5 Things to Look for In a Contract

(00:00) Speaker: It's time for AMG's 2023 Community Leaders Series Podcast Edition. Over the last three decades, AMG has worked to make the role of community leaders more effective and less of a headache. Seminar topics are a response to what our Executive Board members have requested.

(00:18) Speaker: I think in my experience I've even seen worker's comp be a bigger issue than liability when the landscaper puts out the fine straw or puts out the seed or the fertilizer that he or she has actually paid for that contemporaneously with when they're providing the service.

(00:36) Speaker: And now here's your host and CEO of AMG, Paul K Mengert.

(00:42) Paul K. Mengert: Welcome, everybody. This is the AMG Community Leaders Podcast Series and we're excited to have special guest Danielle Rudisill with us today, who is the AMG Operations Manager for the Charlotte Metro area. Danielle has been with AMG for over 15 years and holds the CMCA designation through the Community Association Institute. She is familiar with both North and South Carolina Community Association procedures and is super experienced with helping community associations negotiate contracts and contract provisions. So, I want to certainly say as a opening to anything talking about contracts, Association Management Group and Paul and Danielle, neither of us are lawyers and we don't express to give any legal advice, and as a matter of fact, we would almost always recommend that clients seek an attorney's review of a contract. But our role is kind of to help expedite and facilitate. And in that process, we have found that a number of provisions that are important to community associations in various agreements they may have with contractors. So, let's jump right in. Danielle, welcome.

(02:02) Danielle Rudisill: Thank you so much for having me.

(02:04) Paul K. Mengert: In your experience working with associations, what are the top 2 or 3 things you would encourage associations when they get a proposed contract from a vendor? What are the top 2 or 3 things they should look for?

(02:18) Danielle Rudisill: Well, they definitely want to take a look at the specifications or the scope of work. It's important to ensure that the scope of work is outlined, is detailed, and outlined in any contract that you have so that everybody has the same understanding of what work is to be completed. Absolutely any warranty provisions and the payment terms.

(02:41) Paul K. Mengert: You mentioned, first of all, specifications, you're talking about basically what it is the vendors going to do for the association, right?

(02:49) Danielle Rudisill: Absolutely.

(02:50) Paul K. Mengert: Talk a little bit about how would that be? How would an association do a good job of developing the specifications to a contract?

(02:59) Danielle Rudisill: Well, I encourage my associations to work with professionals in that field. So, for example, we had a community that had a rather large sinkhole develop under their parking lot. The board of directors, you know, of course, are volunteers. They don't have any experience in that. So, developing that scope of work would have been very difficult for them. We referred them to an engineering firm who came out and actually wrote the scope of work that the various vendors bid on, and then that scope of work was included in the contract.

(03:33) Paul K. Mengert: That makes good sense. I've heard that sometimes the material suppliers or manufacturers reps will help do that. Have you found some success with that?

(03:44) Danielle Rudisill: Oh, absolutely. Depending on what you're looking for, there's a wide variety of professionals you can work with from, as you mentioned, material reps, engineers and sometimes even the attorney has recommendations on different people that you can turn to who have an area of expertise for what you're looking for. I know that CAI also has some great resources for developing a scope of work, for a contract for recurring services like landscaping or pool monitoring and systems.

(04:17) Paul K. Mengert: Right, right, right.

(04:18) Paul K. Mengert: Well, very helpful information. Danielle, we're going to go to one of our Community Leader Series newsbreaks, and we'll be right back to discuss other contract provisions that community leaders should be looking for.

(04:35) Speaker: And now it's time for your HOA Solutions Today newsbreak.

