Contracts! What your Board of Directors needs to know
You live in a condo, and you love it. Your garbage gets picked up every week without any issue. The elevator works fine most of the time, and the lawn is cut in summer and snow removed in winter. No worries, right? Then you decide it is time to take a turn on the Board, and you get elected at the Annual General meeting. Now what? You get a better look at what all your neighbours think about the elevator being inoperable 4 times a month and that the garbage contractor isn’t putting the bin back properly, impeding someone’s parking access.
You had no idea there were any issues. Still, the Board has decided to look into these contracts, get quotes, get rid of the elevator contractor and the garbage contractor, and see if the Corporation can save some money by changing contractors. The quotes come in, and the Board sees savings on both contracts and decides to terminate the elevator and garbage contractors. It is at this point that the termination clauses come to your attention. That’s right; an elevator contract is a five-year contract that renews automatically for another five years unless you provide in writing an intent to terminate, but you cannot submit that earlier than 120 days before the contract renewal date. Still, it must be submitted before 60 days from the renewal date. You have missed the window, and you are now stuck with them for another five years. What can you do? The service has deteriorated, and the Board is not happy to be paying a premium for another five years.
This is happening more and more frequently. Vendors that provide services to Condominium Corporations are taking advantage of the fact that Board members change, and in some cases, often. If one Board signs a contract for five years, it is likely not their intention for future Boards to be tied to that contractor for 15 years, but this is precisely what is happening, and there is little recourse for poor service. Some contracts will let you out of the contract if you pay for several months of service, but this gets costly.
Board members should keep a calendar of expiry dates of contracts and note the terms in the agreement for renewal/termination. Board members that have a manager to rely on should make sure the manager is doing this for them and note the terms of the contract for the Board at the time of signing. It is becoming more evident that longer-term agreements may not be in the best interest of the Corporation, giving them less choice and accountability when it comes to service levels.
In any case, it makes sense to review all your contracts and keep a calendar of any key dates outlined in renewal and termination clauses so that the board can support the vendors accountable for the services they are contracted to provide. It may be that the Corporation is paying a bit more per month for services that are contracted short-term (1 year), but it will be far less than having to pay out a contract to get the standard of service the owners deserve. In the end, these vendors do want your business, and shorter-term contracts will keep them working in your best interest to maintain the contract.