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Tuesday, 02 April 2013 17:00

Review Governing Documents Before Entering Into A Contract

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Whenever an association is renewing or entering into a new contract, there are many issues to consider.  With so much focus on finding the right company at a good price, it is easy to overlook the requirements that may exist in the declaration and bylaws.

Some governing documents require that certain contracts be approved by the members or by a specific percentage of the board (such as 2/3 or 75%).  Other times, documents place limits on the length of term for a contract.  For example, an association’s bylaws may limit contracts to no more than one-year terms.  Such a requirement could impact many possible contracts, such as landscape contracts, management contracts, or security contracts.

Governing documents may also require that contracts contain specific terms allowing for termination of the contract.  For example, the governing documents may require that the contract contain a provision stating that the contract can be terminated with 30 days’ notice.

Finally, some governing documents contain specific requirements on who must sign the contract (such as the President and the Secretary).

Associations should be mindful of these types of requirements and limitations in their governing documents so that, once the association finally finds the right company at the right price, the contract does not get challenged or invalidated over a technicality.  If your association has questions about contracts, please contact Lynn Krupnik at 480-922-9292.

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Additional Info

  • Author: Gary Porter
Read 5806 times Last modified on Monday, 01 September 2014 15:09
Gary Porter

Gary Porter, CPA, RS, PRA, has been working in the community association industry for more than 30 years.  As a CPA, he has performed thousands of association audits, and prepared thousands of association income tax returns.  He has specialized in the preparation of tax exemption applications, and has successfully taken more than 80 associations tax exempt, at a cumulative tax savings of millions of dollars.  He is the primary author of PPC's "Guide to Homeowners Associations" and "Homeowners Association Tax Library," which serve as the principal guides used by CPAs within the community association industry.

As a reserve preparer, he has performed hundreds of reserve studies since 1982, and is author of the 1988 book "The Reserve Study Manual."

Mr. Porter is a past national president of CAI, and a member of the Association of Professional Reserve Analysts.

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