New York attorney gives advice to property managers

Property managers are the ones who usually negotiate, review and often sign contracts with contractors on behalf of the owners they represent. These contracts can vary tremendously in scope and dollar amount. Often they are signed without the advice of counsel. They can be in the form of a one-page proposal or can be many pages long. I have found, the shorter the contract, the more likely it is to lead to problems. It is not that the number of pages matters per se, it is that shorter, proposal-type contracts are usually signed or entered into more casually and without as much negotiation of the terms. People tend to look at the scope and the price, then sign on the dotted line. As an attorney who handles the lawsuits that develop from these contracts, I can offer some advice on how problems can arise and how to avoid them.

The first problem that can arise is the easiest to remedy. Both parties must actually sign the contract This is one of the biggest and most common mistakes that property managers make. They will ask a contractor to send or fax a proposal. The contractor will oblige and fax back a proposal, which the contractor has signed to speed up the process. Since the property manager has received the proposal back and knows that he wants to have the contractor do the work he may just file the contract in a folder, without signing and sending back a fully executed original. Think about it, if there is a dispute later on and the issue involves whether the parties had a signed contract it would be unclear under these circumstances whether they had a signed contract.

If the contract had an arbitration provision and one of the parties wanted to invoke it, they would have to present a contract signed by both parties in order to do so. In the situation described above, there would have to be some litigation in order to try to establish whether both parties had agreed to arbitration. This seemingly small point can be very important.

The next big mistake property managers sometimes make is to ask for a certificate of insurance naming the owner and the property manager as additional insureds, but then fail to have a contract provision requiring the contractor to provide this coverage. When a lawsuit occurs, the owner and the property manager may well not be covered by insurance precisely because there is no contractual language requiring that coverage. It may an exclusion under the contractor's insurance policy Even if the property manager requires the Certificate of Insurance before the contractor is allowed to do any work; there still may be a question as to whether this is a contractual requirement or not.

The same is true for indemnification language. I have seen proposals which say in one brief sentence something like "The contractor will, hold the managing agent harmless." This language may not be enough to accomplish what the level of protection the managing agent desires both for itself and for its client, the owner. When you are in a rush to get work started, none of this may seem very important However; when a workman is injured on a project, every word can and will be analyzed with a magnifying glass and become extremely important It can mean the difference between being covered by your carrier and not being covered.

It is also important for managing agents to make certain that their agency status is clear. Anyone reading the contract should know that the company listed as "owner" is really the managing agent acting as "agent" for the owner. I have seen situations where the roof warranty was issued to the management company and that management company has not represented the building in five years. When you need to use that warranty or sue on the warranty, it can add an extra level of confusion and complexity to the litigation. I advise the management companies I represent to have well-drafted, standardized proposals on hand at the office to cover situations where a contract is needed in a hurry. For large projects, contracts should always be drafted by an attorney who knows this area of the law or, at minimum reviewed by an attorney. Just following these few tips will help to lessen the amount of litigation on projects.

COPYRIGHT 2003 Hagedorn Publication
COPYRIGHT 2003 Gale Group