Indemnity and Hold Harmless Provisions in Association Contracts

Condominium and homeowner associations frequently enter into contracts with third-parties. Examples include landscaping contracts, management contracts, and construction contracts. In order to protect the interests of the association, many community association attorneys include indemnity provisions in the contract. Here’s a common example of an indemnity provision:

Contractor will indemnify, defend, and hold harmless the Association from and against any and all claims of every kind, whether known or unknown, resulting from or arising out of Contractor’s work under this agreement.

In this example, the contractor is the “indemnitor” and the association is the “indemnitee”. What is the effect of this language? Let’s assume the Contractor is a landscaper hired to take care of the common areas of the community. One day the Contractor is trimming tree branches. Standard practice requires one worker to operate the saw, and another worker to control the direction of the falling branch. The contractor is short staffed, and there is no second worker to control the direction of the falling branch. A cut branch falls on a unit owner’s exterior deck and damages patio furniture and a BBQ grill. The unit owner then sues the association and wins a judgment for the damaged property.

If the agreement between the association and the contractor contains indemnity language, then the contractor is required to hire and pay for an attorney to defend the association, as well as pay the judgment against the association.

Indemnity provisions don’t transfer liability—the contractor caused the damage and remains legally liable. Instead, these provisions shift the financial obligation related to the claim from the indemnitee to the indemnitor.

Typical indemnity provisions fall into one of three categories: limited, intermediate, and broad. In Oregon, broad indemnity provisions are prohibited by law. I’ll explain each type of indemnity category.

1. Limited indemnity

The limited form indemnity obligates the indemnitor to save and hold harmless the indemnitee only for the indemnitor's own negligence. Let’s go back to our landscape contractor example. In that example, the property damage was caused entirely by the negligence of the contractor. The association did not cause or contribute to the damage. Here, the contractor must indemnify the association.

2. Intermediate

The intermediate form of indemnity obliges the indemnitor to hold harmless the indemnitee for all liability except that which arises out of the indemnitee's sole negligence. Back to the landscape contractor example. Let’s now assume that the tree branch fell much quicker and forcefully than normal because the tree is decaying. Also assume that the association has known that the tree is decaying and decided not to address the issue. In this case, both the contractor and the association are negligent and the contractor is required to indemnify the association.

The contractor would not be required to indemnify the association if the cause of the damage resulted entirely from the association’s negligence. Let’s now assume that the contractor has not touched the tree and the tree branch fell because of rot and decay. In this case, the damage resulted entirely from the association’s negligence. The contractor has no obligation to indemnify the association.

3. Broad

The broad form of indemnity requires the indemnitor to save and hold harmless the indemnitee from all liabilities arising from the project, regardless of which party's negligence introduces the liability. Under this category, the contractor is required to indemnify the association even if the association contributed to the damage or was entirely responsible for causing the damage. This form of indemnity is prohibited under ORS 30.140:

(1) Except to the extent provided under subsection (2) of this section, any provision in a construction agreement that requires a person or that person’s surety or insurer to indemnify another against liability for damage arising out of death or bodily injury to persons or damage to property caused in whole or in part by the negligence of the indemnitee is void.

(2) This section does not affect any provision in a construction agreement that requires a person or that person’s surety or insurer to indemnify another against liability for damage arising out of death or bodily injury to persons or damage to property to the extent that the death or bodily injury to persons or damage to property arises out of the fault of the indemnitor, or the fault of the indemnitor’s agents, representatives or subcontractors.

When entering into a third-party contract for any services related to construction, the association should always have a qualified attorney review the agreement. As part of that review, the attorney should make sure that the indemnity provisions do not fall under the “broad indemnity” category.

The Importance of Bids

Most homeowner and condominium associations engage the services of professionals to help with the operations of the community. These professionals include accountants, landscapers, contractors, and managers. As board members, you have a duty to ensure that association funds are spent carefully and responsibly.  Part of the process to ensure financial responsibility is soliciting and reviewing competitive bids prior to hiring professionals or vendors.

  1.  Define the Scope of Work

Prior to seeking competitive bids the board or committee must develop a comprehensive scope of work. In other words, what services does the board want performed? Let's suppose the association wants to hire a landscaping company to maintain the common areas. The scope of work may look something like this:


Each potential contractor receives the same bid form and returns the form to the association with their total estimated costs and a break-down of each line item cost.  Otherwise, its easy to be misled. Perhaps one contractor's price appears significantly lower, but it's because they haven't included the costs associated with the maintenance of the irrigation system.

Ideally, three bids should be solicited and compared.  However, some associations develop strong and lengthy relationships with vendors. That's ideal, but it makes sense to occasionally compare services and prices of other vendors even if the board is intent on continuing its relationship with its preferred vendor or contractor.

2.  Do Your Homework

Once bids are received, ask around about the vendors who submitted bids. What's their reputation? In Oregon and Washington you can check on the status of a contractor's license, review their insurance, and see if anyone has submitted complaints against the company.

For Oregon contractors visit:

For Washington contractors visit: 

3.  Hammer Out The Contract

Very few people enter into a contract with the expectation of future disputes or that the other party may breach the terms of the agreement.  At a minimum, service contracts should contain the following elements:

  • Detailed statement of when and how work will be performed;
  • Amount and terms of the contract price;
  • Acts or omissions which entitle a party to terminate the contract;
  • A warranty of any work or services performed;
  • A statement by the contractor that it is licensed, insured and bonded;
  • Indemnification language whereby the contractor will indemnify and hold harmless the association and the board members from legal claims arising out of the contractor's work; and
  • Provisions governing how disputes will be resolved, i.e. mediation, arbitration.

As always, have an attorney prepare or review all contracts prior to signing.

4.  Review

Once the bidding and contracting are done, follow-up with contractors and vendors to ensure that the terms of the contract are fulfilled.  The board or a committee should review all association contracts on an annual basis to verify that services have been performed, if new bids should be solicited, and that payments have been made.