COMMON INTEREST COMMUNITY STANDARDS COUNCIL Quick Reference QR-S6 — The Vendor-Vetting Checklist Series: Board Member Essentials ================================================================ ---------------------------------------------------------------- THE AGENCY RELATIONSHIP -- WHAT IT MEANS ---------------------------------------------------------------- The manager is an agent of the board. Authority flows in three forms: EXPRESS Definition: What the management contract says Risk: Low -- it's in writing IMPLIED Definition: What's reasonably necessary to execute express authority Risk: Medium -- inferred APPARENT Definition: What a third party reasonably believes based on the board's conduct Risk: High -- can bind the association beyond the contract Enforce the management contract's authority limits consistently. Inconsistent enforcement creates apparent authority -- and unexpected liability. ---------------------------------------------------------------- PRE-CONTRACT VENDOR VETTING ---------------------------------------------------------------- Before awarding any contract: [ ] Valid state contractor license (if required for scope of work) [ ] Certificate of Insurance AND additional-insured endorsement on file [ ] At least three verifiable references from comparable projects [ ] No active judgments or liens (public records search) [ ] No disciplinary actions by licensing board [ ] Bid based on written bid specification (same spec for all bidders) ---------------------------------------------------------------- FIVE CONTRACT PROVISIONS -- READ EVERY TIME ---------------------------------------------------------------- 1. Scope and Performance Standards Is the scope specific enough to enforce? Does it incorporate the bid specification? Are deliverables measurable? 2. Term and Termination - Defined term (start and end date) - Renewal mechanism (automatic vs. affirmative) - Termination for cause (10-30 day cure period) - Termination for convenience (30-90 day notice, no breach required) -- Non-negotiable. Do not execute without it. 3. Insurance - CGL: $1M/$2M minimum - Workers' compensation: statutory limits - Hired and non-owned auto: $1M - Association named as additional insured on CGL and auto - COI + endorsement in file before work begins 4. Indemnification - Mutual and narrowly drafted - Each party indemnifies for their own negligence - Not one-way; not broadly drafted 5. Warranties (capital contracts) - Defined warranty period - Commencement at substantial completion (not invoice payment) - Process for warranty claims - Vendor obligation to remedy at no cost ---------------------------------------------------------------- BID THRESHOLDS -- MINIMUM REQUIREMENTS ---------------------------------------------------------------- Under $5,000 Manager authorization within budget $5,000 - $24,999 Two competitive bids, board approval $25,000 and above Three competitive bids, board approval, documented bid process Use the most restrictive requirement from statute, governing documents, or this standard. ---------------------------------------------------------------- RESERVE STUDY -- FOUR FUNDING STRATEGIES ---------------------------------------------------------------- FULL FUNDING How it works: Reserves = 100% FFB at all times When appropriate: Highest discipline; lender-ready BASELINE FUNDING How it works: Balance stays above zero across 30-year projection When appropriate: Common responsible approach THRESHOLD FUNDING How it works: Balance stays above board-set minimum When appropriate: Predictable but requires monitoring PAY-AS-YOU-GO How it works: No reserves; special assessments fund replacements When appropriate: Generally disfavored -- avoid CICSC Minimum: Baseline funding. Target: Full funding. ---------------------------------------------------------------- CAPITAL PROJECT OVERSIGHT CHECKLIST ---------------------------------------------------------------- [ ] Written bid specification [ ] Three competitive bids [ ] Board approval before contract execution [ ] Contract reviewed against five provisions above [ ] COI + endorsements before work begins [ ] Weekly progress reports from manager [ ] Board approval of change orders above threshold [ ] Completion inspection before final payment [ ] Lien releases from contractor and all subcontractors before final payment [ ] Warranty commencement date documented in vendor file ================================================================ This card is an educational summary. It does not constitute legal advice. © 2026 Common Interest Community Standards Council. All rights reserved. cic-sc.org