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August 13, 2007
Long Term Contracts - Be Very Wary
I am starting a series on contracts that will result in a full blown article which will be posted on my website at some point, and will also trigger the next E-newsletter touting the 5 most common - and worst - mistakes that Boards of Directors make in signing contracts. If you want to get on the list to receive the E-newlsetters automatically, go to my website [http://www.californiacondoguru.com] and enter to get to page 2, and all you need to do is signup - that's the only way I can reach you!
Now, for one of the worst situations I have seen. Some boards get locked into long term contracts without even realizing it - I mean really long term, with really long term rollover provisions. These often occur if the Board or management misses a short "window of opportunity" to terminate the contract. When I say locked in, I mean really locked in. Some of the laundry providers' contracts are the worst. Notice that I did not say "service provider". Some do not provide very good service.
POINT 1: Competive Bidding is the Key! Almost Every Contract is Negotiable.
If you have 3 laundry provider contracts to review, and like the terms of one better than the other, talk to the provider you like the best and negotiate!
POINT 2: Long Term Contracts Are The Bane of Boards.
If you are handed a contract that has a term that is more than a year with a rollover provision for the same term that kicks in if you miss the termination date, and there is not a reasonable way to end the relationship if you do not like the service that you (don't get), then run the other way. My question to you: have you even checked your Bylaws to see if they even allow the Board to enter into such a contract? Many Bylaws have a one year limitation on contracts.
You may hear the song and dance from the provider that entering into a long term contract is necessary to allow the provider to recoup the cost of the installation and/or the machines. You may hear that the long term nature of the contract will save you money, and it may, in certain situations, but in others, it can spell disaster. Of course, I advise you strongly to check with your legal counsel with regard to any contract. However, if you end up with a long term in a contract, with no way out, with an automatic rollover provision for the same or a similar long term, that happens automatically, and you forget to calendar the magical 90 day window to terminate, it can be very frustrating, costly and disastrous. (And can someone please tell me who can effectively calendar some event 5 or 9 years out?)
A laundry service provider (or cable, or other provider "selling" the idea of a long-term contract) does not have to lock you into a long contract to win and keep your business; all they have to do is perform. Believe it or not, there are providers that believe performance and satisfaction is important.
There will certainly be more on contracts to come .... stay tuned!!
Posted by Beth Grimm at August 13, 2007 6:52 PM