A Guide to Vendor Contracts: Best Practices for HOAs and Property Managers

By: Burt R. Willie - Smith | Knowles

Vendor contracts are essential in managing and operating homeowner associations (HOAs). They help ensure smooth operations for services like landscaping, snow removal, maintenance, insurance, accounting, legal services, and other necessary operations. However, poorly drafted contracts (or no written contract at all) can lead to costly disputes and inefficiencies. Here’s a guide to forming, managing, and enforcing vendor contracts effectively.
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What Is a Contract?
At its core, a contract is an agreement or a "meeting of the minds" between two parties. It consists of three key elements:

• Offer – A proposal to provide goods or services.
• Acceptance – Agreement to the terms of the offer.
• Consideration – The value exchanged by both parties.

​Does a Contract Have to Be in Writing?
While verbal agreements are enforceable in some cases, certain contracts must be in writing under Idaho law. However, it is always recommended to reduce agreements to writing.

Key Contract Provisions to Include
When drafting or reviewing vendor contracts, ensure they include:

• Payment Terms – Who pays whom, how much, and when?
• Scope of Services – Clearly define what the vendor is responsible for.
• Insurance & Indemnity – Ensure vendors have adequate insurance coverage.
• Confidentiality – Protect HOA data and sensitive information.
• Termination Clauses – Define conditions under which the contract can be canceled.
• Dispute Resolution – Include arbitration or mediation clauses to handle conflicts efficiently.

Avoiding Common Contract Pitfalls
Many HOAs make costly mistakes when handling vendor contracts. Common errors include:

• Failing to get contracts in writing
• Not reading the contract before signing
• Assuming new board members can escape prior agreements
• Not securing competitive bids for major projects
• Overpaying vendors upfront
• Not verifying vendor licenses and insurance
• Skipping legal review of contracts

Best Practices for Vendor Selection
To protect the HOA’s interests, and subject to your HOA’s Governing Documents, follow these vendor contract policy suggestions:

• Obtain multiple bids – At least three bids for projects over $10,000.
• Check references and online reviews – Evaluate a vendor’s past performance.
• Verify licensing and insurance – Ensure vendors meet state and local requirements.
• Avoid conflicts of interest – Refrain from hiring vendors with ties to board members.
• Use standardized contract terms – Consider adopting an HOA Vendor Terms & Conditions form.

Final Thoughts
Vendor contracts are the backbone of successful relationships with contractors and vendors serving the HOA. By ensuring contracts are clear, legally sound, and in compliance with Governing Documents, boards can avoid costly disputes and maintain smooth operations. Always consult with an attorney before signing major contracts to safeguard the HOA’s interests.