Reject automatic renewal
Question: I’m a director on my association’s board. Our attorney recommended a specific management company, so we’re concerned that he has a conflict in reviewing their contract for us. There are several questionable clauses in the contract, including this one: “The term of this Agreement shall commence on the date of . . . and shall continue for a period of one year. Upon the expiration of the initial Contract Period, the term of this Agreement will automatically renew for a period of 12 months and each successive 12-month period thereafter unless terminated pursuant to the following sentence: Either party hereto may terminate this Agreement by giving the other party written notice at least sixty days prior to the date of expiration of the initial Contract Period, or extension thereof.”
We’re worried that if we’re not happy with their performance we’ll be stuck with them for a year or risk a lawsuit getting rid of them sooner.
Answer: You are right to be worried. Any association contract that automatically renews should be rejected.
In this instance, if the board misses giving the 60-day termination notice, the contract will automatically continue for another full year. Once the contract is renewed, any attempt to terminate in less than a year may mean damages and a lawsuit -- either the association suing to terminate or the management company suing for the balance of the year’s contract fees. Should that happen, the door is opened to possible personal liability for board members whose decision to sign the contract may not have been in the association’s best interests.
The onus for sending notice desiring to continue the contract should be on the vendor.
Send questions to P.O. Box 11843, Marina del Rey, CA 90295 or e-mail firstname.lastname@example.org.