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Subject: HOA Management Company Contract NDA Clauses
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LanceG1
(Georgia)

Posts:29


03/01/2019 8:31 AM  
I'm a new board member in Georgia.

Last year the board ended up signing a contract with a new management company. When I was going through our contract with the new company I noticed a clause stating that the board is under a 3 year NDA with the management company where they cannot reveal any information about the management companies Business Methods, practices, forms, documents, templates, data concerning the managements business, names of the managements suppliers and clients or nature of the relationships. They've also put a copyright on the Association Management Agreement.

I have some concerns about these provisions and would probably have tried to negotiate them out because:

1. They have the potential of preventing the owners from being able to review the contract terms which I think they should have a right be able to review.
2. If the HOA management company should not be sharing their confidential information with us, and whatever they do share with us, minus individual resident confidential information can and should be open for review etc. by any owner.

From what I've found, I don't think Georgia has any many protections for homeowners in associations as some other states so I think these are legal. How have other people dealt with these kinds of clauses in contracts etc.?
RichardP13
(California)

Posts:3362


03/01/2019 8:49 AM  
That is standard boilerplate language you will find with many companies, generally involving professional services.

It wouldn't be something I would lose sleep over.
AugustinD


Posts:1453


03/01/2019 8:56 AM  
Lance, several years ago I thought as you did: That contracts should be a record that HOA members have a legal right to review. It turns out that this is not so. Contracts typically have "proprietary" information on them. Generally contracts are not records that HOA members have a legal right to review. I think the point of this is to prevent a member telling a competitor of the contractor details of the contract, resulting in unfair bidding.

I would hope that the Board and manager are at least willing to answer basic questions about what a contractor is obliged to do, pursuant to her or his contract.
RichardP13
(California)

Posts:3362


03/01/2019 9:14 AM  
Posted By AugustinD on 03/01/2019 8:56 AM
Lance, several years ago I thought as you did: That contracts should be a record that HOA members have a legal right to review. It turns out that this is not so. Contracts typically have "proprietary" information on them. Generally contracts are not records that HOA members have a legal right to review. I think the point of this is to prevent a member telling a competitor of the contractor details of the contract, resulting in unfair bidding.

I would hope that the Board and manager are at least willing to answer basic questions about what a contractor is obliged to do, pursuant to her or his contract.



That is not true. The language stated is not to prevent anyone from reviewing the specific contract, but to discourage anyone from disclosing how they do business and sharing forms and documents that they either developed with their software or forms they may have created specifically for their client.

I have similar boilerplate language and I would be more than happy to have any owner review THEIR contract. Remember, the contract is between my company and the association of which the owner is part of.
AugustinD


Posts:1453


03/01/2019 9:26 AM  
Posted By RichardP13 on 03/01/2019 9:14 AM
That is not true. The language stated is not to prevent anyone from reviewing the specific contract, but to discourage anyone from disclosing how they do business and sharing forms and documents that they either developed with their software or forms they may have created specifically for their client.


Hence my descriptor "proprietary."
RichardP13
(California)

Posts:3362


03/01/2019 9:35 AM  
What have you been smoking?
AugustinD


Posts:1453


03/01/2019 9:49 AM  
Posted By LanceG1 on 03/01/2019 8:31 AM
I have some concerns about these provisions and would probably have tried to negotiate them out because:

1. They have the potential of preventing the owners from being able to review the contract terms which I think they should have a right be able to review.


Richard, why do you have a problem with my responding to the above?
RichardP13
(California)

Posts:3362


03/01/2019 9:56 AM  
Proprietary has NOTHING to do with the contract, it has to do with the product and services they provide. Please tell me what secrets are in a contract, kickbacks, illegal donations, what? They might have language in that an association couldn't hire a manager from that company for a period of two years after they left.

The best way to find out is have the OP call the management company and ASK.
AugustinD


Posts:1453


03/01/2019 10:06 AM  
Richard, we disagree. A contract may have proprietary information. So far, I do not see that Georgia HOAs are required to provide members reviewing privileges of a contract or a copy of a contract. See http://ga.elaws.us/law/section14-3-1602 and https://law.justia.com/codes/georgia/2010/title-44/chapter-3/article-6 .
AugustinD


Posts:1453


03/01/2019 10:09 AM  
From https://www.inc.com/encyclopedia/proprietary-information.html:

"Proprietary information, also known as a trade secret, is information a company wishes to keep confidential. Proprietary information can include secret formulas, processes, and methods used in production. It can also include a company's business and marketing plans, salary structure, customer lists, contracts, and details of its computer systems. In some cases, the special knowledge and skills that an employee has learned on the job are considered to be a company's proprietary information.
... "

LanceG1
(Georgia)

Posts:29


03/01/2019 10:12 AM  
The bigger of my two concerns is the ability for any homeowner to be able to review this document. The confidentiality clause causes most of the issues because, beyond the fact that is it there, you really can't maintain it once homeowners get their hands on it. People can and will share these documents.

With contractors hired by the management company, instead of putting crazy language in the contract with the HOA, it would be more effective and customary to have a non-solicitation agreement between the MC and contractor. Also, ours has language stating that you can't hire one of their contractors for 3 years.