(04:39) Newsbreak: A neighborhood in Yukon, Oklahoma, is grappling with a rough road situation after a construction crew repeatedly disregarded their community rules. The gated neighborhood located off Route 66 near Sierra Road and comprising nearly 200 homes, has been dealing with the aftermath of large construction trucks driving through its streets. The construction company allegedly used a fire hydrant near the entrance to access water for their worksite. To reach the site, the company's trucks repeatedly passed through the neighborhood, despite the presence of a prominent sign at the entrance, clearly stating no large trucks allowed. The community's residents have long struggled with this issue as the construction vehicles breached the neighborhood's peace and damaged the roads. In response to the ongoing problem, homeowners have taken action by getting the approval of their HOA for a specific fee targeting the drivers of these large trucks. According to the newly established policy each time a construction truck enters the neighborhood against the rules, the offending party is liable to pay a fine of up to $500. Seeking accountability and compensation for the damage caused, homeowners are urging the construction company to bear the responsibility for each trip they made through the community. As the construction trucks continue to traverse the neighborhood when the gate is opened, a financial burden on the construction company could significantly escalate. The situation has ignited tension between the community and the construction company, sparking discussions about respecting neighborhood guidelines and safeguarding the well-being of residents. As the conflict unfolds, residents are keen to find a solution that upholds the neighborhood's integrity while encouraging responsible practices from businesses operating in the vicinity.

(06:15) Paul K. Mengert: We're back. I'm Paul K. Mengert, and I'm here today with Danielle Rudisill discussing things to look for in association service contracts. Danielle, you've outlined a few things. I know there are a lot more. Give us a few more things you would suggest associations be on the lookout for.

(06:34) Danielle Rudisill: Well, you definitely want to review the specifications as they relate to the insurance provisions that the vendors will be required to maintain for the protection of the association and any cancellation provisions as well.

(06:49) Paul K. Mengert: So, under the insurance, what would you particularly be, you know, what would be the first thing you'd be like on the lookout for with insurance?

(06:58) Danielle Rudisill: Well, I definitely want to see that they have liability insurance. You know, you want to make sure that they have coverage so that if there are, if there's any damage on the part of the vendor, that their insurance is sufficient to cover those damages. The insurance requirements for a vendor who is maybe working in, a on a very small, isolated project would be very different than one where if you had a large condominium project, they're working on the HVAC system that's on the roof. So, you want to, you know, pay attention to the insurance provisions as they relate to what the vendor is doing and the size and scope of the project that they're working on. And if it's a recurring project, you definitely want to make sure that they have sufficient insurance because as they're on your property on a recurring basis, there's more opportunity for those liability issues to come up.

(07:52) Paul K. Mengert: Now I noticed that you didn't mention worker's comp. Is that is that also something that you would find just to be absolutely vital?

(08:02) Danielle Rudisill: Absolutely. And you're absolutely right. So, the first thing that we look for is liability insurance. The second thing that we're going to look for is workman's compensation. You want to ensure that the workers are protected while they're on your property. And it is the vendor's responsibility to do that. So, you want to make sure that the workers’ compensation is part of their insurance package and that it's sufficient to cover the work that the workers are doing.

(08:24) Paul K. Mengert: Right. And just broadly speaking, AMG's position would be don't buy any contractor giving you the reasons why they don't need to have worker's comp. They absolutely do need to have worker's comp. And I think in my experience, I've even seen worker's comp be a bigger issue than liability, not because it necessarily is a bigger issue, but it's harder to get and it's more expensive. And a lot of times small contractors will try to give you a song and dance of why they don't need it. AMG's position, and I think the industry leaders across the country, you know, are firmly in our camp that associations should just never take the risk of hiring a vendor without worker's comp, because even if they're not required by the state and in both North and South Carolina, there may be requirements that if you have very few employees, like 1 or 2, it might not be required by state law, but it's still required for good business practices because if somebody gets hurt on the property, has a physical, one of the workers sustains a physical injury on the property and the vendor doesn't have worker's comp, guess what they're coming back against the association. And you know, sadly, Danielle and I have both been involved in situations where workers have been seriously injured, and, you know, we've seen tens of thousands, even hundreds of thousands of dollars of cost where a worker is seriously injured. So, it's, we're unfortunately involved in some dangerous tasks with heavy equipment and sometimes up on top of buildings. So, there is a risk of people being injured. And of course, the fear is that they can come back against the, you know, all of the community members. So, a board, a board member never wants to take the risk of subjecting his or her neighbors to the expense of injury of a contractor.

