In recent months, nationwide fuel prices have increased dramatically. Condominium and homeowners’ associations are increasingly seeing contractors, particularly landscapers and other recurring-service vendors, add line-item fuel or gas surcharges to invoices. Even when the base contract price appears settled, these add-ons can create budget volatility, owner frustration, and disputes over whether the association is obligated to pay amounts that were not clearly priced or approved.
To avoid potential surcharges for high fuel prices, contractor proposals, which are considered to be contracts, must be carefully reviewed to ensure they do not authorize additional charges. Certain proposals explicitly include language regarding fuel surcharges and permit additional fees above the contract price when fuel prices rise above a stated threshold. Other proposals may not directly address fuel surcharges based on rising fuel costs, but instead include a vague provision that authorizes the contractor to shift increased expenses to the customer. The best practice is to have the association’s legal counsel review the proposal before signing it so that language can be added prohibiting fuel surcharges or, at the very least, the board can be fully aware of any potential charges the proposal authorizes and factor them into its business decision of whether or not to enter the contract.
Preferably, the contract will set a capped contract price, and only allow charges over the contract price with written board authorization. If the contractor insists on fuel surcharges to some extent, the board can consider including a base price for fuel, and a requirement that there will be no surcharges unless the base price is above some increased percentage (e.g. 10%). This also allows for a termination of the surcharge if the price then comes back down.
If an association has a contract and receives an invoice that includes a fuel surcharge, the board should contact legal counsel to determine the validity of the charges and whether the association is legally responsible for paying them. When surcharges are not explicitly authorized, the precise contract language is crucial to determining the association’s obligation to pay the charge. A review of the contract by the association’s legal counsel can also reveal weaknesses in the contractor’s position based on the contractual language so that the board is in a better position to dispute the charges.
The fuel pricing spike across the U.S. serves as a critical reminder to community association boards to double check proposals from service vendors. Do not hesitate to contact Kaman & Cusimano LLC before approving payment to confirm whether the charge is authorized and enforceable. If your association is not currently a Kaman & Cusimano client and is interested in learning more about our services and how we can help, please click the following link: Request for Proposal and type “Fuel Surcharges” in the subject field.