Ultimately, the thing that should allow a management company to stay in business and thrive is providing great service to the HOA which is a win/win, instead of crazy confidentiality clauses. Companies copy other companies business models etc. all the time, it creates healthy competition that benefits everybody.
AugustinD


Posts:1453


03/01/2019 10:13 AM  
From the Georgia law firm site http://ljlaw.com/wp-content/uploads/2015/02/Books-and-Records.pdf:

Are members entitled to see contracts of the association?
"Another common request from members is to review contracts of the association or vendor
bids. Many times such requests are grounded in a member’s dissatisfaction or distrust of a
particular vendor. For those associations who are bound by the terms of the Code as it applies
to their books and records reviews, members requesting to see such contracts are often
surprised and disappointed to learn that they are not entitled to review contracts of the
association. A member may, if he or she satisfies the requirements of the Code, request
to review the minutes of the board meeting where a particular contract was discussed and voted on, but there is nothing in the law which would allow the member to view the contract itself."
BarbaraT1
(Texas)

Posts:138


03/01/2019 10:25 AM  
They just don't want other management companies to know their rates or schedule A fees.

Is this a real problem or a theoretical problem? Do you have an owner asking to see the contract? Have you ever had an owner ask to see the contract?
RichardP13
(California)

Posts:3362


03/01/2019 10:27 AM  
Posted By AugustinD on 03/01/2019 10:09 AM
From https://www.inc.com/encyclopedia/proprietary-information.html:

"Proprietary information, also known as a trade secret, is information a company wishes to keep confidential. Proprietary information can include secret formulas, processes, and methods used in production. It can also include a company's business and marketing plans, salary structure, customer lists, contracts, and details of its computer systems. In some cases, the special knowledge and skills that an employee has learned on the job are considered to be a company's proprietary information.
... "




AND you really think proprietary information is included in such a contract?

Elvis has left the building and slammed the door shut.
LanceG1
(Georgia)

Posts:29


03/01/2019 10:28 AM  
That is what I found as well. Legally you are not required to let them review this in GA.....which the management company is fully taking advantage of here.

But that doesn't stop the HOA from adopting policies that would allow them to review these documents and offer better transparency than the minimum allowed by the law which is what I'm driving at. It allows better transparency and takes away some of the ammunition surrounding accusations of impropriety etc.. Those who have nothing to hide, hide nothing and the best defense against a false accusation/innuendo complaint for a homeowner about this is transparent truth.

IE: here are the fees the management company charges for various things, here are the terms of the contract etc., you're welcome to read it yourself. The secrecy is what leads to the lack of oversight and the HOA horror stories vs being as open as you can other than personally identifiable information about specific residents which this does not fall under.

AugustinD


Posts:1453


03/01/2019 10:35 AM  
Hi Richard, at this point and for this thread, I believe the only response from you that I might find compelling is, "Oops."
AugustinD


Posts:1453


03/01/2019 10:41 AM  
Lance, your points are well taken by me. I have seen management companies pull this. I have kind of resented it. But the law seems to be on the side of the contractor where I am and in Georgia.

I think many boards would explain the situation; quote some legal authorities (like the HOA attorney, Georgia statutes, and the HOA insurer?); and do the best they can to answer questions about the contract to the extent the law allows. Maybe have the members provide their question in writing and inform them the Board will respond at the next meeting, explaining why there is a delay?

Your HOA does not need a lawsuit from the management company. Even if it is frivolous, with the insurance company necessarily involved, it will cost the HOA.

I really hate writing this. Opaqueness is the biggest problem at HOAs by far.
LanceG1
(Georgia)

Posts:29


03/01/2019 10:57 AM  
Sorry, I should have explained that last point a little bit clearer, because it sounds like you mis-understood what I was suggesting.

I wasn't suggesting that we violate our current contract terms, disclose things we cannot legally and open us up to a lawsuit, that would be a bad idea. But, what about during a contract renewal/renegotiation and then moving forward what about having policies that make clauses like this a non-starter? Or.... is there so much collusion in the Management Company space that it is impossible to find a provider without this clause and they will be unlikely to budge?
RichardP13
(California)

Posts:3362


03/01/2019 11:58 AM  
Posted By AugustinD on 03/01/2019 10:35 AM
Hi Richard, at this point and for this thread, I believe the only response from you that I might find compelling is, "Oops."



Those who have nothing to hide, hide nothing and the best defense against a false accusation/innuendo complaint for a homeowner about this is transparent truth. Kinda what I believe.

But for you to post some attorney's opinion that you shouldn't allow a member to review a, let's say, a management contract, because they might be a "troublemaker", is a load of crap. But then I expect you to be a person who would hide behind some attorney's opinion.

There are bad management companies, even worse attorney, BUT, don't place everyone in that category because of experience you might have had.

Just saying!
RichardP13
(California)

Posts:3362


03/01/2019 12:06 PM  
Posted By LanceG1 on 03/01/2019 10:57 AM
Sorry, I should have explained that last point a little bit clearer, because it sounds like you mis-understood what I was suggesting.

