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Contracting with HOAs
Getting it Right in Writing

Contracting with HOAs

Stonebrae, a high-end residential community located in the Hayward Hills, across the bay from San Francisco, is maintained by Gachina Landscape Management. Besides residents, the community is visited by thousands of visitors that come to play golf and attend weddings throughout the year. For this reason, management requested ample green spaces but water restrictions due to the drought, made this a challenge. As an alternative, the landscape company replaced some turf areas with vibrant drought-tolerant plants that they guarantee for as long as they have the maintenance contract.

An account to provide maintenance services to a homeowner association can turn into a windfall for a landscape company, or it can create more headaches than it is worth - depending in part on how the agreement is composed.

Attorney Milene Apanian, whose practice exclusively focuses on construction law, including advising landscape contractors, defines the fundamental function of the agreement this way: "The contract is a risk management tool and it needs to be used early on to establish the relationships of the parties. If you start off on the right foot, meaning you know what you are getting into and everybody's expectations are identified early on, then you help avoid disputes."

Apanian points out that each state can have different regulations regarding contracts and other legal devices such as mechanic's liens and payment bonds, and as a California attorney, her advice may not apply exactly in your state.

To that point, the Legal Information Institute at the Cornell Law School states, "the Uniform Commercial Code, whose original articles have been adopted in nearly every state, represents a body of statutory law that governs important categories of contracts," but contracts dealing with particular business sectors "may be highly regulated" by state law.

Contracting with HOAs

Unlike small residential maintenance contracts that can be month-to-month, larger clients are usually renewed yearly, as was the case with the HOA complex known as The Woods in Westchester, N.Y., which was maintained by Manzer's Landscape Design & Development.

Contracting with HOAs

Change of leadership, whether in the HOA hierarchy or a property management firm they employ, brings a risk of losing a service contract. "New managers will evaluate all their expenditures," says Mike Dyck, the general manager of the equipment manufacturing company, Masco Sweepers. "When this happens, you must be prepared to present your best justification of your operation and costs."

Of the many challenging issues that can arise in a service contract with an HOA, one is the origin of the hiring.

"Often times the HOA will hire property managers and then the contract is let out by the property manager and not the HOA so if that is the situation, the contractor can't pursue the HOA for breach of contract, they have to go after the property manager (for unpaid invoices)," she cautions. This situation also may impact notice requirements, such as preliminary notices.

"Other times the property management company will just recommend a contractor and have the HOA enter into the contract directly," adds Apanian.

Regardless of who hires the landscape firm, certain individuals within the association or property management company should be designated as having the authority to make changes, approve or disapprove of work completed according to Apanian who has seen situations where a person who does not have the power to legally bind the client requests extra work, which then leads to a dispute over payment.
If the contract is with the HOA, and since HOA leadership can change regularly, she advises to identify authorized individuals by position - president, vice president, secretary - instead of by name. If the names are known, they can also be included.

Contracting with HOAs

Besides clearly listing the scope of work in a contract, exclusions, such as declaring that the maintenance crew will not be obligated to move outdoor furniture that is left in their way, should also be included.

As to creating the contract, Apanian has dealt with contractors that have copied and pasted different provisions from different contracts that they have downloaded from the Internet or obtained from a colleague, without really understanding the meaning of the provisions, which results in a contract that is more beneficial to their customers than to themselves. For that reason, she suggests seeking out a lawyer who specializes in construction law at least before signing a contract and certainly before doing any work.

In addition, many law firms have form template contracts available at a reasonable flat fee. Or an attorney can start with the template and customize it to relate to a specific business.
"Often times contractors, people in general, look to lawyers to resolve disputes," Apanian relates. "But personally my approach is preventing disputes, and the contract is the great way to do that and delineate everybody's roles, responsibilities and obligations early on."

Milene Apanian is a California-licensed attorney at law who is a partner at the firm Abdulaziz, Grossbart and Rudman located in North

As seen in LC/DBM magazine, January 2019.

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October 17, 2019, 6:34 am PDT

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