Four Things You Need to Know About Elevator Maintenance Contracts
Property management companies need to be aware of the potential areas of risk and exposure in the typical elevator maintenance contract. In general, these contracts renew automatically at the end of each term and there may be little opportunity to renegotiate the contract once it is signed. However, these are often not contracts of adhesion, meaning that they are often negotiable prior to signing them. Here are four areas to take into consideration before and after entering into an elevator maintenance contract.
1. You have the right to negotiate
As mentioned above, property managers and building owners can negotiate the terms and conditions of elevator maintenance contracts before they are signed. When negotiating terms look for three areas in particular: the service contract, references to the type of building and elevator performance metrics.
Regarding the services contract, be aware that the boilerplate template used by the elevator maintenance company will take only some responsibility for some faults. The owner is expected to play an outsized role in maintaining the elevators, with the maintenance contractor charging for many types of service call. Work with a lawyer that is experienced in elevator maintenance contracts and ensure that a larger portion of the preventative maintenance is covered by the maintenance company and that such maintenance is stipulated in the contract.
Another area of concern is the fact that elevator maintenance contracts often do not vary according to the type of building where the elevators are installed. In reality, it matters what type of building it is since hospitals, residential buildings and office buildings have differing usage patterns, user demands and areas of concern. A local lawyer with experience in elevator maintenance contracts will be able to review the boilerplate contract and draft specific terms and clauses that protect your best interests as the owner/property manager of a specific type of building.
Finally, be sure to understand the elevator performance metrics that matter to your building and jurisdiction, then add those metrics to your maintenance contract. That will ensure that your elevator is maintained by your maintenance contractor in a way that complies with local code and the specific requirements of your stakeholders. By doing so you avoid potential fines and other financial penalties (such as reduced lease/rental payments by tenants) caused by poorly maintained elevators.
2. Many potential issues are not included
In the boilerplate of a standard elevator maintenance contract, certain issues remain the responsibility of the building owner/property maintenance company. When negotiating an elevator maintenance contract, care must be taken to more equitably share the maintenance burden related to such incidents as:
- Damage to the car or hoistway enclosures, and other appurtenant apparatus
- Debris or items in the hall door sill tracks
- Elevator doors being knocked off tracks
- Flooding in machine room, car or the elevator pit
- Items of value that fall in the pit (money, keys, ID, jewelry etc.)
- Stuck or otherwise broken buttons
- Vandalism, “misuse” and trapped passengers as a result of “misuse”
“… avoid potential fines and other financial penalties … caused by poorly maintained elevators.”
3. Termination can be tricky
Terminating an elevator maintenance contract can be difficult. There are self-renewing or evergreen clauses as well as a right of first refusal clause. Elevator maintenance contract evergreen clauses usually renew every three to five years. The owner/property management company would typically have a relatively narrow timeframe (eg 90 -120 days) to cancel before the window expires and the contract is non-cancelable for several years. A competent local lawyer with experience in elevator maintenance contracts may be able to soften the rigidity of the renewal window either by expanding it beyond 120 days or eliminating it altogether.
Another area of concern is the right of first refusal clause. This clause gives the elevator maintenance contractor the right to meet or match offers by a competitor prior to cancelation of the maintenance contract. Luckily, there are ways to use this clause to the advantage of the property owner/property manager. For example, property owners/property management companies could present the maintenance contractor with a competitor’s offer that contains terms that the incumbent contractor refused to accept. Ideally, this includes advantageous characteristics like a single-year term and the lack of an evergreen clause.
Elevator maintenance contracts can, of course, be terminated for breach of contract or some other cause. Typically, cancelation for cause can occur after the contractor has been given 30 days to rectify the issue(s). Owner/property managers should keep accurate notes to provide the basis for alleging a deficiency. A letter from a lawyer stating the breach or failure on the part of the contractor and setting a time limit to rectify the matter is a highly effective way of ensuring that either rectification occurs or termination for cause is possible.
Nevertheless, if you are a property owner or management company be sure to legally conclude the relationship with your current elevator maintenance company before contracting another company. In such a case you stand the risk of being sued by the original elevator maintenance company for breach of contract.
4. Prevention is better than Cure
Usually elevator maintenance contracts include the conducting of safety tests, but if something occurs that can affect the performance and reliability of the elevator it is usually the responsibility of the owner/property management company ?
To avoid situations where the elevator maintenance contract does not cover preventative services, it is wise to include the following deliverables in the service contract:
- Inspection and Safety Testing according to local laws and codes.
- Mechanical and Electronic Repairs and Replacements. Including bearings, brakes, gears and ropes.
- Performance and Mechanical Testing of the elevator control system, acceleration/deceleration system, and all safety features (eg. emergency communications system)
- Regular Lubrication of guides, rails, suspension, and safety machines to ensure the elevator(s) continues to run smoothly.
South Florida Law
Are you a property owner or maintenance company with an elevator on your premises? If so, your elevator maintenance contract is a high-stakes, essential agreement that can present a challenge to your business continuity or finances. Beware of agreeing to an elevator maintenance contract without first reviewing it with an experienced local business lawyer. To protect your interests, it is best practice to have a qualified legal professional review all of your contracts and ensure that your statutory rights and the best interests of your business are being protected. At South Florida Law, PLLC we have years of experience in drafting and reviewing business agreements and real estate property maintenance agreements of all types. Contact us today for us to review the document so that you avoid binding your business to terms that may not be in your best interest. Our number is (305) 900-8885 and our contact form can be accessed by clicking here.