The term “no cut contract” was originally used to describe a type of contract where a professional athlete would be guaranteed a roster spot for a specified period of time.
The term is commonly used today to describe business service contracts that cannot be cancelled until they have expired. This use to be very common in the property management industry, but not so much anymore. Most associations ask for the right to cancel their management contract for ANY reason with 30 days notice. Management companies that are dedicated to providing good service should not push back against this kind of provision. If a service provider is not performing, why should they retain your business?
This type of contract also makes it much easier to make adjustments to the service as time goes on. Why should a community be locked into a certain staffing level if it is determined that a lower staffing level would suffice?
I have seen situations where communities have had to “pay off” their non-performing property management companies for the remainder of the unexpired term. Has your community made the mistake of entering into an agreement like this? Were there any adverse consequences?
Legal disclaimer – I am not an attorney and I do not play one on TV. This should not be considered legal advice.
by Dan Tiernan, COO, Campbell Property Management