(10:26) Danielle Rudisill: Absolutely.

(10:27) Paul K. Mengert: Are there some other provisions that that also come to mind? I know you mentioned the cancellation. What do you like to see with the cancellation?

(10:36) Danielle Rudisill: Well, you know, on the part of the association, I like to see a cancellation provision that allows them to terminate the agreement within, you know, with a specified number of days’ notice. And also, you know, a provision that states that they can do that with or without cause, you know, sometimes when you're looking at the terms of a of a contract, it can be challenging to say, well, was this specific term fulfilled to the satisfaction of the association? And, you know, that can be a somewhat subjective concept. But if the association has the ability to cancel without cause with a specified number of days’ notice, you know, you really take that that issue off the table because sometimes it just, you know, it's no longer a beneficial partnership between the two companies.

(11:22) Paul K. Mengert: Right. And one of the things that I've seen some associations do successfully, if they can't negotiate an agreement where it can just be, you know, they have the right to cancel it for any reason, sometimes I've seen them say that they can cancel it if, in the opinion of the association's expert, whether that be architect, engineer, arborist or whatever that might be, if in the Association's expert's opinion, the vendor's not fulfilling the contract, it can be cancelled. A more middle of the road provision would be something more like you see in some arbitration where each side picks an expert and the two experts pick a third expert and the third of them, the three of them agree. But I've just found many times in negotiating with vendors that they'll just accept the association's expert. So that would be that'd be the way I would suggest associations go in the event they need to agree to anything other than just can cancel for any reason. Now, of course, also associations like to look at what is it going to cost if I cancel because if the vendor has already done more work than they've been paid for, usually there has to be a provision, you know, to pay up for the work that's already been completed.

(12:45) Danielle Rudisill: Absolutely. And that's something you'll see oftentimes in a landscape agreement because the work that they are completing over a 12-month period isn't, you know, equal over 12 months. But they'll allow the association to pay an equal installments. I really like to see in that situation a schedule outlined in the contract which specifies each month and the percentage of the contract that it represents. So, you know, January's 8%, in February is 3%. And then as you get to March and April, it's 10%, 20% and so on. And it's nice to see that outline in the contract because again, we're not this isn't subjective and them saying, well, we've done XYZ things, but and so that's what percentage is represented there. It's outlined from the very beginning and there are a lot of resources that you can look to, whether it's CAI or other landscape companies, you know, vendors in that field that can help design a schedule that makes sense for both the landscaper and the association for an example.

(13:45) Paul K. Mengert: Well, perfect. Hold that thought. We'll talk more about payment terms when we come back from our HOA Community Association newsbreak.

(13:55) Speaker: And here's another HOA Solutions Today newsbreak.

(13:58) Newsbreak: High rise condominiums in Florida are having financial hardships as new structural mandates and soaring insurance costs take a toll on their budgets. Recently, individual condo homeowners with Citizens Property Insurance received a jolt when they were mandated to obtain flood insurance coverage for their units, regardless of being as high as ten stories above ground. The requirement for Citizens Condo Flood Insurance was passed during last year's second Legislative Special Session on property insurance. A spokesperson for Citizens explained that the separate flood insurance measure aims to mitigate potential litigation disputes between wind and flood damage in future storms. The state backed insurer now oversees just under 1.2 million policies. For condo owners this new mandate means added expenses further burdening their finances. The increase of flood insurance costs has been noticeable, with one high rise HOA board member stating that their building’s flood insurance premiums surged by 14%, rising from $97,000 to $110,000 between 2021 and 2022. Additionally, their property insurance premiums skyrocketed by a staggering 77%, surging from $106,000 to $187,000 during the same period. The Surfside Condo collapse tragedy in 2021, which claimed nearly 100 lives, triggered Florida lawmakers to pass Senate Bill 4D. This bill now requires milestone inspections for condominiums, ensuring safety measures are in place. Furthermore, it mandates that each association maintains sufficient reserves to cover any necessary repairs identified during the inspections. Amid these challenges, high rise condo communities in Florida are navigating a precarious financial landscape while prioritizing the safety and well-being of their residents. The ongoing efforts to comply with the new mandates and manage escalating insurance costs underscore the urgency to address the complexities of high rise living in the state's dynamic environment.

