UOAQ Newsflash #14 - OTIS 90-day Exclusion Clause
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Dear Subscriber,

Most lift maintenance agreements require notice of termination at least 90 days prior to the contract’s end-date.  Failure to give this notice may allow the contract to automatically renew for another extended period.   The UOAQ has previously suggested to members they should give notice of termination as early as possible: do not wait until ‘just in time’.

We were recently advised of a development in the lift industry.  In particular, the potential exclusion of major components from certain Comprehensive Agreements as soon as the 90-Day Termination Notice is provided to the lift maintenance company…but without any corresponding reduction in the service fees payable to that company.

We make no comment about this development other than to strongly urge all complexes with lifts to read our latest WHO KNEW 4.2 and consider engaging the services of an independent lift consultant if necessary.

So far, we are not aware of this type of exclusion clause being adopted by any other lift maintenance company, but we all need to be very attentive to all aspects of any lift maintenance agreement. There is too much at stake to be unaware of clauses which may work to your detriment.


Wayne Stevens
President
Unit Owners Association of Queensland Inc.

WHO KNEW?  Some Insights Into Strata Lifts

4.2: OTIS’ 90-DAY EXCLUSIONS CLAUSE
A New Twist & It Can Really Hurt

 

Always Beware Any 90-Day Termination Notice Requirement

The UOAQ published WHO KNEW 4.1 in May 2015, alerting members to some of the many risks with long-term lift maintenance contracts, including: Most contracts require notice of termination at least 90 days prior to the contract’s end-date.  Failure to give this notice can mean the contract automatically re-news for another extended period.

At the time, we cautioned members to “…give notice of termination as early as possible: do not wait until ‘just in time’.  In the case of new contracts, handover the termination notice when you sign the contract.”

This article was republished early-2016 on our behalf by LookUp Strata. At the time, we still thought this good advice.
 

A New Twist 

Recently, one of our members raised a concern about our recommendation to handover the termination notice as soon as possible.  Specifically, a body corporate could be severely penalised by a new exclusion clause now being included by OTIS in their Comprehensive Service Agreements.

The UOAQ commissioned an independent, professional review of this new OTIS contract.

The review concluded that upon any 90-day Termination Notice being given by the body corporate, such notice immediately excludes all major components from the scope of the agreement for the remainder of the service period…but without any reduction in the contract fees.


And It Can Really Hurt

As their name suggests, Comprehensive Service Agreements cover much more than the basic ‘grease and oil change’ contract, and naturally cost a lot more.  Significantly, they include repair and replacement of many of the major lift components.  Excluding these major components from the agreement, but without any corresponding reduction in fees, means you may be paying a lot of money for nothing.

At best, the body corporate will not be covered for major components for the last 90 days of the contract, if the body corporate provides notice under Cl.13 on the 90th day before expiration of the service period…but without any reduction in the contract fees. 

At worst, the body corporate will not be covered for major components for the entire contract period if the body corporate hands over a Cl. 13 notice when they sign the contract…but without any reduction in the contract fees.
 

We Sought Confirmation from OTIS

The UOAQ wrote to the OTIS General Manager (QLD) seeking confirmation of our conclusions.

OTIS responded, confirming that “For the avoidance of doubt, should your members act on your advice and issue a notice of termination immediately on contract signature, then the effect of the exclusion will be as you have assessed, with consequent unnecessary detriment to your members’ interests.

We note that this new exclusion clause makes no distinction between a notice given as early as possible and one given as late as possible…the effect of the exclusion will be immediate, regardless of when the 90-Day Termination Notice is given.

For the avoidance of any doubt, and in the spirit of Trust but Verify, we include links to the correspondence in full. See UOAQ’s letter and OTIS' reply.


Where to from Here?

  1. If you already have a contract with OTIS: Please have it checked by an independent lift consultant before you provide any 90-Day Termination Notice.
  2. If you are considering a new contract with OTIS:  Please have it checked by an independent lift consultant before you sign the contract.
  3. Other Lift Companies: Regardless of which lift maintenance company you are either currently with, or are considering for a new contract, please engage the services of an independent lift consultant.  There is too much at stake to not get professional advice.
  4. Independent Lift Consultants:  The UOAQ strongly recommends using an independent lift consultant.  The benefits which flow from a consultant’s advice can be truly astounding, with the consultant’s fee usually recovered within the first few months of the contract.  The UOAQ can point you towards a highly regarded consultant, who already has delivered enormous benefits to our members, at a reasonable cost. 
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