How to Avoid the Pitfalls of Laundry-Room Contracts

Many of the companies that operate laundry rooms in New York co-ops and condos run a clean ship. But laundry-room contracts can be “fraught with pitfalls,” Eric Goidel, a senior partner at the law firm Borah, Goldstein, Altschuler, Nahins & Goidel, tells Brick Underground. Here are a few of the perils: 

Binding multi-year contracts. Because of the expense of installing new appliances, contracts with laundry operators typically have six- to eight-year terms, says Peter von Simson, CEO of New Bedford Management. 

Right of first refusal. Some contracts provide that the original laundry company has the right to match any competing bid when the lease term is coming to an end. Goidel says this can have “a chilling effect” on getting bids from competitors. And without competing bids, it's very hard to negotiate new terms with the same vendor when the contract is already in place. 

Built-in auto-renewals. Contracts from laundry operators can often renew without the board doing anything. "These auto-renewals also require very specific timing, language, and delivery required for a laundry contract not to be renewed," says von Simson. There might also be a clause stating that if, during the last year of the term the company installs any new laundry equipment, the contract automatically renews for another six to eight years. 

Multiple termination notifications. Contracts between boards and laundry operators often have "very specific language as to what conditions have to be met for a contract to be terminated," says von Simson. In most cases, the terms require specific notification of any problems as well as giving the company the right to try to correct problems with the machines or the service before a contract can be ended, he says. 

A “license to use” might be the answer. Accepting a lease from a laundry company is a board’s first big mistake, attorney Arthur Weinstein tells Habitat. “You do not want to give them a tenant’s right to occupy the space and the protections offered to tenants under New York’s complex landlord and tenant laws, which generally favor the tenants.” (He made these remarks before the recent passage of the Tenant Protection Act, which significantly strengthens tenant rights.) 

Weinstein recommends that the rights granted to the laundry room company be contained in a “license to use,” which allows the company to run its operation on the premises but does not grant the rights of tenants. “It’s very difficult to evict a non-performing laundry room company that has a lease rather than a license,” Weinstein says.