(15:59) Paul K. Mengert: Welcome back, folks. I'm Paul K. Mengert here with Danielle Rudisill discussing things to look for in community association contracts. Danielle is the Charlotte area Operations Manager for AMG and we're certainly pleased to have you with us today. Danielle, I know we kind of cut you off talking a little bit about payment terms. Talk a little bit more about how you want to develop payment terms in a community association service contract.

(16:28) Danielle Rudisill: Well, you certainly want to understand what percentage of the work is represented by each month so that you know, in the case that you are canceling early, then everybody understands what work has been paid for and what work hasn't. But in addition to that, it's important to note the due dates for each of the payments, if it's a recurring service contract, and the amount of time that kind of the grace period. So, AMG operates on a standard kind of 30 days. So, if the installment is due on the 1st, the association has until the 30th to pay it without any penalty. So that's a that's an important part to understand is when those payments are due and what the grace period is for receipt.

(17:12) Paul K. Mengert: Sure. And I know different people have different ideas with this. One of the things that I have found works really well for community associations with landscaping particularly, is to actually create the schedule such that when the landscaper puts out the pine straw or puts out the seed or the fertilizer, that he or she is actually paid for that contemporaneously with when they're providing the service. I've just found that you tend to get more fertilizer and more seed if you pay for it when it's put out rather than the landscaper having already been paid for that on a 12-month amortization or whether he maybe he's not going to be paid for it for another month or two. I just feel like our clients get more if you pay for things when the service is provided. Not that it's required, I know there are upsides and downsides to that, but that's would be a point for me that I think you get better service paying as you go. Do you have you had any particular experience with that?

(18:16) Danielle Rudisill: Oh, absolutely. I have a community that pays for their mulch installation, it's part of the contract and the amount of that mulch installation is defined by the contract, but it's paid for at the time that it's installed. Certainly, that's something that the association has to be aware of and has to prepare for from a budget perspective. This is a large community of more than 200 townhomes, so as you can imagine, the mulch installation is around $20,000 to $30,000 depending on how deep they make it.

(18:45) Paul K. Mengert: It's not always, but usually one of the kind of competitive advantages that an association has in contracting is usually they have the money. I mean, not always, but usually they have the money. So, paying when they have received the service rather than making the contractor wait, you know, I've found that you can negotiate better prices if you can turn around quick payment sometimes. So, you know, of course there you need to jump through all the administrative hoops on getting the payment out. But those who pay fast sometimes get better service for lower prices.

(19:21) Danielle Rudisill: Well, absolutely. And I find that because the vendor knows that the association is going to pay for the entire installation at the time of service, they tend to get their service earlier than other clients who they may have amortized it over the year, but now they have the vendor has this large upfront cost.

(19:43) Paul K. Mengert: Yeah, perfect. I think this is good guidance. Thank you, Danielle. We're going to go to our final newsbreak today.

(19:51) Speaker: And now our final HOA Solutions Today newsbreak.