I wasn't suggesting that we violate our current contract terms, disclose things we cannot legally and open us up to a lawsuit, that would be a bad idea. But, what about during a contract renewal/renegotiation and then moving forward what about having policies that make clauses like this a non-starter? Or.... is there so much collusion in the Management Company space that it is impossible to find a provider without this clause and they will be unlikely to budge?



I can't speak to this first hand because I am involved in such a case. It involves a former employer, who happens to be a HOA lawyer, who is accusing me of stealing his trade secrets and proprietary, four years after I left his company. He had no trade secrets, he had no HOA specific software and his only "proprietary" software was MS Word, MS Outlook and MS Excel, which I later found out was bootlegged. To defend myself on my own would cost me $50K, but I have my insurance covering this.

For your information, the clause is in there to protect themselves against employees/managers jumping companies and taking clients with them. Personally, except for mine, I haven't seen it used. As I said, call the company and have them explain it to you. If not satisfied, maybe they aren't the right fit for you guys.
BarbaraT1
(Texas)

Posts:138


03/01/2019 12:08 PM  
Posted By LanceG1 on 03/01/2019 10:57 AM
Sorry, I should have explained that last point a little bit clearer, because it sounds like you mis-understood what I was suggesting.

I wasn't suggesting that we violate our current contract terms, disclose things we cannot legally and open us up to a lawsuit, that would be a bad idea. But, what about during a contract renewal/renegotiation and then moving forward what about having policies that make clauses like this a non-starter? Or.... is there so much collusion in the Management Company space that it is impossible to find a provider without this clause and they will be unlikely to budge?




Again, is this an actual, tangible issue you are currently facing, or are you worried about the theoretical response of a theoretical owner who might theoretically ask to see the contract?

Because unless you have an owner who is right now demanding to see the contract, you are working yourself into a tizzy over nothing.

What you pay the management company is readily available in your financial statements.

What tasks the board delegates to the management company can be disclosed by the board.

This information is what the typical owner wants to know. If you someday get an owner who wants to know more you could - and bear with me, because this is going to be a totally radical idea - TALK to your management company, rather than assume they are engaging in "collusion".
AugustinD


Posts:1453


03/01/2019 12:18 PM  
Posted By RichardP13 on 03/01/2019 12:06 PM
... I am involved in such a case. It involves a former employer, who happens to be a HOA lawyer, who is accusing me of stealing his trade secrets and proprietary, four years after I left his company. ... I have my insurance covering this.


Q.E.D.
RichardP13
(California)

Posts:3362


03/01/2019 1:20 PM  
This is language from one HOA in Georgia:

The Board of Directors shall keep correct and complete books and records of accounts and minutes of its proceedings and the same may be inspected by any member, his agent or attorney, for any proper purpose at any reasonable time.

So the attorney you posted is there to protect the Board and the management company. Didn't see anywhere about the owners, which is typical. Unless I am reading it wrong, it says records, which can include contracts, be inspected by any member, his agent or attorney for any proper purpose. The attorney you quote has his own spin. Kinda of like the president says one thing and someone else has to clean up the language.

What I would like for you to do is tell me based on any management contract you have read where there is confidential or proprietary information that someone can't see. The financials will tell be what the MC is charging, so that's can't be a secret. There are software and forms that I have developed over the years that I would want someone sharing, but would I go to court over, HELL NO.

GenoS
(Florida)

Posts:2770


03/04/2019 2:15 PM  
Posted By AugustinD on 03/01/2019 8:56 AM
Generally contracts are not records that HOA members have a legal right to review.

I know this thread is about Georgia, but by way of comparison, in Florida, contracts are records that HOA members have a legal right to review.

Owners have the right to inspect and/or obtain copies of most official records of the association and that includes:

FS 720.303(4)(i) "A current copy of all contracts to which the association is a party, including, without limitation, any management agreement, lease, or other contract under which the association has any obligation or responsibility."

Again I realize you're talking about Georgia where things are probably different.
FredS7
(Arizona)

Posts:878


03/04/2019 4:16 PM  
Posted By AugustinD on 03/01/2019 9:26 AM
Posted By RichardP13 on 03/01/2019 9:14 AM
That is not true. The language stated is not to prevent anyone from reviewing the specific contract, but to discourage anyone from disclosing how they do business and sharing forms and documents that they either developed with their software or forms they may have created specifically for their client.


Hence my descriptor "proprietary."




All you have to do is construct an NDA for the association and get anyone who wants to review the documents to sign it.
GenoS
(Florida)

Posts:2770


03/04/2019 11:31 PM  
Posted By FredS7 on 03/04/2019 4:16 PM
All you have to do is construct an NDA for the association and get anyone who wants to review the documents to sign it.

Is that a good thing? Suppose you sign an NDA, read it, and see some things that don't pass the smell test. What if you find things that, in your sincere and honest evaluation, are hurting the association or the homeowners? What then? How can you campaign for a board seat based on opposition to the current agreement if you can't talk about it in order do drum up support for your candidacy?

The whole arrangement stinks. The MC works for you, not the other way around, and I wouldn't let an amployee or vendor of mine dictate the terms of an NDA that I must agree to.
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