In last month's newsletter, we discussed tips on how a Manager and Board may secure a contract that best protects the interests of the association.  However, what if your association has already entered into a contract with a vendor who has strayed from its' obligations or the association wants out of a contract for financial or other reasons?

Your association may be able to claim that a contract is void due to noncompliance of the Pennsylvania Home Improvement Consumer Protection Act (HICPA).  HICPA, which became effective as of July 1, 2009, mandates the form and content of certain contracts.  HICPA applies to contractors who perform over $5,000 of home improvement business annually.  "Home improvement" is defined broadly and includes contractors who engaged in work, such as the repair, replacement, remodeling, removal and renovation of items such as driveways, swimming pools, roofs and siding.  While HICPA does not apply to landscaping services in all cases, it does apply if a landscaper is involved in providing certain other services, such as those mentioned above.

Specifically, landscapers will fall within the purview of HICPA if they are involved with lighting systems, non-decorative fences, concrete walkways, windows, doors or the installation of retaining walls, fountains or drainage systems.

HICPA mandates a significant number of requirements for home improvement contracts and also provides a list of provisions which, if included in a contract, will provide the consumer (i.e., the association) with the ability to void a contract.  Therefore, if the contract form that a business has been utilizing does not contain required information, it should be revised.  For example, HICPA requires that all contracts contain the contractor's registration number with the Bureau of Consumer Protection and identify that the contractor agrees to maintain insurance.  Additionally, HICPA prohibits a contractor from including a provision within a contract allowing for an award of attorneys' fees and costs; although the consumer still has the ability to receive attorneys' fees and costs.

While HICPA's applicability to associations has yet to be tested,  it is likely that it does apply to association contracts, as it is designed to provide a consumer with the above protections and beyond those set forth in Pennsylvania's Unfair Trade Practices and Consumer Protection law, which does apply to associations.  As such, you may wish to have counsel review your contracts to ensure compliance with HICPA, particularly if your association has an interest in voiding or revising a contract with a vendor.

Attention to detail is key when negotiating vendor contracts for community associations. A vendor proposal lacking specificity that is signed by a manager or board constitutes acceptance of the terms laid out by the contractor and creates a binding contract. In this event, associations are at risk when disputes and disappointed expectations sour the relationship between the board and the contractor. The good news is that with some careful, pre-negotiation planning and a checklist of key contract terms and the assistance of legal counsel, a manager and board may secure a contract that best protects the interests of the association. This way the risk of costly litigation will be significantly reduced and the association will be protected should a vendor stray from its obligations or an issue arise that was anticipated and planned for in the written contract. Important clauses to be aware of include, but are not limited to:

Scope of Work:  The contract should always include a detailed description of the work to be performed so both parties know exactly what to expect.

Timing & Payment:  The contract should contain the start and finish dates for the work, the schedule for completion, the contract sum, and any payment terms. The association should make sure it can withhold payment or setoff payments owed if the work is defective.

Warranties:  There should always be a warranty for work and materials provided by the contractor. The length of the warranty will depend upon the particular industry. Also, any manufacturers' warranties should be signed over to the association upon completion of the project.

Insurance:  The contractor should always have insurance and the contract should specify the types of insurance and amounts required. A construction contract will often require builder's all-risk coverage, commercial general liability insurance, automobile insurance, contractual liability coverage for indemnity obligations, workers' compensation, and employers' liability.

Indemnification:  There should be an indemnification clause requiring the contractor or vendor to indemnify the association against claims of damage or injury resulting from the contractor's conduct.

Attorney Fees:  In the event of a dispute, the contract should provide for an award of attorney fees to the prevailing party. If the association is not entitled to attorney fees under the contract, the association may find that the attorney fees expended in pursuing a breach of contract are equal to or greater than its damages.

A checklist of key vendor contract terms will assist boards in negotiating better contracts. Legal review of vendor contracts is prudent to assure that the agreement is complete and to customize the agreement to the association's advantage based on the particular materials and services being provided.