Locking in for a Lower Price: Long-Term Contracts

By Sandra Gottlieb, Esq.

Understandably, service providers such as cable or satellite dish companies will regularly seek long-term contracts of five years or more with homeowner associations. They explain that this is because their up front costs related to getting their systems set up within the association are significant, and they want to be reasonably sure that they can earn a profit.

Long-term contracts can provide potential cost savings to many homeowner associations, and a proper contract prepared by an attorney experienced in common interest development law can ensure that the association gets what it pays for. However, some boards of directors are unaware of provisions in their governing documents that may limit the board’s ability to enter into long-term contracts. Sometimes, CC&Rs or Bylaws will not allow the board to enter into any contracts with a term in excess of a certain number of years (usually one year) without the vote and approval of the members (usually a majority of the voting power). Some more recent CC&Rs or bylaws provide for certain exceptions for laundry room leases or contracts, cable television or telecommunication services.

Because contracting with common interest developments (condominiums, planned developments and stock cooperatives) is a regular practice with major telecommunications providers, they are aware that many governing documents will contain these kinds of provisions, and they should perform due diligence by reviewing governing documents prior to contracting with an association. However, this doesn’t always happen. If a provider fails to review the CC&Rs and the board is unaware of their restrictive CC&R provisions regarding long-term contracts, the stage is set for entering into a contract without the proper authority to do so. As you can imagine, this can result in quite a legal mess that must be cleaned up, and it places the members’ access to the provider’s services at risk.

If your association is considering entering into a long-term contract, let the attorneys at SwedelsonGottlieb assist you to ensure the association is properly protected. Contact us at 310-207-2207 today.

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