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posted: 5/10/2014 12:01 AM

Boards should be careful with contracts that include automatic renewals

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Q. Our association entered into a three-year elevator maintenance contract. The contract automatically renews for additional three-year terms unless notice of nonrenewal is given to the elevator company. The contract says the notice of nonrenewal has to be given within a specified period of time before the initial term of the contract expires. We missed the deadline to give the notice on nonrenewal. Is the automatic renewal provision enforceable?

A. Yes, in general, the automatic renewal provision is enforceable. Associations must be very careful when entering into a contract that includes an automatic renewal provision.

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Associations should make a decision whether to enter into an agreement that automatically renews -- that is usually negotiable. If the association does agree to such a provision, it should consider whether to agree to a provision whereby the contract renews for the same length of time as the original term, or whether subsequent terms should be for a shorter term. Associations must keep a timeline to keep track of all contracts, particularly those that automatically renew, in order to know when to send notice of nonrenewal if that is the board's desire.

It is also important to consult with an attorney before issuing notice of nonrenewal of a contract that automatically renews. There may be procedural nuances that the layperson may miss, resulting in a failed termination and possibly expensive litigation over the validity of the termination. In the worst case, the association may find itself with two contracts if a termination of the original contract is ineffective. That is, the association could find itself in a contract with the original vendor, and a contract with a new vendor that the association engaged when it thought the original vendor's contract was terminated.

Note, too, that some contracts include a right of first refusal provision, in addition to an automatic renewal provision. Under such a provision, even if an association properly terminates a contract, the association would have to provide the vendor a right of first refusal on a proposed contract with a new vendor. So, termination of the contract with the original vendor may not end the relationship. This underscores the need for associations to have all contracts reviewed by its attorney.

Q. Many residents of our association have dogs. The barking of the dogs can be very annoying. I complain to the board whenever I hear a barking dog, but the board has not done anything about the problem. Doesn't the board have a responsibility to address the noise?

A. Dogs bark; that's a fact of life. So, there is going to be some amount of barking in an association that permits dogs. A typical covenant says something like "nothing shall be done in a unit that is noxious or offensive, or that constitutes an annoyance to other residents." The issue then is not whether a dog is heard barking. Rather, the issue is whether the barking rises to the level of violating the association's covenants or rules.

It may be that the board in your situation has made a determination that the barking you have complain about does not rise to the threshold level of a violation. You should certainly inquire to see if that is the case. When barking does reach a level that, in the determination of the board, is a violation, the board could levy fines against the owner after providing the owner notice and an opportunity for a hearing. If the problem is serious enough, and other measures are not successful in curbing the barking, the board may be able to require the owner to remove the dog from the property.

• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in Buffalo Grove. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.

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