: Our HOA has a landscaping contract that has been "auto renewed" for the past 10 years. Can they do that?
It is common for service contracts to contain "evergreen clauses." The
provision causes a contract to automatically renew for a specified
period of time
unless the board gives written notice to the vendor that the
association will not renew the agreement.
original sets of CC&Rs have a one-year limitation on contracts. This
required by the Bureau of Real
Estate (Cal. Admin. Code, Title. 10, §2792.21) to prevent the developer
from obligating associations to long-term contracts that may benefit the
developer but harm the association. If the landscape contract you
referred to was
for a one-year period that automatically renewed each year for one-year
periods, it meets industry standards.
the term of the landscape contract was for a period of ten years, it
undoubtedly violates your CC&Rs. That does not make the contract
illegal nor does it make it voidable. It means the
board that signed the agreement intentionally or unintentionally violated the
association's governing documents. Ending the agreement before the ten-year period has expired will be problematic.
Notice of Non-Renewal
Evergreen clauses usually include a notice period of 45, 60 or 90 days
before the renewal date of the agreement. Following is an example:
term of this Agreement will extend automatically for successive 12
month terms unless the Association gives ABC Landscaping written notice
it does not want it renewed. Notice must be given at least 45 days
before the Renewal Date of any term...
I've seen evergreen clauses that require 120 or 180 days
notice before the renewal date. The danger with long notice periods is
that they usually expire before the board starts to focus on the issue.
By then it is too late and the contract has already renewed.
An easy way to avoid such problems is to eliminate evergreen clauses from
all contracts so they become month-to-month after their initial term.
Board's should put together a binder of all existing contracts and set
up a calendar with reminder dates at least 60-90 days in advance of the
renewal notice cut-off for each contract. This will give the board time
to review the vendor's performance and decide whether to give notice of
non-renewal. In addition, boards should always have a contract checklist
that includes legal review before any agreements are signed.
: Associations needing legal assistance can contact us
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