The Basics of a Community Association Management Contract

There are five key components that should be considered when drafting a management services contract between the Community Association and its Management Company.

(1) Termination clause. While some states provide for contract termination, many do not. Also be wary of self-renewing or long-term contracts. Use a contract with either a fixed-term or a 90-day (or less) termination clause -- one that can be invoked with OR without cause.

(2) Insurance. Make sure to verify that the contract expressly states what type(s) of insurance that each party will carry. While most general liability policies typically name the Managing agent, only some directors and officers (D&O) policies do the same. Best practices indicate that the Association should name the manager on its D&O coverage as well.

(3) Ownership of Records. All books and records should remain the property of the Association and remain available to the board at any reasonable time. Any management contract should reflect this requirement.

(4) Transition. If the management contract is terminated, there should be a provision for the orderly transfer of records to facilitate a smooth and systematic transition from one management company to the next (or to the Association if self-management is chosen).

(5) Legal Review. Yep, don't forget the lawyers. As with all contracts, it is best that both parties (Association and Manager) submit the contract to their independent counsels for review prior to signing.

*special thanks to Common Grounds, Stephen Marcus for contributing to this post