(19:56) Newsbreak: Scottsdale, Arizona, is taking significant strides towards water conservation with a new initiative encouraging residents and businesses to skip overseeding this fall. As part of the effort, one proactive HOA took the lead last season and achieved remarkable success. In the past, homeowners and HOAs traditionally overseeded their lawns in September and October. However, last year, a Scottsdale HOA made a bold decision to deviate from the norm and abstained from overseeding. The outcomes were astonishing, as the community successfully saved an impressive 1.5 million gallons of water. Beyond the financial benefits reaped by the HOA, the decision to skip overseeding also made a substantial contribution to environmental conservation. Scottsdale water highlights that approximately 70% of residential water usage is dedicated to outdoor activities, making timely water saving strategies critical. The HOA intends to continue to forgo overseeding in subsequent seasons, championing water conservation and their community. In alignment with this proactive stance Scottsdale Parks and Recreation is leading by example and committing to reduce overseeding in the city's parks. Their aim is to inspire other HOAs to follow suit and collectively contribute to the city's water conservation efforts. By adopting these sustainable practices, Scottsdale residents and organizations are playing an active role in preserving the region's precious water resources. With water conservation becoming increasingly critical, the communities’ united efforts serve as a significant step towards a more sustainable future.

(21:32) Paul K. Mengert: We're back, everyone. And as we close out this edition of HOA Community Leaders Series Podcast Edition, I think there are a few important things to remember, and I'm going to give my important things to remember and then ask Danielle to give hers. But first, I want to say thank you for joining us for this and other episodes of our Community Leaders Podcast Series. First of all, I want to remind our community leaders of the importance of having a contract reviewed by the community association attorney. Often this cost very little, and I know when associations have had contracting issues, those that have had the attorney involved on the front end are truly very appreciative of a few words that the attorney might add or delete from an agreement that can make it much more favorable to our client. Secondly, I want to remind everybody that Paul and Danielle and AMG are not attorneys, and we're not here to give you legal advice on contracting. We're just talking about practical advice in negotiating arrangements with vendors from a practical standpoint. And for that I would refer you to a guide that AMG has that lists a number of contract provisions, including those that Danielle has discussed today, or if you can't find it otherwise, ask your community association manager for a list of contract provisions to consider. Or of course, always feel free to discuss those with your community association lawyer. So that's kind of Paul's wrap up from this podcast. Danielle, would you have some final words?

(23:16) Danielle Rudisill: You know, again, to your point, I think it's important that you always ensure that you're having your contracts reviewed by an attorney and, you know, depend on the professionals in those areas that can help you with these various provisions based on their experience, because they're the experts.

(23:34) Paul K. Mengert: Excellent. Well, thank you again for joining us. And thank you, everyone, for listening to this episode. And a special thank you to AMG Director of Operations in Charlotte, Danielle Rudisill, for speaking with us on the five things to look for in an HOA Community Association contract. I'm Paul K. Mengert, your host for the 2023 AMG Community Leaders Series Podcast Edition. If you would like to explore more of our podcast episodes or access additional 2023 Community Leaders Series content, please visit HOACommunityLeaders.com.

(24:11) Speaker: Thanks for listening to 2023 AMG's Community Leaders Series Podcast Edition. To find more information on this episode, please visit HOACommunityLeaders.com. This podcast is a production of BG Ad Group.

(24:26) Speaker: All rights reserved.

• A reminder to our community leaders of the importance of having a contract reviewed by the community association attorney - often this cost is very little, and if there are contracting issues, those that have had the attorney involved on the front end are truly very appreciative of a few words that the attorney might add or delete from an agreement that can make it much more favorable to the client.

• AMG is not an attorney, this is some practical advice in negotiating arrangements with vendors from a practical standpoint, and you can also refer to the guide that AMG has that lists a number of contract provisions.

• Depend on the professionals in those areas that can help you with these various provisions based on their experience, because they're the experts.

