How to Successfully Enter into Contracts with Vendors

Almost every association employs vendors for services in their community. Whether it’s a landscaping, pool service, or maintenance company, almost every association will need to negotiate and enter into contracts with vendors. It is imperative that the board not only choose the right vendor for the job but also make sure they enter into contracts that are beneficial to the association.

When you are looking for a vendor, pay attention to reviews and talk to current and past clients to get as much information about the vendor. Additionally, check with the Better Business Bureau or other accrediting organization to review their rating.

Once you’ve found the appropriate vendor, review their contract for services. This is an important step. Unfortunately, many associations do not really review, much less negotiate, contracts. It sounds elementary, but boards must read the contract and ask for the terms and provisions that they want included. Be specific and ask for what you want. The next step is to get the contract to the association legal counsel for review. This will cost the association a few hundred dollars, which is money well spent rather than having to involve the attorney after the contract has been signed and a problem has arisen.

When reviewing the contract, make sure that the statements and representations contained in it are correct and that the association has the authority and ability to make those representations. Confirm authority in the governing documents for the association. It’s important to ask the vendor to indemnify the association for any damages caused by their work. In addition, depending on the work being done, you should ask the vendor to carry a certain amount of liability insurance while they are working on association property.

Steer clear from signing long-term contracts because industries change quickly. A three, five, or seven-year term can feel like an eternity. Pay particular attention to deadlines and timeframes. Mark these important dates on a calendar for reference. Also, beware of long-term auto-renewal provisions. If you have a vendor not performing, the last thing you want to do is miss the deadline to terminate a contract and be left using the company for another term because of an auto-renewal provision.

If you do have to terminate a contract, make sure you pay attention to the termination provisions and follow them. If you need to send a notice 30 days before the termination date by certified mail, make sure you do so. Contract negotiation and execution are very important parts of a successful vendor relationship. It seems simple, but it is so important. Take the time to review contracts, ask specifically for what the associations wants, and it should be the start of a successful long-term relationship.

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