Rebid HOA manager
Is there a best practice as far as how often the HOA manager should be put out for bid?
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Dale,
Management contracts typically have a one-year term and automatically renew unless terminated or renegotiated by the board of directors. They are also normally the largest single expenditure in the organization’s operating budget. The board has a fiscal responsibility to act prudently in the expenditure of the association’s financial resources. While I’m no fan of any management company in this state, it’s up to the board to determine what they believe to be the appropriate use of the association’s resources. Unfortunately, most association boards do not do a sufficient and through review of the actual boiler plate of the management contract that binds them to cost and expenses that are totally unreasonable and surely not in any way in the best interest of the community as a whole, These contracts are written to provide the management company the most financial return for doing the least amount of work. While the annual contract renewal is an excellent opportunity to renegotiate the management contract to provide more favorable terms to the community, there is little motivation from the management company to negotiate a new contract if there is no threat of loss of the contract.
Assuming that the board is satisfied with the performance of the management company and the agreed terms of their management contract, then I would make this statement that at least on a three-year frequency, the association should put the management company out for bid. It does not hurt to get proposals and possibly new contract terms from both competitors and the current management company. Competition drives greater efficiency and lower costs. If the management company refuses to renegotiate their contract and bid, then drop them like a hot potato. Management companies in this state are a dime a dozen, and you have many options for effective management that will negotiate their terms with you to get your business. If the existing company offers a new contract with more favorable terms, you are always free to renew your contract under those new terms.
Staying with a management company because you are afraid of the transition could constitute a breach of the board’s duty to act prudently and in the best interest of the community.
Dennis