The vast majority of both one-time projects and long-term service contracts  involving vendors and service providers and their community association or HOA clients go  smoothly and either conclude or continue without incident. However, a small  percentage of jobs do jump the tracks in one way or another, and when that  happens, things can get complicated. Sometimes it’s a contractor’s inability to stay on schedule or stick to an agreed upon budget that does it;  sometimes it’s the quality of work itself that’s not up to par. Whatever the cause, sometimes it’s necessary for association administrators to pull the plug on a contract—and that sometimes can be easier said than done.  

Breaking Ties

Before any contracts are signed, experts agree that associations should make  sure that all vendors and service providers are properly licensed and have a  good record with the Better Business Bureau.. Another useful search is your Clerk of Courts office to determine whether the contracting firm or its  principals appear in litigation.  

There are numerous reasons why a community association manager or board might feel  it necessary to break a contract with a vendor or service provider, but  according to Anne Ward, senior counsel for  Ehrlich, Petriello, Gudin & Plaza in Newark, New Jersey, “The most common reason is because there’s been a breach on the part of the vendor. In other words, they haven’t lived up to their part of the bargain—they’re not providing the benefit that they’re supposed to be providing, and that’s a reason to terminate the contract.”  

“The most popular reason I see is that the service is not satisfactory, poor  service or it’s not compliant with the agreement,” says Scott Piekarsky, a attorney and managing member of Wyckoff, New Jersey-based Piekarsky  & Associates, LLC. “That’s typically the reason why one wants to switch vendors.”   

“Any breach of any material terms of the agreement is a reason for a condo association or HOA  to feel it necessary to break a contract,” adds Eric Frizzell, a partner with the law firm of Buckalew Frizzell & Crevina, LLP in Glen Rock, New Jersey. “That would include failure to perform services properly, failure to be on site  during required periods, and failure to respond within required time frames on  a service contract. For example, an elevator service contract might require the service company to respond to a report or a complaint within a time frame and  failure to respond promptly can be a detriment to the building, especially in a  high-rise. Other reasons could be misconduct by workers directed toward homeowners, any type of inappropriate conduct or alcohol on the premises during  work hours. There could be all sorts of reasons.”  

Writing the Contract

The association should decide what it wants to accomplish in a contract, and to  be sure everything is included. In negotiating and writing a contract, an  association board should rely on advice from its manager and management  company, attorney, and consultants—but the board makes the ultimate decision on the terms to which it will agree.  

“The best way an association can protect itself against contractor problems is  through written contracts,” says Piekarsky. “Written agreements with clauses to provide for extrication, exit and  cancellation if there is a problem. Standards can be set, representations can  be sought, warranties and guarantees obtained, and a procedure where if there  is a problem, they give notice and an opportunity to cure. There’s also the basic, obvious stuff in writing a contract; who the parties are, what  the service or product is and the pricing and the timing to deliver.”  

“Too often associations will enter into contracts without having their attorney  review them and the contracts will fail to adequately specify what the  contractor is going to do,” says Frizzell. “One instance where this arises, a contractor will submit a one-page proposal and  the association considers that proposal to be a contract, when in fact it  normally needs to be fleshed out in great detail with regard to services that  are going to be provided, remedies and numerous other provisions, such as  insurance and indemnification.  

“So two key provisions in any contract, with any contractor or service provider,  are insurance provisions to make sure that they provide proof of adequate  insurance,” Frizzell continues, “and that they provide an endorsement that names the association and management  company and board additional insureds,” says Frizzell. “And an additional provision that says in simple terms that if the contractor  breaches the contract or is in violation of any law or is negligent in any way  causing damage to the association or any of the residents, the contractor is  going to fully indemnify the association.”  

 “The critical thing is to have a contract drafted which makes it clear they can  terminate for cause,” adds Ward. “Most contracts provide that they can terminate for cause and that you have to  give a certain amount of notice. The best way to draft it so that if there is  cause, you don’t have to give that much notice, or otherwise you have to pay those monthly  fees, so it has to be a contract which is drafted carefully. The contract that  the association has with a vendor should be very clear in terms of what that  vendor’s obligations and responsibilities are. That’s more important than anything else.”  

