Contracts are essential to any two parties that enter an agreement, homeowners associations and attorneys included. But, what should an HOA attorney contract even consist of in the first place?
When a homeowners association hires an attorney — or any vendor, for that matter — it should always formalize the agreement through a written contract.
A contract establishes the working relationship between two parties as well as serves as a form of protection and point of reference in case of any disputes. While the specifics of an HOA attorney contract can change from one to another, there are a few key details and provisions that must never be left out.
First of all, the HOA lawyer contract should clearly indicate who the client is. While it is generally understood that the HOA is the client in such an agreement, some people might argue otherwise.
The contract should state that the lawyer represents the association and its best interests; not any single homeowner or board member — not even the HOA manager. This will make it clear to all parties that the attorney will offer legal advice based on what they think is right for the community.
HOA attorneys primarily work with the association’s board. But, things can quickly spiral into a mess of overlapping dialogue when there are several board members liaising with a single attorney. That said, it is a good idea to designate a point of contact — a specific board member or two who will act as a liaison between the attorney and the rest of the board.
Indicating who the attorney must communicate with not only makes things more organized and easy to follow but can also reduce fees. If your attorney is taking the time to read and respond to five or six emails that all say the same thing, then your HOA will end up paying a lot more money in billable hours.
Far too many HOA attorney contracts don’t specify what services to which their client is entitled. This creates a gray area of sorts when problems do arise. You might bring up an issue to your attorney and expect them to provide you with a solution, only for them to say it’s not covered in their contract.
Spelling out the scope of services will allow your HOA to set its expectations. Additionally, if your attorney fails to deliver the services they are contractually obligated to do, then you have written proof. This can support your side of the argument in case there is a dispute.
An HOA attorney contract should indicate the legal fees and retainer fees, including any deposits, that the client must pay. Don’t be afraid to negotiate with your lawyer or law firm when it comes to this aspect of the agreement. More importantly, never sign a contract that you have not thoroughly reviewed, as you may be surprised by some of the amounts you need to pay.
The contract should also require your attorney to send you a detailed monthly report outlining the services delivered and how much each one cost. It is important to know what services fall under billable and non-billable hours. For instance, basic correspondence such as phone calls and emails may cost you money. Ask about other expenses, too, such as travel expenses, overhead, and mailing costs.
Your contract should require your attorney to provide you with an affirmative disclosure every year that they have professional liability insurance. Although most attorneys and firms already do this, it is still imperative to get the requirement in writing.
This disclosure is even mandatory in many states. For instance, in California, the State Bar’s Rules of Professional Conduct gives an attorney 30 days to let a client know that their professional liability insurance has lapsed or ended.
Many contracts have a set duration, and so should yours. Your contract should make the duration of the agreement clear to both parties. If your attorney’s rates are not expected to change on an annual basis, then it may be a bad idea to have the contract expire or renew every year. After all, negotiating the terms of a contract and reviewing it can eat up a lot of time.
Aside from things that you should include in an attorney contract, there are also things that you should watch out for. If you find the following provisions in your contract, ask your attorney to remove them or re-negotiate.
Contingent fee-based collections are when lawyers do collections and only charge the association if they win.
In other words, the HOA will pay a fee contingent on the circumstances of the case. Some contracts charge a certain percentage of the collection amount if the suit doesn’t go to court and a higher percentage if it does. There are even fees contingent on whether or not the owner appeals.
While this may seem like a tempting offer, HOAs should examine it more closely. With this type of setup, lawyers or law firms are less likely to go after the difficult cases because they have a smaller chance of winning.
Moreover, contingent fee-based collections give attorneys an opportunity to charge a higher fee for such matters. This will result in the homeowner, who usually ends up paying attorney’s fees, paying a lot more than normal.
Such a practice can also affect how owners are treated, i.e. selective enforcement. And that can foster contempt among neighbors as well as between the board and the residents. Hence, you must watch out for exploitative provisions like a contingent fee-based structure of collections.
In addition to contingent fee-based collections, another provision to look out for is granting the attorney the ability to keep all the money they collect if the HOA is behind on payments. Although a lawyer can place a lien on the collected amount if the association has unpaid legal fees, it is usually prohibited to automatically take the money collected without a court order.
While most attorney contracts generally look the same, there are certain variables that you should definitely include and others that should set off alarms in your head. The best practice for any board is to carefully review the HOA attorney contract and never sign without reading it through first. This, of course, applies to all contracts you sign, too.
It can be difficult to go through a contract and try to understand all the legal terms, especially if your board has no legal knowledge or expertise. This is where an HOA management company can help. Start looking for the best one in your area today using our online directory.