Hold Up: 5 Areas to Negotiate on Elevator Maintenance Contracts

Properly operating elevators rank near the top of the most important  — and most visible —equipment in a community association. Yet some communities sign standard service contracts without giving the terms much thought.

“One of the biggest mistakes across the board with associations is not having a lawyer look over the elevator contracts,” says Jennifer Biletnikoff, a shareholder in the Naples, Fla., office of Becker & Poliakoff. “There are a lot of provisions that I’d recommend changing if possible.”

Here are some of the critical areas associations should try to negotiate with the provider.

1. Duration and Auto-renewal

Every manager has been in that situation where owners or board members demand they fire a vendor immediately. “The board gets very upset and calls the manager and tells them to terminate the contract,” says Paul Grucza, director of education and client development at the Seattle-based management company CWD Group, Inc.

“The manager has to ask if they’ve looked at the contract because it has specific dates and circumstances under which the contract is terminable. If those terms aren’t met to the letter, the contract can’t be terminated.” Elevator maintenance contracts can be particularly difficult to get out of prematurely.

“Every elevator maintenance contract I’ve looked at is of a longer duration, like five years,” Biletnikoff says. “Those are fine if it has a 30-day termination notice with or without cause.

“But a lot of them require you to give notice of deficiencies or breaches and the opportunity for the company to cure those before you can terminate. As a lawyer, I hate those kinds of provisions.”

Perhaps surprisingly, though, Biletnikoff doesn’t have a big problem with evergreen clauses that automatically renew.

“As you long you have the ability to terminate without cause by giving 30 or 60 days’ notice, auto-renewal isn’t so concerning to me. It’s more problematic if your only right to cancel is, say, 60 days before the end of a term. Then you can be stuck.”

If your clients have that type of provision, you need to be vigilant.  “We’ve set up triggers in all of our managers’ maintenance charts to know 90 or 120 days out from the end of the term so they can advise their boards if they wish not to renew,” Grucza says.

2. Maintenance Visits

Don’t let your clients sign elevator service contracts that are vague about maintenance visits.

“The number one complaint I get from clients is ‘we have this contract for maintenance, but they’re never here,’” Biletnikoff says. “A lot of elevator contracts talk about maintenance visits, but they don’t specify how often maintenance will be performed.”

So what kind of detail should you look for?

“A solid provider is going to identify all the critical component pieces that must be looked at every month and also have a special section with items that won’t come up all the time, such as the federally mandated five-year load test for elevators that go up four stories or more,” Grucza says.

“I have our managers check if the contract refers to that load test, how it’s undertaken, and if it’s a separate cost.”

3. Service Calls

Service calls are inevitable, especially on aging elevators. “The older the equipment, even though it’s being maintained, the greater the opportunity for elevator failure,” Grucza says.

The contract needs to be clear about how service calls will be handled. For starters, it should spell out reasonable response times for service requests. “In a non-emergency situation, reasonable is within 48 hours,” Grucza says. “In an emergency, response should be within two hours of dispatch.”

The contract should define what constitutes an emergency and whether emergencies trigger extra charges, as well as what’s considered to be an “after-hours” call and the related costs.

4. The Nitty Gritty

Biletnikoff advises associations to also scrutinize the exclusions. “Pay very close attention to the exclusions because they often contain provisions regarding obsolete components,” she says. “We see so many changes in the mechanics that, nine times out of 10, most of the stuff they need for a repair isn’t covered so you’re paying extra costs.”

The fee schedule warrants a close examination, too. “I recently saw one that said that if the client terminated, it was anywhere from a $500 to $1,500 transfer fee to reprogram the elevators,” Biletnikoff says.

5. Volume Pricing

Managers with multiple elevator communities in their portfolio may have some leverage when negotiating on behalf of their clients.

“We were able to negotiate a 22 percent reduction on month-over-month costs on the monthly contract with a provider who serviced 80 percent of our downtown buildings,” Grucza says.

Use the Association Attorney!

Boards sometimes are reluctant to bring in the attorney for fear of the cost, but Biletnikoff and Grucza agree that elevator contracts are one area where attorney input is essential.

“On every single elevator service contract, before the board signs it, it’s a requirement in our shop that it goes to association counsel to be reviewed,” Grucza says. “We want someone with some legal oomph to go over it to make sure the association is protected and it’s fair.”

And the contract doesn’t have to get more complicated simply because an attorney is involved. “We can often just create a one-page addendum to get rid of some of these worrisome provisions,” Biletnikoff says. That can save a whole lot of money and stress — for the board, the owners, and the manager — down the road.