 Here are a few additional elements real estate experts believe that associations  should seek to include when writing a contract:  

 • Termination for no cause, which could occur if the association board decides to get rid of a contractor it doesn’t like; if a new board or management company wants to replace the contractor with another it prefers; or if the board elects not to complete a project that  is already underway. Then the association must pay the contractor for all costs  and expenses he incurred prior to the termination.  

 • A default clause, which allows the association to cancel the contract if the  contractor doesn’t cure a default within a specified time after notice by the association. The  time to cancellation may be five, 10, or 30 days.  

 • A description of the work to be done, including a comprehensive scope of work  statement, and a schedule of values containing a complete breakdown of  quantities of materials and labor and their associated costs.  

 • A schedule that specifies three dates: when the work will begin, substantial  completion, and final completion.  

If Problems Arise

 Piekarsky believes that if a contract dispute develops, the board should first  approach their management company. “It depends on the level of the problem, but typically it’s a situation where the manager will try to work it out,” he says. “Maybe the problem is an oversight, a misunderstanding, maybe the owner or  foreman didn’t know about the oversight. So first you try to work it out through amicable and  friendly means to resolve it. Many times it’s a one-time thing and unintentional. Beyond that, sometimes it requires getting  the association’s attorney involved and thereafter there may be drastic measures of terminating  and in the most serious and drastic cases, there may be litigation.”  

“The board should keep good records with respect to what’s occurring,” says Ward. “For example, ‘say you have a vendor that said they would have a receptionist or somebody on the premises visible at all times,’ and ‘let’s say, they’re not living up to their responsibility,’ somebody should be taking notes and keeping records. For instance, ‘say, on May 22nd there was nobody on the premises.’ So if you end up going to court you have a record of the breach and you should  send advance notices to the parties in question.”  

“If there is a problem, you want to sit down as soon as possible with the  contractor and review your areas of concern. You definitely want to try to work  things out,” adds Frizzell. “You also want to be careful to not make a statement that is inadvertently  prejudicial to the association in the event, you can’t work things out and it ends up in litigation. Sometimes, people may be afraid  of confrontation so they minimize what their concerns are. They may make a  statement like ‘this really isn’t a major issue,’ or something along those lines. You don’t want to make those types of statements. You also want to get your attorney  involved, earlier rather than later.”  

Most Contentious Contracts

Certain types of repairs and services are especially prone to contract disputes,  construction-law attorneys say. Roofing jobs, concrete restoration and  replacement of windows and sliding glass doors are notorious for generating  disputes, as are landscape maintenance and solid-waste collection agreements.  

“Construction related work is a very good example,” says Piekarsky. “My opinion is because you have so many variables from the quality and the nature  of the product to the skill of the workmen and the weather conditions. There  are just so many variables, and if they're all not just right, something that  can seem so simple to do can turn into a disaster. The big thing is experience  and reputation; when you’re working with a vendor who has good references you’re probably not going to have those problems.”  

 “I think that there’s a greater chance for disagreements about whether the services are being  properly performed,” adds Frizzell. “If someone is supposed to provide you with an A-B-C brand photocopier and that’s in the contract, you either get it or you don’t, the more specific the better. If it’s a materials contract it’s easy to confirm if you received the materials you ordered, but if it’s a services contract and the contract is drawn with terminology that is too  vague that can lead to disagreements.”  

 In closing, dealing with contracts—including extricating your board or association from one that's no longer  meeting your requirements or expectations—boils down to doing your homework beforehand, making your needs and standards  clear (and making sure they make it into the language of the contract) and  involving your legal counsel earlier in the process rather than later.  Following this protocol will not only save you time and headaches, it will save your building or HOA money in the long run.  

Staff writer Christy Smith-Sloman contributed to this  article.