work, but many certifications and licenses required for larger communities are not necessary with smaller complexes. At a minimum, however, all vendors should have business licenses and/or insurance coverage as required by law. Should an accident occur with the vendor at fault, the association may be forced to use its own liability insurance, hence the vigilance and essential "checking off" of qualifications before the vendor is hired.
Property Managers: Get the Board Involved
The property management company can help steer the board of directors through the complicated and tedious steps involved in selecting the best vendor, but, before you get started, keep these rules of thumb in mind:
- For larger jobs, such as deferred maintenance projects, obtain 3 bids. If the property manager does not have 3 appropriate contractors for the project on his or her preferred vendor list, then it's time to research. Invite the board of directors to assist; they are valuable assets in determining what is best for their property.
- When you receive an estimate/bid, make sure that what is being offered is what was requested. At times, contractors may be tempted to pad their costs because of ancillary work that they believe could be beneficial (but not necessarily crucial). If the board and property manager believe the additional work is not critical to the project at hand but could be performed at a later date, ask the potential vendor to create a separate bid to be done at a later date. Ask for an expiration date for the bid. If the vendor does not honor a bid within its prescribed timeframe, find another vendor.
- Make sure you check qualifications. If it is a new vendor, ask for references and call the references. Obtain photos of their projects (before and after photos are particularly helpful) and see whether they have received positive reviews online.
- After all the steps above have been followed, the board should schedule a meeting with the vendor. This is particularly important with new vendors, and those whom the HOA will entrust with a large maintenance project. If the vendor is professional, on time, and forthcoming with providing all business references, licenses and insurance, then there is a good chance he will perform to expectations.
Homeowners should be mindful of their CC&Rs regarding contracting independently without board approval. Contractors without the proper business documentation can open the HOA to legal action, but if the work they perform is counter to covenants and restrictions, the aesthetics of the community are undermined. When the board becomes involved after the fact, it could result in the homeowner having to spend more to undo what his contractor has done.
When to Fire an HOA Vendor
Vendor relationships develop over time. Property managers and boards come to count on go-to vendor partners to perform well and at a reasonable price. When relationships sour, it can be for a number of reasons. If a preferred vendor begins to turn out slapdash work, issues estimates past set deadlines, or suddenly starts issuing change orders, if you have an established affiliation, it may time for a talk with your contractor. Reminding them that yours is a long-standing alliance is never a bad idea, but remember that they could be undergoing management changes, financial difficulties, or other business setbacks that affect the quality of their processes as well as their work. This is why it's important to discuss these issues before they destroy a vendor partnership.
If your vendor is fairly new and has left unfinished work, necessitating phone calls and emails for them to return to finish the job, add them to your list to not rehire. Property managers should remind HOA directors with job approval and payment authority that it is appropriate to hold back a final progress payment for a large project if the work is not complete. Once the walk-through is done and the board has done its assessment of work performed according to estimate, the progress payment can be released. It's not appropriate for a vendor to contact a board member directly regarding payment; if the contractor proves to be valuable, the property manager (or the board member contacted) should remind them of the protocol.
It's prudent, albeit time-consuming, for a property manager to check existing vendors' licenses and insurance periodically. If a vendor has supplied, for example, proof of Workers Compensation insurance, but that coverage expires during the course of work, look for another vendor. Even if your vendor does exemplary work, it is never worth sacrificing the financial security of the HOA when he has not done his due diligence as a business owner.