3 Reasons Your Cooperative Attorney Needs to Review Contracts

Your Cooperative attorney wears many hats.  Obviously they will litigate your nonpayment cases and evictions, but sometimes Board’s and management companies forget to use them for arguably the most important task…reviewing contracts.

We see all too often that Cooperative’s will rely on canned or template contracts provided to them by the vendor/contractor or perhaps one they retrieved on-line thinking it must legally protect their interest.  Sometimes they are right.  Often, they are not, and it can cause many problems and cost your membership thousands, if not tens of thousands of dollars.

Calling your attorney after you signed a bad contract is trying to put the horse back in the barn. Here are a few examples to let the message sink in:

1. Management Contracts

While the vast majority of management companies we know use standard language widely accepted in the industry, many times, there will be terms within the management contact that can be very unfair and problematic.  Your cooperative attorney will spot these right away.  Are you agreeing to a term that cannot be canceled upon 60 days’ notice?  But, are you responsible for the entire term if you want to change management companies?   What are your indemnification obligations?  If the cooperative has to reimburse the management company as a result of their actions which caused a lawsuit, you should not necessarily be automatically responsible. We will make sure the management companies use language that avoids the cooperative isn’t responsible for their mistakes.   There are big differences in the terms: “negligence” and “gross negligence.”  The difference may cost you.

2. Contracts for Construction

Your cooperative attorney will assure essential terms are mandatory.  Adequate guarantees of workmanship and warranties are non-negotiable.  We had a client years back who did not have our office review the contract on a 7-figure project.  The workmanship was horrid and required massive repairs. The contractor refused to provide anything to remedy the situation since it fell outside of a short warranty period.  The client should not have had to pay out of pocket for the repairs.  Our own experts verified the poor workmanship, yet the court held the client to the strictest reading of the contract terms. Since the repairs came after the expiration of the short warranty/guarantee of workmanship, they were stuck and the contractor got off scot-free.   The reason we use this example is that the court stated to the parties during the ruling, this should have been caught before signing the contract and his hands were tied.  Obviously, he felt bad for the injustice that occurred, but people may enter into bad deals.  This one was.

3. Landscaping Contracts

Be wary of deals where you are getting a discount in consideration for extended terms of contracts. We have seen a lot of these vendors give you a sweet deal if you sign on for 3-5 years. However, if you cancel it any sooner, they will hit you to repay the discounted amounts.  What happens if you terminate because of poor workmanship? It seems unfair the contractor should be rewarded for their poor service and you have to compensate them in a form of liquidated damages because of their failures.  This is not cool in our book, and it shouldn’t be for you either.

What is the takeaway?

First, Contracts that your cooperative attorney did not draft are not contracts looking out for your interest.

Second, contracts that your cooperative attorney did not review cannot be relied upon to assure your interest has been protected. My dad who is an engineer taught me a great lesson growing up: measure twice, cut once. It rarely requires extensive time or costs to have your cooperative review any proposed contract or to provide proposed revisions or supplemental addendums, or what we call “wrap around contracts.” There is nothing more frustrating than a client being screwed on poor workmanship, or an unconscionable contract term that could have been prevented, particularly those that result in an otherwise good case, being lost.

 

About the author

Creighton D. Gallup in an experienced Partner with Pentiuk, Couvreur & Kobiljak, P.C. He has drafted proposed legislation exempting housing cooperatives from the Michigan Truth in Renting Act and the Michigan Consumer Protection Act. You may recognize him as Creighton is a frequent instructor at NAHC and MAHC where attendees benefit from his many years’ experience working with management companies and housing cooperative boards.

 

Please note this content is provided to our readers for educational purposes but it is not intended and should not be regarded as legal advice. Readers are encouraged to consult with competent legal counsel for personalized guidance.

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3 Reasons Your Cooperative Attorney Needs to Review Contracts

Your Cooperative attorney wears many hats.  Obviously they will litigate your nonpayment cases and evictions, but sometimes Board’s and management companies forget to use them for arguably the most important task…reviewing contracts.

We see all too often that Cooperative’s will rely on canned or template contracts provided to them by the vendor/contractor or perhaps one they retrieved on-line thinking it must legally protect their interest.  Sometimes they are right.  Often, they are not, and it can cause many problems and cost your membership thousands, if not tens of thousands of dollars.

Calling your attorney after you signed a bad contract is trying to put the horse back in the barn. Here are a few examples to let the message sink in:

1. Management Contracts

While the vast majority of management companies we know use standard language widely accepted in the industry, many times, there will be terms within the management contact that can be very unfair and problematic.  Your cooperative attorney will spot these right away.  Are you agreeing to a term that cannot be canceled upon 60 days’ notice?  But, are you responsible for the entire term if you want to change management companies?   What are your indemnification obligations?  If the cooperative has to reimburse the management company as a result of their actions which caused a lawsuit, you should not necessarily be automatically responsible. We will make sure the management companies use language that avoids the cooperative isn’t responsible for their mistakes.   There are big differences in the terms: “negligence” and “gross negligence.”  The difference may cost you.

2. Contracts for Construction

Your cooperative attorney will assure essential terms are mandatory.  Adequate guarantees of workmanship and warranties are non-negotiable.  We had a client years back who did not have our office review the contract on a 7-figure project.  The workmanship was horrid and required massive repairs. The contractor refused to provide anything to remedy the situation since it fell outside of a short warranty period.  The client should not have had to pay out of pocket for the repairs.  Our own experts verified the poor workmanship, yet the court held the client to the strictest reading of the contract terms. Since the repairs came after the expiration of the short warranty/guarantee of workmanship, they were stuck and the contractor got off scot-free.   The reason we use this example is that the court stated to the parties during the ruling, this should have been caught before signing the contract and his hands were tied.  Obviously, he felt bad for the injustice that occurred, but people may enter into bad deals.  This one was.

3. Landscaping Contracts

Be wary of deals where you are getting a discount in consideration for extended terms of contracts. We have seen a lot of these vendors give you a sweet deal if you sign on for 3-5 years. However, if you cancel it any sooner, they will hit you to repay the discounted amounts.  What happens if you terminate because of poor workmanship? It seems unfair the contractor should be rewarded for their poor service and you have to compensate them in a form of liquidated damages because of their failures.  This is not cool in our book, and it shouldn’t be for you either.

What is the takeaway?

First, Contracts that your cooperative attorney did not draft are not contracts looking out for your interest.

Second, contracts that your cooperative attorney did not review cannot be relied upon to assure your interest has been protected. My dad who is an engineer taught me a great lesson growing up: measure twice, cut once. It rarely requires extensive time or costs to have your cooperative review any proposed contract or to provide proposed revisions or supplemental addendums, or what we call “wrap around contracts.” There is nothing more frustrating than a client being screwed on poor workmanship, or an unconscionable contract term that could have been prevented, particularly those that result in an otherwise good case, being lost.

 

About the author

Creighton D. Gallup in an experienced Partner with Pentiuk, Couvreur & Kobiljak, P.C. He has drafted proposed legislation exempting housing cooperatives from the Michigan Truth in Renting Act and the Michigan Consumer Protection Act. You may recognize him as Creighton is a frequent instructor at NAHC and MAHC where attendees benefit from his many years’ experience working with management companies and housing cooperative boards.

 

Please note this content is provided to our readers for educational purposes but it is not intended and should not be regarded as legal advice. Readers are encouraged to consult with competent legal counsel for personalized guidance.

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