Homeowners Associations

When do associations have to get competitive bids?

When it comes to condominium and homeowners’ associations contracting for services and supplies for their communities, the associations are all over the map on the procedures they use to find a provider. Some will go get competitive bids on each and every contract and always take the lowest bid while others will obtain no bids and just contract with whoever they want. Neither of these extremes would be following the applicable laws and good business practices as an association’s contracting policy.

Let’s first look at what kind of contracts do not require competitive bids. As professional services are considered unique and each professional provide their services in an individual manner, according to Section 718.3026(2), Florida Statutes, for condominium associations, contracts with employees of the association, and contracts for attorney, accountant, architect, community association manager, time-share management firm, engineering, and landscape architect services do not require competitive bids. An association is free to find the unique professional they like and hire them.

There are two other situations where competitive bids are not required. If an association needs to obtain products and services in an emergency or if there is only one source of supply in the county of the product or service, an association can go ahead and just sign a non-bid contract.

In contrast, competitive bids must be obtained by condominium associations, pursuant to Section 718.3026(1), Florida Statutes, for all other contracts that are for the purchase, lease, or renting of materials or equipment, or for the provisions of services and which require payment by the association on behalf of any condominium operated by the association in the aggregate that exceeds 5 percent of the total budget of the association including reserves.

So, for contacts for low amounts where the price does not reaches 5 percent of the total annual budget (including reserves), competitive bids are not required.

If bidding is required, nothing in the statute requires an association to accept the lowest bid and a minimum of only two bids are required. For some reason, many think that you have to get at least three bids.

There are very similar contract provisions concerning when competitive bids are needed for homeowners’ association (HOA) contracts under Section 720.3055, Florida Statutes. One major difference is that the threshold requirement for competitive bids for HOAs is 10 percent of the total annual budget of the association including reserves.

So there really are not that many contracts that an association gets involved with that require competitive bids. The scope is limited to large cost contracts for goods or services that will exceed 5 percent or 10 percent of the annual budget and that won’t be provided by one of the listed excepted professionals. There is nothing wrong with getting competitive bids from professionals if an association wants to make sure they are getting a good deal for their money. However, many times when it comes to the listed professionals, you will be comparing apples to oranges as each professional provides its services in their owner unique way. Therefore, the differences in how the professionals operate need to be understood when you are putting out, and then reviewing, bids from different professional.

Last, it is important to point out that all contracts with the association for the acquisition of materials that will not be fully performed within one (1) year and all contracts for the provision of services must be in writing. If they are not in writing you probably won’t be able to hold the provider to whatever terms may have been agreed to verbally.

Rob Samouce, a principal attorney in the Naples law firm of Samouce & Gal, P.A., concentrates his practice in the areas of community associations including condominium, cooperative and homeowners’ associations, real estate transactions, closings and related mortgage law, general business law, estate planning, construction defect litigation and general civil litigation. This column is not based on specific legal advice to anyone and is based on principles subject to change from time to time. Those persons interested in specific legal advice on topics discussed in this column should consult competent legal counsel.