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Beware of the Proposal

Quorum

The urge to just sign a vendor's proposal is always great. The work needs to get done, and everyone wants to move forward. No one wants to spend the additional money for an attorney to review the agreement and delay things further. Resist the urge to just sign the proposal and take a moment to review the terms to see if there are any contractual landmines. At that point, you can decide if further review of the proposal is required.

Vendor's proposals/agreements are generally drafted by the vendor or its attorney to protect the vendor's interest, not the community association's (CA) interest. While each proposal varies based on the scope of work, there are a number of provisions to always look out for. The following will identify a few important ones that need to be reviewed carefully.

Termination

Search the proposal to see how termination is addressed. Some proposals will not permit early termination or tie termination to some type of cure period. Some long-term types of agreements will restrict the CA's ability to terminate to the time that the contract is set to renew, which if missed can lead to the renewal of the agreement. Neither of these termination scenarios is desirable for the association. CAs should seek to include in the agreement the ability to terminate the agreement, with or without cause, upon a certain specified amount of notice. The notice period for a “with or without” cause termination can range depending on the scope of work, ranging from immediately to 90 days.

Termination Penalty

Some proposals will allow the CAs to terminate the agreement, but will assess a penalty. A termination penalty should not be accepted if assessed as a result of termination with cause and should be either deleted or negotiated if assessed as a result of a without cause termination by the CA.

Limitation on Liability

Be on the lookout for a provision that limits the vendor's liability, especially when limited to the amount of the fees for the agreement. The association should seek to have this provision stricken. If the vendor will not agree to strike the provision entirely, consider alter­ native language such as limiting liability to the amount of coverage provided by the vendor's insurance coverage, the amounts of which are specified in the agreement.

Insurance

All agreements must require the vendor to maintain insurance coverage in the amount appropriate, for the work being performed. Typical coverage includes commercial general liability, automobile liability, fidelity, and when money is involved, excess liability, worker's compensation, and professional liability for engineers and architects. It is not sufficient for the vendor to simply agree to maintain insurance without stating the amount of coverage sufficient for the work being performed.

Venue

The venue provision addresses the jurisdiction in which a lawsuit would be filed. Especially when dealing with national companies, confirm that the venue is the state where the CA is located. Having to defend or prosecute the case in Georgia is not going to be cost effective for the association. If the vendor will not yield on this issue, the board should obtain alternative proposals, unless the vendor provides a unique service.

Restoration of Property

For those vendors who are doing work on the CA's property, the CA should require in the contract that the vendor is responsible for any damage it causes to the property, regardless of fault. In other words, if they break it, they bought it. Few proposals will include this provision, and it needs to be added.

This was not intended to provide a complete list or a review of all of the issues that arise from proposals. Rather, this was intended to highlight some of the most common issues that arise so each board can recognize a few provisions that should cause pause, and may trigger a more thorough review. As always, if there are questions, check with legal counsel before proceeding.

Jeremy Tucker is a community association attorney at Lerch, Early & Brewer in Bethesda, Maryland who represents community associations and condominiums in a wide range of matters, including general counsel and litigation. Jeremy serves on the board of WMCCAI and is past chair of the Maryland Legislative Committee. For more information on vendor proposals and agreements, contact Jeremy at (301) 657-0157 or jmtucker@lerchearly.com.

This article first appeared in the December 2014 Quorum, the magazine of the Washington Metropolitan Chapter Community Association Institute.

This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.

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