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Prevent Automatic Contract Renewals in Service Contracts, By: Nicholas J. Meinert, Esq.

Community association boards execute contracts on the association’s behalf with various types of contractors to maintain, repair, and replace their associations’ common elements. Project specific contracts involve a contractor completing a particular project, for example, replacing the roof of a building. Project specific contracts should always include a start date and completion date requirement.

Service contracts involve a contractor performing a service for the association over a particular period of time, for example, snow removal services, landscaping, and laundry equipment. When contractors provide association boards with proposals for service contracts, the contract often includes an automatic-renewal clause. If an automatic-renewal clause exists, the association is often required to notify the contractor within a specific time period before the contract term ends that the association will not renew. Once the contract renews, the  board typically cannot cancel the contract without paying a large penalty, and the contract often renews for anywhere between a month, to five years, depending on the contract language.

A board should always attempt to negotiate the automatic renewal provision out of the contract, or, at  a minimum negotiate a longer period of time to give notice of non-renewal. If your Association already has contracts with automatic renewal clauses, now is an ideal time to mark your calendars with the dates of  the auto-renewal deadline. Do not miss the  opportunity to part ways with contractors who are not performing to the board’s satisfaction.