Identifying and Mitigating Risks in Contract Management
Why is Risk Mitigation Important?
A poorly managed contract can lead to:
Legal disputes due to ambiguous terms.
Financial losses from unexpected costs or penalties.
Service disruptions from non-compliant vendors.
To prevent these risks, condominium managers must ensure contracts are clear, legally compliant, and regularly reviewed.
Key Risk Mitigation Strategies
Clear Terms and Conditions
Contracts should explicitly define:
Scope of work – What services are being provided?
Payment obligations – How and when payments must be made.
Timelines and deliverables – Expected service completion dates.
Termination clauses – Conditions for ending the contract.
Dispute resolution procedures – Steps to handle conflicts.
Example: A landscaping contract should specify:
The exact frequency of maintenance (e.g., weekly lawn mowing).
The scope of work (e.g., snow removal, tree trimming).
The penalties for missed services.
Compliance with Alberta Laws
Contracts must align with provincial regulations to be enforceable.
Key Legal Requirements:
The Condominium Property Act governs condominium corporation obligations, including contract authority and termination rights.
The Real Estate Act Rules mandate that condominium managers:
Fulfill their fiduciary obligations to their clients.
Ensure all financial obligations and commitments regarding real estate transactions are in writing, expressing the exact agreement of the parties.
Example: If a condominium corporation enters into a long-term condominium management contract, the contract must include a written agreement stating the manager’s responsibilities, financial commitments, and authority.
Regular Reviews and Updates
Contracts should be reviewed periodically to:
Ensure compliance with new laws.
Confirm that terms are still beneficial to the condominium corporation.
Renegotiate outdated clauses to reflect changing needs.
Example: A condominium’s janitorial contract originally required cleaning five times per week, but due to budget cuts, the board wants to reduce it to three times per week. Instead of waiting until renewal, the contract should include an option for modifications during its term.
Enhancing Operational Efficiency Through Contract Management
A well-managed contract improves efficiency by reducing confusion, service delays, and disputes.
How Contracts Improve Operations
Streamlined Processes
Clearly defined roles prevent confusion.
Condominium boards and vendors understand their responsibilities, reducing unnecessary delays.
Example: A security service contract should specify:
The guards' working hours.
The emergency response protocols.
The board’s obligations, such as maintaining security equipment.
Performance Metrics
Establish measurable standards to track vendor and service provider effectiveness.
Use Key Performance Indicators (KPIs) to evaluate compliance with contractual terms.
Example: A maintenance contractor’s performance may be measured by:
Response time to service requests.
Completion of scheduled maintenance on time.
Number of complaints from residents.
Timely Deliverables
Contracts should include specific deadlines for completion of work.
Late services may result in penalties or termination of the agreement.
Example: A contract for elevator repairs should:
Require work to be completed within 48 hours of breakdown.
Include financial penalties if the deadline is missed.
Practical Strategies for Effective Contract Management
To apply these principles, condominium managers should implement structured contract management practices.
Develop Standardized Contract Templates
Why? Using standardized templates ensures that all agreements comply with legal requirements and include essential clauses.
What to Include:
Legal compliance statements (aligning with the Condominium Property Act).
Dispute resolution clauses.
Performance review metrics.
Termination provisions.
Example: A standardized vendor contract template for service providers should always include insurance requirements, liability clauses, and compliance with local laws.
Implement a Contract Management System
Why? A system (either software or a structured tracking process) ensures that deadlines, renewals, and compliance requirements are monitored.
Best Practices:
Maintain a digital database of contracts.
Track renewal dates to avoid automatic contract extensions.
Set reminders for performance evaluations.
Example: A condominium manager uses contract tracking software to get automatic notifications when a service contract is approaching expiration.
Conduct Training Sessions for Boards and Managers
Why? Educating board members and staff ensures everyone understands their contractual obligations.
Key Topics for Training:
Legal compliance under the Condominium Property Act.
Risk management strategies.
Common contract pitfalls and how to avoid them.
Example: A new board member training session covers:
How to read a contract.
How to assess vendor proposals.
What termination rights the board has under Alberta law.
Evaluating Contract Effectiveness
Regular contract evaluations ensure that agreements remain beneficial and enforceable.
Step 1: Risk Assessment
Why? Identifies potential risks in existing contracts and prevents financial or legal issues.
Key Questions:
Are there unclear contract terms that could lead to disputes?
Does the contract comply with Alberta’s laws?
Are penalty clauses included for non-performance?
Example: A condominium management contract lacks a termination clause, forcing the corporation to stay in an unfavorable agreement. This risk should be addressed before renewal.
Step 2: Performance Reviews
Why? Ensures service providers meet expectations.
Key Questions:
Is the contractor delivering services on time?
Are vendor complaints increasing?
Have there been violations of contract terms?
Example: A janitorial company fails to meet cleaning schedules. The board reviews the contract and decides to replace the vendor due to repeated performance failures.
Step 3: Establishing Feedback Mechanisms
Why? Allows stakeholders (board members, residents, and vendors) to provide ongoing input on contract performance.
Best Practices:
Hold quarterly contract review meetings.
Allow residents to report vendor performance issues.
Use feedback surveys for major service providers.
Example: A condominium corporation sends a survey to residents asking for feedback on snow removal services. Complaints indicate delays, leading the board to renegotiate contract terms.
