By Callie McDermett, American Heritage Restoration

The construction and maintenance industries have seen significant cost increases in recent years, largely driven by rising labor and material prices. According to the National Association of Home Builders (NAHB), building materials’ prices have risen by 19.2% year-over-year and have increased by 35.6% since 2020. Yet, many communities unknowingly drive-up costs through outdated maintenance policies. With such rapid escalation in prices, HOA boards and community management companies must be strategic about how they handle repairs and maintenance. A key factor influencing long-term maintenance costs is how work orders and approvals are structured—particularly regarding Not-To-Exceed (NTE) limits.(NAHB ARTICLE)

Trends in Material & Labor Pricing

The rise in construction costs is driven by several factors:

• Labor shortages, driven by fewer workers entering skilled trades, have increased wages, making qualified contractors more competitive. While the most skilled contractors may not always be the cheapest, it’s important to vet contractors carefully to ensure high-quality work. Choosing the lowest bidder often leads to higher costs in the long run due to poor workmanship, repeat repairs, or safety issues. After all, price is only a concern in the absence of value.

• Material prices fluctuate due to inflation, supply chain disruptions and high demand. As a result, decisions must be made quickly to secure favorable pricing. Additionally, stricter regulations and rising insurance premiums are driving up contractor costs.

1. Set a Higher NTE (Minimum of $2,000): Increasing the NTE to at least $2,000 allows contractors to address routine maintenance issues immediately without waiting for board approval. This proactive approach prevents small issues from turning into major repairs and reduces delays that lead to higher costs.

1. Establish a Trusted Contractor for Small Repairs: HOAs should select one qualified contractor per year to handle repairs under $10,000. This ensures consistent work quality, minimizes downtime, and strengthens the relationship with the HOA board.

1. Require Board Approval Only for Mid-Range Repairs ($2,000 - $10,000): Reviewing proposals for projects in this range is reasonable but limiting these approval processes to mid-range repairs and your single/preferred contractor helps avoid unnecessary delays and ensures project flow.

1. For Larger Projects Over $10,000, Collect Multiple Bids: Larger projects require careful consideration. By requesting bids from at least three contractors, including the preferred one, HOAs can compare options, secure competitive pricing, and ensure transparency.

• Transparent Pricing: The contractor should provide clear pricing based on labor, materials, and drive-time for maintenance calls, ensuring the HOA isn’t automatically charged the full NTE amount for each service call.

• Emergency and After-Hours Rates: Predetermined rates for emergency or after-hours calls will help avoid unexpected costs while still addressing urgent issues promptly.

• Monthly Reporting: Contractors should provide the HOA with monthly reports detailing the cost and time spent on each job, from work order through proposal, approval, and completion. Reports should also include insights into how effectively communication was exchanged between the contractor, HOA, and management company.

Callie McDermett has been working for American Heritage Restoration for five years alongside a talented leadership team and industry professionals with over 100 years of combined experience serving the community with roofing & construction expertise.

Given these rising maintenance and reconstruction costs, HOAs face an essential choice. The right maintenance strategy can control expenses, while the wrong approach could lead to even higher costs in the future. Planning ahead and making strategic decisions about maintenance can help avoid unexpected price hikes and ensure long-term savings.

How Low NTEs Lead to Higher Long-Term Costs

A common issue in maintenance planning is the use of low NTEs. An NTE is a predetermined spending limit that a contractor can use before requiring board approval. When NTEs are set too low, it causes delays and deferred maintenance.

For example, if an NTE is set at $500 or $1,000, even minor repairs may require a proposal, board review, and approval. This can turn a small, inexpensive repair into a much larger, costlier issue due to delays. A simple $600 leak repair delayed by board approvals could escalate into a $6,000 roof replacement due to water damage.

A better approach is to:

Streamlining the Process with an Annual Maintenance Contract

To ensure cost-effectiveness and avoid deferred maintenance, HOAs should vet contractors at the start of the year and select one to handle all NTE-related work and repairs under $10,000. An annual maintenance contract can streamline the process, and should include:

HOAs must hold contractors accountable for clear communication and transparency while ensuring costs are controlled and timelines met. Establishing clear expectations in an annual contract allows contractors to address routine issues promptly while maintaining oversight on larger projects. This proactive approach helps prevent delays and minimize deferred maintenance.

The Bottom Line

HOAs and community management companies must adapt to rising construction costs by improving maintenance and repair management. Increasing NTEs, working with a trusted contractor for routine repairs, and streamlining approval processes will prevent small issues from becoming expensive reconstruction projects.

Developing a proactive maintenance plan allows communities to assess their large project needs well in advance. This provides more time to plan, budget, and phase out larger expenses. Anticipating major projects ensures they are managed efficiently rather than becoming urgent, costly emergencies. By adopting smarter maintenance agreements, communities can save money, reduce long-term damage, and maintain their properties in excellent condition.

About the Author

Callie McDermett has been working for American Heritage Restoration for five years alongside a talented leadership team and industry professionals with over 100 years of combined experience serving the community with roofing & construction expertise.