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Laundry room contracts can often contain clauses that benefit the laundry company, at the expense of the board.
AUTHORJohn LaGumina, LaGumina Law Firm
A laundry room is a prized amenity and a valuable source of revenue for the building. But contracts with companies that operate laundry rooms can be fraught with pitfalls.
First off, the contract may look boilerplate, but that doesn’t mean you don’t need to read the fine print and show it to your attorney. Laundry lease agreements often have provisions that are not favorable for boards, the biggest one being that they’re written as lease agreements, which makes it harder to break and get out of the contract. They should be written as license agreements, because you’re giving the vendor permission to put machines in your common area. They’re not exclusively occupying the common area, so it shouldn’t be a lease.
What are the specific clauses in these contracts that put boards at a disadvantage?
The three really bad ones are automatic renewals, clauses that make it really difficult to even figure out how and when to terminate, and the right of first refusal, which is especially onerous. I’m talking about situations where the co-op or condo board is entirely dissatisfied with the vendor and would like to switch, and has interviewed new vendors and is ready to go. And all of a sudden, you see there’s a right of first refusal, which effectively gives your current vendor a chance to match whatever deal the new vendors are offering. So unless they’re going to give you a sweetheart deal, your current vendor is probably going to be able to match it, and you’re stuck with them.
If you are forced to renew, are there at least provisions you can wring out of your vendor to get better service?
You can absolutely beef up service provisions. A typical one would be that if a machine breaks down more than a certain number of times in a certain period, you’re going to get a new machine. Another typical example, especially if you’ve been with a vendor for a while, is to have them paint and fix up your laundry room at no cost.
Let’s say your lease is expiring, and you’re coming up for renewal. Can you negotiate for better terms, and what is the most important thing to lock into your new contract?
No. 1 is to not have an automatic renewal clause. These contracts are usually eight years, and I have yet to see a vendor willing to go for a shorter term. You’re going to be stuck with them for that length of time, but there should be a clause that gives you the ability to get out without having to give a reason when the lease is up. So when you’re at the end of your eight years, you can enter into discussions for that easy out. With almost every vendor contract, there are a lot of important clauses, but termination is one of the most important.
What about getting your vendor to switch to a license agreement instead of a lease?
If the vendor agrees, do it. You can argue that it’s still going to be a fair agreement, since the vendor’s going to make the same money and they’re still going to have eight years. But if you want to get out of it at the end of eight years because you’re dissatisfied, you should be able to.
Now, you can negotiate other clauses, such as giving them a chance to cure. I personally don’t like those clauses, because if you’ve expressed your dissatisfaction to a vendor multiple times and are so fed up that you want to terminate them, what’s the point of going through a cure?
So the bottom line is to have your attorney look over your contract and, if possible, negotiate one that gives you an easy way out?
Yes. That’s why you need to be aware of automatic renewal and the right of first refusal before you sign anything. I recently looked at a contract for this property up in Putnam County and told the client: “Look, I hate to say this, but it’s going to be very difficult to get out of this. The most you might be able to do is negotiate better service provisions. And hopefully on the renewal, the vendor will be more reasonable with how to get out of it at the end.” You’ve got to pay attention if you don’t want to find yourself in that situation.
FROM THE COURTS
May 12, 2021
Board of Managers of the St. Tropez Condominium v. JMA Consultants, Inc.
This litigation is a road map as to what to expect in Florida after the collapse at Surfside. This contract-related case relates to a similar collapse of a façade, but here in New York City back in December 2015. As expected, everybody sues everybody else, starting with the plaintiff condominium’s insurer filing a subrogation action against various parties. At the same time, the condominium’s board brings its own action suing the engineering firm brought in to consult on the façade, terrace, and roof restoration project at the building, for $4 million in damages. The engineers then turn around and bring a third-party action naming anybody that had anything to do with the project.