Service Maintenance Agreements - Part One: A Simple Overview
Elevator maintenance agreements provide the framework for your relationship with your elevator service company and outlines a scope of work with terms and conditions. There are typically three potential options. First, any elevator company can provide you with their standard agreement(s), but they tend to be more favorable towards the elevator company (for example, a 5-year term with specific termination clauses). Secondly, you may choose to hire an elevator consultant to draft a scope of work for you and the elevator service company to agree upon. Elevator consultant agreements tend to be more balanced towards both parties and sometimes more to the side of the elevator owner, for example, penalties for overdue testing. Of course, there is a third option, the Washington Elevator Philosophy, which we will get into later.
Service Agreement Overview
There are two typical levels of service agreements “Full Service” or “Oil and Grease”. Elevator companies will have different agreement level names, but most fit into these two categories. Coverage will vary slightly, but the concepts are the same:
Full-Service: These include both maintenance and “insurance” as described below. Service callbacks (trouble calls), repairs, parts, and testing are typically included. The monthly price is higher, but everything should be covered.
Maintenance: With a maintenance agreement, the elevator company will provide you with a Maintenance Control Program (MCP), which is required by code. These are the logs to document the work performed. The agreement will include some level of regular maintenance. Many elevator companies will perform some or all testing at no additional charge. It’s widely accepted that performing proper maintenance will result in safe and reliable operation. For example, like your car or any mechanical equipment, maintaining it will maximize the useful life of the equipment.
“Insurance”: This is a concept relatively unique to the elevator industry. Over the years, many elevator companies have committed to covering all labor and materials to repair or replace all components that fail, with some exceptions or exclusions. This includes major and minor parts. In theory, building owners can expect consistent monthly service expenses with no billable surprises due to the comprehensive coverage.
Oil and Grease: Oil and Grease (Lube & Examination) agreements generally provide less maintenance. Any parts, repairs or service callbacks are billed separately. Testing is sometimes included, but not always. The monthly cost is lower, but the owner may need to account for costs in the form of service calls or repairs.
Additional Agreement Considerations
Now that you are familiar with the general concepts of maintenance agreements, let’s dive into some of the different clauses that you should be aware of when reviewing a potential agreement:
Term: Elevator agreements are generally long-term (5-years or more) with automatic roll-over renewals. A lot can change in that time. PRO TIP: Negotiate a shorter term without an automatic renewal. Or at least allow yourself a way out of the agreement if you are not happy.
Cancellation Clauses: If changes occur and you are no longer happy with your service provider, are you able to easily terminate the agreement? There are two types of cancellations – with cause or without cause.
Without Cause If your agreement can be cancelled without cause, for any reason, you can provide notice of termination and hire a new service company.
With Cause (sometimes called a performance clause) will require a breach to break the agreement. These clauses usually include a “cure” period, which will allow the service company to make corrections before the agreement can be cancelled. You’ll need to be careful here, as non-performance can be hard to prove. This clause also will typically leave the correction(s) up to the elevator company’s sole discretion to resolve. Some maintenance agreements can be vague in some areas. For example, it might state that maintenance will be performed on a “regular and systematic” basis. This can mean different things to different people. PRO TIP: Make sure there is a clear & simple path to cancel if service levels and expectations are not being met. Remove any ambiguity.
Service Frequency: Elevator industry agreements are notoriously vague when it comes to maintenance. They often have general statements such as “regular and systematic” or “tailored to your specific building needs”. The elevator company might perform one or two maintenance visits in a year but four may be needed due to the equipment age, use & environmental conditions. PRO TIP: Make sure the maintenance frequency is very clear. If obligations are not met what does your cancellation clause look like?
Testing: Elevators require various safety tests. To learn more visit our testing blog post. Many companies will perform annual tests, but exclude quarterly fire service and five-year testing. You will want to understand what is and is not included to budget for the work. PRO TIP: Be aware of what is required and what is covered.
Exclusions: Many agreements claim full parts coverage, but they all have exclusions. Common exclusions are vandalism, misuse, fire, flood, acts of god, incoming power, obsolete components, etc. These are reasonable, but you will want to understand what it means in practice. We have seen major components fail that were covered, but the company points to various exclusions. PRO TIP: Understand what is covered and have an open conversation with your elevator service company.
Equipment types:
Original Equipment Manufacturer (OEM): This is the manufacturer who provides the controller (which essentially is the brains of the elevator), components, parts and/or software.
Non-Proprietary: Some OEM elevators are non-proprietary, meaning all companies have access to parts and technical support. These are generally from third party manufacturers (MCE, Elevator Controls, SmartRise, etc).
Proprietary: Other types of OEM elevators are manufactured by one of the “majors” (for ex: TKE, Otis, Schindler, Mitsubishi or Fujitec). While all of the majors have a parts division, (for ex: TKE’s part’s division is Vertical Express) certain components and sometimes software may have more limited parts availability or technical support if the elevator service provider is not the OEM. PRO TIP: Be sure to find out from your service company what the level of support is for your equipment.
Possible Additional Costs
Some companies charge extra for certain services. Examples include phone monitoring, video monitoring (newer elevators) or remote monitoring. Some companies include phone monitoring in their agreements for no cost. Others charge extra for it. Remote monitoring or Internet of Things (IoT) is a new(ish) technology that most of the major companies have heavily invested in to provide “predictive maintenance”. Some companies charge extra for this service, calling it a “Digital Subscription fee” or something similar. From my perspective, it typically results in less hands-on preventative & proactive maintenance. PRO TIP: In addition to the maintenance agreement cost, pay attention or ask if there are any other fee(s).
Disclaimer: While I’m not a lawyer, I have extensive elevator industry experience and hope our perspective is helpful. Still have questions? Feel free to call Sean.
But wait, there’s more. Part 2: The Customer Experience
The information provided on this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and examples on this blog are for general informational purposes only.