Q: Can HOAs fire a contractor under contract?

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Q: Can HOAs fire a contractor under contract?

“We have a lawn maintenance and snow removal contract signed by a previous board for five years. There is no performance clause and no escape clause. The performance has really gotten bad. Several meetings with the contractor has ended in failure as his answer is, ‘I have a contract. Live with it.’ What can we do, if anything?”

– John from New Berlin, WI

Well, the vendor alleges that they have a contract, but that may not be accurate. We’ll get to that in a bit.

This is a terrific example of the importance of a well-crafted contract. A good contract specifies not just the terms of payment, but also the scope of work, as specifically as possible, and also addresses the steps that must occur if the contract is to be altered or amended, or if either party must terminate the contract. Previous boards probably dropped the ball by approving such a vague contract. That’s water under the bridge now, though. It’s up to your current board to look out for the best interests of the owners it represents.

Address communication problems

Can you manage a relative's property without a license?In a normal situation, the first step is to address the communication problem. Obviously, there’s a disconnect between what you expected of the maintenance and snow removal vendor and what they think is acceptable. If the contract doesn’t define what the vendor is supposed to do, you’ll have to renegotiate the scope of work and create an addendum to the contract. And if you are renegotiating the scope of work, then the hours and equipment usage the vendor will have to commit will probably change, and bang: You have almost a whole new contract.

For example, a lawn maintenance and snow removal company would be thrilled to have a conversation with someone about expanding the scope of their work. This conversation would provide them with a chance to negotiate for more revenue, and to have more of a “flagship” property to show other prospective clients.

You should want to know what you’re paying the vendor to do. Is your monthly retainer extremely low compared to what other vendors would charge to execute the services that you are expecting? After all, you get what you pay for. You may want to get a few estimates so you know what you’re dealing with.

In this case, it sounds like the business relationship between the HOA or condominium board of directors and the vendor may be beyond redemption. Someone worth keeping on would have responded more constructively at the first meeting!

Exiting the contract

If you want to terminate the contract, the trick is how to do so without exposing the association to a breach of contract lawsuit from the vendor. This may be doable, but you’ll have to have your ducks in a row.

First, establish whether you even have a valid contract. You might not. To be valid and enforceable, every contract has to have what lawyers call the “essential elements of a contract” in place. These essential elements are defined by state law. Since you’re in Wisconsin, let’s take a look at a venerable source, “The Business Law of Wisconsin,” by Edward and Charles Voigt. Yes, it goes back to 1904, but lawyers have had the essentials of contract law figured out for a long time, and their explanation is terrific.

According to the authors, Wisconsin law requires that four essential elements be present: an agreement, competent parties, consideration, and the thing to be done or omitted, usually called the “contract matter.”

In your case, it appears the first element may be missing: An agreement means the two parties have had a “meeting of the minds,” and therefore there is no real agreement. Nobody knows for sure what both parties agreed to if it’s not in the contract. Furthermore, the Voigts state that the agreement must be both “entire and adequate.”

Your contract also may be deficient in the fourth element: There’s no specification of precisely what is to be done (See pg. 57 and following). For example, “The agreement must be entered into by the parties so that the subject matter can be ascertained,” write the Voigts. Courts will not make a contract for parties, nor enforce one whose terms cannot be ascertained.

Yes, the Voigts were writing over a century ago. But subsequent case law at all levels has upheld their reasoning: Courts can’t enforce contracts that aren’t specific enough to be understandable. We’ll leave it to you and your legal counsel to determine whether this applies to your specific situation.

The elements of a contract are in place – what now?

In the event you do have an enforceable contract, then in order to terminate the contract except by mutual assent, you’ll have to demonstrate that the vendor is actually in breach of it. Otherwise, the contract will remain in force until someone does breach the contract, or the contract becomes impossible, or one of the parties ceases to exist.

Next, document the poor performance on the part of the vendor. Have photographs, dates and times. For snow removal, photograph the accumulated snow and ice and record the time that has elapsed since the precipitation. You are going to be able to demonstrate a breech in contract before the vendor ever could. If the vendor ever tries to sue you in court over terminating the contract, then he’s going to have to deal with the counterclaim, and that’s going to make him look pretty bad to the local business community.

You have some leverage in this regard: You could report the vendor to the Better Business Bureau, with a formal complaint, or leave negative online reviews on websites like Yelp (but be aware that this could possibly expose your association to defamation suit if you are careless). If the vendor wants to continue attracting business, he will want to play ball rather than have you damage his reputation with truthful complaints online and on social media.

Compensation and damages

If you do terminate the contract (simply by saying you’re not paying for any future months), could the vendor potentially sue? Sure. This would be quite likely in the early weeks of a contract, if a vendor had just hired extra staff, trained them, and bought some riding lawn mowers and extra snow removal equipment to service the account. In that case, they’ve spent a bunch out of pocket, and could be entitled to recoup damages.

This is a question to put to your legal counsel: Is there a valid contract here? Demonstrating that there’s no legal contract in place seems to be the most promising and least risky avenue. But it hinges on the actual language in the contract document.

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