What is an HOA contract? Everything you need to know

What is an HOA contract?

An HOA contract is a formal agreement that outlines the scope, terms, and conditions of services or obligations between a homeowners association (HOA) and another party. This can include property management companies, landscapers, pool maintenance providers, security firms, or any other vendor whose services are necessary to maintain or improve the community.

More specifically, HOA contracts help define:

• The expectations and deliverables for both parties
   
• The duration of the agreement
   
• Payment terms and invoicing procedures
   
• Termination clauses
   
• Performance standards and accountability measures

In Rhode Island, these contracts must align with Rhode Island laws regulating common interest communities. Because of this, HOA contracts are not one-size-fits-all. Each one should be tailored to meet the specific needs of the association and its residents.

This article is not intended to and does not constitute legal advice or create an attorney-client relationship. Board members should consult their association’s attorney to discuss the legal implications of their decisions or actions prior to proceeding.
 

Why are HOA contracts needed?

HOA contracts can help protect the association from legal and financial risk. They establish obligations in writing, which provides a reference point if disputes arise over deliverables, quality of service, or payment. Rather than relying on informal understandings or verbal agreements, contracts help keep everyone accountable.

Additionally, these agreements help with continuity and clarity. Board members may change over time, but a well-written contract keeps services consistent and expectations aligned. This is especially important when transitioning from one management partner or vendor to another. Having documented terms helps prevent confusion and lapses in service.

When agreements are documented, reviewed, and voted on by the board, it can help homeowners feel more confident in how decisions are made. Residents may not need to see every detail, but knowing that contracts exist and have been thoughtfully approved by the board can enhance trust.
 

What is included in an HOA contract?

An HOA contract typically includes several critical sections. While the structure may vary depending on the service being contracted, here are a few common elements that are generally included in most Rhode Island HOA agreements:

1. Contract duration and renewal terms

   Most contracts specify a start and end date. Some contracts include auto-renewal provisions, while others require formal board approval to continue. Boards should carefully review these clauses to avoid unintended extensions. It’s also important to track these dates in a centralized system or shared calendar, so renewal decisions aren’t rushed.
    

2. Scope of work

   This section outlines the responsibilities of the vendor or service provider. It should be specific and detailed. For example, a landscaping contract might spell out mowing frequency, seasonal cleanup procedures, irrigation maintenance, and snow removal policies. For a property management contract, it might include financial reporting, resident communication, maintenance coordination, and support for board meetings.
    

3. Payment terms

   How and when the vendor is paid is a critical part of any HOA contract. This section will detail billing frequency (e.g., monthly, quarterly), payment methods, and any late fees or penalties. Boards should also look out for escalation clauses that increase costs over time and make sure they align with the association’s long-term budget.
    

4. Termination clauses

   An HOA contract may allow both parties to terminate the agreement under certain conditions. This may include breach of contract, unsatisfactory performance, or mutual consent. Some contracts require advance notice — often 30, 60, or 90 days — to terminate without penalty. Boards should consult legal counsel to determine whether these provisions are fair and enforceable.
    

5. Insurance and licensure requirements

   Boards should confirm that vendors carry appropriate insurance, such as general liability, workers’ compensation, and vehicle coverage (if applicable). Contracts often require vendors to submit certificates of insurance and copies of relevant licenses before work begins. This may help mitigate risk to the community, as failure to secure proof of insurance before services begin may leave the board liable for any accidents or damage that occurs on-site.
    

6. Confidentiality and non-disclosure clauses

   Some HOA contracts include provisions that prohibit either party from disclosing confidential information. This can apply to items like pricing terms, resident data, or proprietary processes. These clauses are common in vendor and management contracts where sensitive information may be exchanged. Boards should work with an attorney to verify that these clauses are clear, reasonable, and in compliance with applicable privacy laws.
    

7. Dispute resolution

   Rather than resorting immediately to litigation, many contracts outline a process for resolving disagreements — such as through mediation or arbitration. This can help resolve issues more efficiently and cost-effectively. However, boards should seek legal advice before agreeing to any mandatory arbitration clauses, which may limit their options.
    

8. Performance benchmarks

   For service-based contracts, it may be useful to include measurable benchmarks. These can include response times for maintenance requests, timelines for delivering financial reports, or expectations for property inspections. Clear benchmarks provide a basis for evaluation and help the board make data-driven decisions when it’s time to renew or replace a vendor.

When and how to review HOA contracts

Regular contract review is part of a well-functioning board. Contracts should be reviewed before renewal, during annual budget planning, and any time there is a major change in community needs or vendor performance. Board members should read contracts carefully, seek clarification where needed, and consult with legal counsel when drafting or negotiating terms.

A strong property management company will support the board in reviewing vendor agreements, offering insights based on industry best practices, and helping identify areas where terms can be improved or renegotiated. At FirstService Residential, we provide our boards with contract templates, vetting checklists, and guidance based on decades of experience managing Rhode Island communities.

If your board is seeking guidance on reviewing existing HOA contracts or developing new ones, FirstService Residential can help. With proven expertise, local knowledge, and a commitment to resident satisfaction, we’re ready to support your community every step of the way. For more information, contact a member of our team today