LAUNDRY-ROOM CONTRACTS, P.2

Mascera's building, for one, opted for cash-only equipment. "They wanted me to put in the credit-card machine," he says of his building's company, but he notes, many of his building's residents have their laundry done by outside help. "You don't want to leave the cleaning lady your Visa card."

For most buildings, however, the advantage of the machines that accept cards is that they can be more easily repaired. For security reasons, only certain service people can have access to the machines that collect money, says Edward Kwitko, senior vice president of the laundry company Hercules. By contrast, Hercules promises seven-day-a-week service on the credit-card machines, because everyone in his organization can service them without special keys.

Many companies let residents ask for refunds for non-working machines by e-mail; the company then sends a check in response. Others put "instant refunds" directly on the smart cards, after residents call a number, get a PIN code and insert the card in the dysfunctional machine.

Federal regulations that took effects in January 2007 limit the amount of water a commercial laundry can use. Existing equipment won't have to be replaced until it wears out, but in general this means most new installations will use new, environmentally friendly front-loading washers that use less water than.

Because front-loading machines don't have large agitators taking up space, some residents fear they are smaller than the top-loaders. Coinmach regional vice president David Tulkop calls this an "optical illusion," noting the usable space is about the same. Still, Gallagher says, residents face a little bit of a learning curve in adjusting to front-loading washers, which need less soap and can't be opened to add, say, a forgotten sock, once the wash cycle has started. Buildings that switch over may have to conduct some training sessions.

Spin Cycle: Right of First Refusal

Once a standard feature, right-of-first-refusal clauses are growing less prevalent. These give the laundry company the right to match any competitor's offer. This can you’re your building feels stuck with a company whose service isn't up to expectations. However, in a 2005 case involving Coinmach and an Inwood Park co-op apartment building, an appellate court upheld a lower trial court ruling that said laundry-room operators cannot grant themselves a right of first refusal to renew a lease in perpetuity.

Attorney Troup says most but not all vendors have removed them and buildings should keep an eye out. "Just because something is unenforceable doesn't mean it isn't in a contract."
Other clauses to veto are those granting the company automatic renewals, as well as and "minimum compensation" requirements that can change a deal if laundry income drops. Posner, of Century Management, won't entertain contracts that include automatic renewals. "No contract automatically renews anymore," he says. "In the old days you were stuck but [now] people aren't standing for it." In addition, Posner puts into contracts that if a laundry company changes owners, the contract is "null and void."

Termination clauses, however, are hard to negotiate, says Troup, because "the vendor has a very large investment going in, sometimes up to $100,000, what with the state-of-the-art equipment and smart-card machines." One contract he worked on included a 15-day window in which the vendor could cure problems before the contract would be terminated and the equipment removed. "If you try to get any more onerous than that, they don't find it economically feasible."

He advises buildings to ensure that their laundry-room contracts are not structured "as a lease of real property, so they are not leasing the laundry room; they are renting the equipment to us." That way, he says, if a contract must be terminated early, for whatever reason, laundry companies "would tend to get a lot less sympathy from the court." He notes that buildings should also ask for indemnity from the vendor, in the event of damage to a unit-owner's property.

In the end, Mascera's "take-away advice" to other boards negotiating contracts is make the company "commit from a service perspective to what they are promising you. I lived for a long time with a vendor that had really crappy service."

 

Adapted from Habitat November 2006. For the complete article and more, join our Archive >>