BOARD OF DIRECTORS EDUCATIONAL SERIES: UNDERSTANDING THE BASICS OF IMPORTANT PROVISIONS

zer iyer

At HMC, we feel so lucky to work with industry professionals who share the common goal of educating Board Members and, in turn, creating stronger, more successful communities. We are very grateful to Zer Iyer from Angius & Terry for her presentation on important contract provisions.

Contracts are an essential aspect of ensuring the Board is meeting its fiduciary duty to protect the financial and legal interests of the Association. In this session, we discussed the most vital provisions:

  • Insurance
    • Worker’s Compensation must comply with statutory requirements.
    • Deductibles and self insured retentions: Must be declared to the Association, must be approved by the Association.
    • Additional Insured Endorsement: Must name the management company and board members (among others); must specify a particular form (2010 form 1985 or equal)
    • It is important to verify that all vendors working on your property provide certificates of insurance prior to beginning any work. HMC utilizes a third party, RMIS, to track and verify all insurance certificates of vendors who work on the properties we manage.
  • Indemnification
    • The contractor should agree to indemnify the Association under the contract
    • Indemnification should extend to the management company and board members (and others)
    • Indemnification should include the Association’s passive or contributory negligence
    • Indemnification may carve out those incidents when the Association was solely negligent or engaged in willful misconduct, which caused the harm
    • Mutual indemnification should only be agreed to if demanded by the contractor
  • Dispute Resolution
    • Binding arbitration is written into most contracts
    • Dispute resolution should be avoided if at all possible (Note: this may not be possible with all vendors)
    • Arbitration appears to be a trial, but without the protections of a trial
      • No right to appeal
      • No requirement that the arbitrator know or follow the law
      • Will be quicker, but is usually not cheaper because arbitrations are essentially “mini trials” and the lawyer fees will correspond
    • Should include mediation as the method of dispute resolution because it allows for the filing of a lawsuit if you don’t reach an agreement.
  • Attorneys’ Fees
    • Should apply if either party attempts to enforce the contract
    • Should include not just the filing of a lawsuit, but any involvement in dispute resolution (even mediation or other forms of ADR)
    • Should include witness/expert fees
    • Should include language allowing the court to grant more than what is provided for in a fee schedule
    • Levels the playing field and heightens the stakes for failing to work an issue out internally

Ensuring that the correct provisions are established in these sections of the contract will help protect the Association.

 

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