Yukon HOA at Odds with Construction Company

A neighborhood in Yukon, Oklahoma is grappling with a rough road situation after a construction crew repeatedly disregarded their community rules. The gated neighborhood, located off Route 66 near Sara Road and comprising nearly 200 homes, has been dealing with the aftermath of large construction trucks driving through its streets. The construction company allegedly used a fire hydrant near the entrance to access water for their worksite. To reach the site, the company's trucks repeatedly passed through the neighborhood, despite the presence of a prominent sign at the entrance clearly stating, "No large trucks allowed." The community's residents have long struggled with this issue, as the construction vehicles breach the neighborhood's peace and damage the roads. In response to the ongoing problem, homeowners have taken action by getting the approval of their HOA for a specific fee targeting the drivers of these large trucks. According to the newly established policy, each time a construction truck enters the neighborhood against the rules, the offending party is liable to pay a fine of up to $500. Seeking accountability and compensation for the damage caused, homeowners are urging the construction company to bear the responsibility for each trip they made through the community. As the construction trucks continue to traverse the neighborhood when the gate is opened, the financial burden on the construction company could significantly escalate. The situation has ignited tension between the community and the construction company, sparking discussions about respecting neighborhood guidelines and safeguarding the well-being of residents. As the conflict unfolds, residents are keen to find a resolution that upholds the neighborhood's integrity while encouraging responsible practices from businesses operating in the vicinity.

Florida high-rise condo owners feel financial pinch with rising HOA fees and insurance costs

High-rise condominiums in Florida are having financial hardships as new structural mandates and soaring insurance costs take a toll on their budgets. Recently, individual condo homeowners with Citizens Property Insurance received a jolt when they were mandated to obtain flood coverage for their units, regardless of being as high as 10 stories above ground. The requirement for Citizens’ condo flood insurance was passed during last year's second legislative special session on property insurance. A spokesperson for Citizens explained that the separate flood insurance measure aims to mitigate potential litigation disputes between wind and flood damage in future storms. The state-backed insurer now oversees just under 1.2 million policies. For condo homeowners, this new mandate means added expenses, further burdening their finances. The increase in flood coverage costs has been noticeable, with one high-rise HOA board member stating that their building's flood insurance premium surged by 14%, rising from $97,000 to $110,000 between 2021 and 2022. Additionally, their property insurance premiums skyrocketed by a staggering 77%, surging from $106,000 to $187,000 during the same period. The Surfside Condo Collapse tragedy in 2021, which claimed nearly 100 lives, triggered Florida lawmakers to pass Senate Bill 4D. This bill now requires milestone inspections for condominiums, ensuring safety measures are in place. Furthermore, it mandates that each association maintains sufficient reserves to cover any necessary repairs identified during the inspections. Amid these challenges, high-rise condo communities in Florida are navigating a precarious financial landscape while prioritizing the safety and well-being of their residents. The ongoing efforts to comply with new mandates and manage escalating insurance costs underscore the urgency to address the complexities of high-rise living in the state's dynamic environment.

Scottsdale Homeowners Association Tests Out Not Overseeding and Saw Major Benefits

Scottsdale, Arizona, is taking significant strides towards water conservation with a new initiative encouraging residents and businesses to skip overseeding this fall. As part of this effort, one proactive HOA took the lead last season and achieved remarkable success. In the past, homeowners and HOAs traditionally overseeded their lawns in September and October. However, last year, a Scottsdale HOA made a bold decision to deviate from the norm and abstain from overseeding. The outcomes were astounding, as the community successfully saved an impressive 1.5 million gallons of water. Beyond the financial benefits reaped by the HOA, the decision to skip overseeding also made a substantial contribution to environmental conservation. Scottsdale Water highlights that approximately 70% of residential water usage is dedicated to outdoor activities, making timely water-saving strategies critical. The HOA intends to continue to forego overseeding in subsequent seasons, championing water conservation in their community. In alignment with this proactive stance, Scottsdale Parks and Recreation is leading by example and committing to reduce overseeding in the city's parks. Their aim is to inspire other HOAs to follow suit and collectively contribute to the city's water conservation efforts. By adopting these sustainable practices, Scottsdale residents and organizations are playing an active role in preserving the region's precious water resources. With water conservation becoming increasingly critical, the community's united efforts serve as a significant step towards a more sustainable future.