Whether a board can enter into a multi-year contract with management company or a multi-year contract with an onsite employee manager will depend upon the restrictions contained in the association's governing documents. Following is language found in some old documents that presents no impediment to 3-year agreements. It limits the original developer but not subsequent boards:
Neither Grantor, nor any of its agents, shall enter any contract which would bind the Association or the Board for a period in excess of one (1) year.
Following is more typical language in most documents. It limits contracts with vendors, i.e., third parties who provide goods or services to an association. It does not limit employment agreements:
The Association may not take any of the following actions unless approved by a majority of the voting power of Association Members (other than Declarant): (a) Enter into a contract for a term longer than one (1) year with a third person who furnishes goods or services for the Common Area(s) of the Association…
Following is a broader restriction. It clearly limits all manager contracts to one year.
The Board of Directors, on behalf of the Association, may contract with a Manager for the performance of maintenance and repair and for conducting other activities on behalf of the Association, as may be determined by the Board. The maximum term of any such contract (“Management Contract”) shall be one (1) year…
Sometimes there is conflicting language between an association’s CC&Rs and its bylaws. When that happens, the CC&Rs prevail.
: Because of the potential liability found in employment and contract issues, boards should seek legal counsel before signing contracts.
: Associations needing legal assistance can contact us
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