(214) 658-1900 
Swimming with the Fishes: Issues Regarding HOA Pool Monitoring Services Contracts
By: Kristen Pierce
Spring is officially in the air and summer is right around the corner which means that property owner associations across the state of Texas are either beginning to receive quotes and bids from various pool monitoring companies or looking through contracts from prior years to ensure they have properly renewed for the upcoming pool season. While it is important to quickly secure a pool monitoring company before they book up for the upcoming pool season, it is equally, if not more important, to carefully review the contract provided by the pool monitoring company. By the time fall arrives, many associations begin the time-intensive process of terminating the pool monitoring services contract, entering into negotiations due to lack of service, as contemplated and set forth in the contract, incorrect pricing, other varying issues under the contract, or, under extreme circumstances, filing lawsuits against the pool monitoring company for breach of contract and other claims available under the law. While carefully reviewing a pool monitoring services contract cannot completely eliminate issues that may arise, it can help prevent some issues that can arise with these contracts. This article will focus on issues regarding HOA pool monitoring services contracts and contract provisions of which associations need to be aware of.
Texas contract law primarily focuses on the enforcement of the terms and provisions specifically written in the contract itself. Below are a few contract provisions that associations may want to focus on when reviewing their pool monitoring services contract and consider having legal counsel review:
- Pool Regulations
Each pool monitoring services contract (“contract”) must include a provision regarding pool regulations that the pool monitoring company’s staff must ensure all patrons abide by. This is the portion of the contract that should include the pool rules that are available to all homeowners and occupants. Typically, this section includes rules on pool access, conduct of patrons, and items that can and cannot be brought into the pool area. Ensure that all pool rules are included in this section or as an exhibit to the contract so that the pool monitoring company has a detailed list of what is expected from them and relative to the conduct of Owners. If all pool rules are not included in this section, the association may have a difficult time proving that the pool monitoring company breached the contract by failing to ensure the pool was properly monitored.
- Insurance and Indemnification
When an association hires a pool monitoring company, it is important that the association reviews the contract and determines whether the pool monitoring company has insurance and who is the responsible party within the indemnification clause. It is best practice for an association to require proof of insurance (often called a “Certificate of Insurance”) and stipulate such requirements in the contract. Such requirements can include the amount of coverage, specifically what is covered under the insurance, and whether the association is considered an Additional Insured. Practice Tip: Do not rely on the proof of insurance only – call and verify that coverage is in fact in place.
An indemnification clause, also known as a “hold harmless clause” is a clause within a contract that transfers the liability of one party’s actions away from the other. Typically, these contracts include an indemnification clause that stipulates that the association will indemnify and hold harmless the pool monitoring company (including all officers, members, and employees) for and against all claims, damages and expenses which are a direct result of negligence under the contract. While a pool monitoring company may not agree to the removal of such clause altogether, the association may also want to demand a reciprocal indemnification clause in which the pool monitoring company will indemnify and hold harmless the association (including all officers, board members, and agents) for an against all claims, damages and expenses which are a direct result of negligence under the contract.
- Termination and Auto-Renewals
Arguably two of the most highly contested issues concern those involving termination of contracts as well as auto-renewals. Provisions regarding termination and auto-renewals are vital in determining specifically when and how to terminate the contract, and to whom to provide notice of termination. Often, these contracts include specific deadlines for termination and specific deadlines for when notice of termination must take place in order to eliminate an auto-renewal clause. Auto-renewal clauses mean that the contract, including all its terms (and often times a discount in costs of services) will automatically renew for a certain specified period, typically through the next pool season. Failure to terminate timely and properly may result in the association dealing with an issue of auto-renewal, even if the association does not want to work with the same pool monitoring company. While there may be legal defenses that the association may assert to attempt to terminate the contract after an auto-renewal date, it is important for the association to calendar these dates and to give the association ample time to determine whether it would like to continue working with the pool monitoring company or whether they would prefer to terminate the contract. In addition, the association should take careful consideration of the requirements to terminate as termination may be for any reason or for only specific reasons as specified in the contract. Additionally, the contract may require a specific method in notification of termination. The association should carefully review this section of the contract to determine what is and is not expected of them. Practice Tip: Even if the pool vendor representative says you can send the notice by electronic mail, we strongly recommend also sending the notice as required per the contract.
- Entire Agreement
The “Entire Agreement” clause or sometimes called a “Merger” clause is a key provision in contract law. In essence, an “Entire Agreement” clause means that there are no other outside deals or agreements beyond what is specifically listed or agreed upon in the contract. The Association must review the entirety of the contract to verify that all oral, or even written agreements have been documented within the contract. If the contract includes an “Entire Agreement” clause and the association did not include any additional agreements or understandings within the contract itself, a court may not allow that outside agreement into the contract.
- Dispute Resolution
A dispute resolution provision is a portion of the contract that an association hopes it never needs. However, it is important for the association to review specifically what steps or methods the contract requires in order to resolve a dispute. Does the contract require arbitration, litigation, mediation? All these methods have positives and negatives, but some will significantly increase the legal expenses of the association without any guarantee that legal expenses will be collectable from the pool monitoring company should the association prevail. Does this provision require litigation to be filed in a certain county or a certain state that is not the location of the association? The dispute resolution provision of the contract must be reviewed carefully to determine the answers to these questions and for a further discussion on whether the association is willing to comply with the terms of the dispute resolution clause.
- Exhibits/Appendices
Typically, the contract will include various exhibits and appendices that include all types of information including, but not limited to, payment schedules, services provided, and other terms and conditions. The main point of concern with exhibits and appendices is ensuring that the association receives the document(s) and reviews each document carefully. For example, some contracts reference an “Exhibit H” or “Appendix C” only to discover that the association did not receive a copy of such exhibits or appendices, and, more importantly, has no information of what it should contain. While an argument could be made that the pool monitoring company did not give the association all documents under the contract, such argument could be distinguished if the association signs the document and, presumably asserts that they have read and will abide by the terms of the contract. The association must review any references to exhibits and/or appendices and verify that they have received such exhibits and/or appendices.
Contract law in Texas is seemingly straightforward in that the terms of the contract control. While there are various contractual defenses that either party can assert for their failure to abide by the terms of the contract, most of the issues with contracts lie in either a failure to properly review and consider the terms of the contract or an association’s uncertainty in whether they can negotiate the terms of the contract. As a general rule, although contracts are subject to good-faith negotiations, it is vitally important for an association to communicate which provisions must be incorporated into the contract. Your association may consider hiring a property owners and community associations attorney to review your association’s services contract.
Kristen Pierce is an Associate Attorney with Henry Oddo Austin & Fletcher, P.C., with a focus on Property Owners and Community Associations law. This article is made available by the attorney and/or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law; it is not being made available to provide specific legal advice. By using this website and/or article, you understand that there is no attorney-client relationship between you and the law firm publisher or attorney author. This website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.
Apr 17, 2024
