It’s The Law – Tips for vendor contracts.

TIPS FOR VENDOR CONTRACTS

Here are some tips for entering into and negotiating contracts with various suppliers.

It’s the Law By HOWARD BOOKSTAFF, Hoover Slovacek LLP , HAA General Counsel

CONTRACTS ARE IMPORTANT! They determine the rights and responsibilities of the parties. They can also be used to limit liability under certain circumstances.

The best contracts are those that you never have to look at after they are signed. However, when problems occur, contracts become an essential part of either a claim or a defense to a claim. Here are some tips to consider when entering into and negotiating contracts with various types of vendors.

Use a written contract

You wouldn’t enter into a verbal lease with a resident, so why is it any different with a vendor?

Every time a contractor does work for you, you have a contract, even though it may only be a verbal contract. However, if you have any problems with a contractor, it is beneficial to have the rights and responsibilities of the parties in writing. Contracts can cover all or any part of the aspects of your relationship, including outlining the scope of work, identifying payment terms and minimizing liability through indemnification and insurance requirements.

Comply with the Sue Weaver Act

Chapter 145 of the Texas Civil Practice and Remedies Code (known as the “Sue Weaver Act”) addresses an owner’s liability for a claim of negligent hiring of in-home service companies and residential delivery companies. An “in-home service company” means a person who employs a person to enter another person’s residence and for a fee repair of: (i) an appliance; (ii) the residence’s heating, air-conditioning, and ventilation system; (iii) the residence’s pluming system; or (iv) the residence’s electrical system. A “residential delivery company” means a person who employs a person to, for a fee: (i) deliver an item to another person’s residence; and (ii) enter the residence to place, assemble or install the item.

The Act provides that a person who contracts with a residential delivery company to deliver an item, or who contracts with an inhome service company to place, assemble, repair or install an item, is presumed to have not acted negligently in doing so if: (i) the residential delivery company or in-home service company meets certain criminal history screening requirements; or (ii) the person who contracts with the company requests that the company obtain a criminal history background check on any employee of the company being sent to deliver, place, assemble, repair or install an item and the person’s request is in writing and is delivered to the company prior to the company’s employee being sent.

The criminal history check required by the statute provides that the person who hires the designated company will be presumed to have not acted negligently if: (i) at the time a person is hired, the company obtained criminal history record information regarding the officer or employee; and (ii) the criminal history record information shows that, in the 20 years preceding the date the information was obtained for a felony, or in the 10 years preceding the date the information was obtained for a Class A or Class B misdemeanor, the officer or employee has not been convicted of, or placed on deferred adjudication for certain offenses.

In order to avoid a claim that you would be responsible for an employee of a company that you sent into an occupied unit, you want to, at least, make a request that the company obtain the appropriate criminal history background checks in accordance with the statute. It would be beneficial in any written contract to confirm that you have made this request.

Outline the scope of work

What work will be performed by the contractor? The more detailed the description of the work, the less problems you will have holding the contractor accountable. Be sure the contractor is responsible for obtaining all of the applicable licenses and permits and complying with applicable law. Also, be sure to have a clear understanding when the work will begin and when the work will be completed.

Clearly outlined payment provisions

The most common problems owner and managements companies run into is not having clear payment provisions. It is essential to outline when payment is due, how much will be charged and what the terms of payment will be. It is beneficial under certain types of contracts to have a provision requiring that you approve the work before payment is due. Several types of contractors can file liens against the property. You do not want to be surprised when an invoice comes. By outlining these terms in a written contract, you can minimize, or build defenses to, claims.

Obtain a solid indemnity clause, where appropriate.

Depending on your negotiation power and leverage, you may be able to have the contract contain appropriate indemnities whereby the contractor will indemnify you for any claims resulting from the conduct of the contractor, subcontractors or their respective employees. If contractors are coming to your property, be sure that the contractors will comply with all applicable rules of the property with respect to access to and from the property, representations to residents and conduct towards residents.

Have appropriate insurance requirements

Be sure the contractor has the appropriate type and amount of insurance to cover claims relating to its conduct on the property. When appropriate, you may want to require that you be listed as an additional insured.

Job responsibility of off-duty police officers

If you hire an off-duty police officer, be sure to clarify what services you are hiring the officer for. You do not want to be held responsible if a claim is made against a police officer exercising police-type authority on your property. It is beneficial to clarify that the police officer is not being retained for the purpose of exercising the officer’s authority as a peace officer. You do not have the authority, nor should the officer give you authority, to make arrests, investigate or prevent criminal activities or pursue other conduct which the officer is only authorized to perform as a peace officer. You do not want to be held responsible for the actions the officer takes as a peace officer.

Payment provisions in locator contracts

Locators are widely used in the apartment industry. However, most locators are not operating under a written agreement with the owner of the property. This causes problems with respect to determining whether a locator has earned the locator fee assessed. A written contract can identify when the locator’s commission is earned and payable. If your plan is to only pay a locator if the perspective resident has been a resident in good standing for a period of time, its best to provide this in a written contact.

How long is a laundry contract?

Many laundry companies have their own contacts which owners tend to sign without much review or question. These are long-term contracts and could significantly impact property operations for a number of years. These contracts should be reviewed and negotiated when appropriate. You may want to consider expressly stating that after the initial term (which is often five to 10 years or more), the contract continues on a month-to-month basis, rather than for “successive periods” (which could be successive 10 year periods).

New cable contract rules

On February 15, 2022, the FCC promulgated regulations intended to promote the goals of prohibiting cable companies and other video service providers from enforcing or executing contractual provisions that grant them exclusive right to provide video programming service. The rules prohibit certain revenue sharing agreements and require disclosure of exclusive marketing arrangements. The new requirements went into effect for new contracts April 27, 2022. The compliance date for existing contracts is September 26, 2022. If you share revenue with the cable provider or have exclusive marketing arrangements, changes may have to be made to your contract. You should consult with your cable provider to determine how the contract can be revised to maintain compliance with the new rules.

Contracts are a necessary evil in many types of businesses including the apartment industry. You should review your existing operations to determine how you can better avoid problems through written contracts with various types of vendors. Hopefully this series of tips will help you navigate these potentially difficult waters.