What is a Contract to Tow From Private Property?
A towing contract for private property is a legal agreement between the property owner (usually the lessor, but sometimes the lessee) and the towing company or parking management firm which is responsible for parking enforcement. A towing contract usually outlines the specific terms and conditions of when and where to tow vehicles, as well as any compensation or benefits for the assists provided by the towing source. For instance, a parking enforcement firm operating on a college or university campus, may contract with the institution to pay for 3% to 5% of each parking ticket issued. In other circumstances they may retain a flat fee for contracts which cover a specific geographic area. Regardless of the method of compensation, the written parking enforcement contract is usually required to be signed in order for the towing service/parking enforcement contractor to operate legally in most jurisdictions. Moreover, in jurisdictions where local rules apply to the use of booting or hitching devices, their use may only be set forth in contracts with an authorized governmental agency (for parking violation enforcement).
In addition to permitting the applicant for the permit/contract to outline the terms of what is to be enforced, the towing contract assures the governmental agency that the applicant is working within the restrictions (if any) based upon the parameters of the written contract . Therefore a contract between a private towing company and an employer on a military installation is likely to have entirely different terms than a contract between the city clerk’s office and the local towing company assigned to city/county buildings. In each instance the contract is particularized for the purpose of that agency, whereas the owner/operator of a business entity, seeking to direct enforcement rights to a private towing company, is likely to enter into a long term contract (1-5 years), with longer renewal periods.
I have encountered many clients who tacitly accepted the use of a standard towing contract for the sector or industry in which they are doing business. The property owner fails to observe that the contract does not fit their business goals, violates local ordinances, or they fail to address the entirety of parking enforcement codes. It is rare that a towing connoisseur has not encountered at least one or two contracts which are not strictly adhered to by the vast majority of towing companies. Accordingly, a few basic points of understanding when negotiating a contract for your property can make all the difference.
Elements of a Towing Contract
The towing contract is the legal foundation between the towing operator and the property owner and, as a result, covers key components that are vital to both parties. First and foremost, the contract should clearly define the service, for example:
The amount of space each vehicle will occupy.
The number of vehicles to be removed.
The period for towing (i.e., 24 hours, 7 days a week, etc.).
There should also be a definition of the scrap metal materials that are prohibited, especially in states like Florida, where it’s against the law for a towing company to sell any scrap metal material found on the vehicle.
At the center of the contract, there should also be a discussion of fees, including:
The cost per mile beyond the base rate.
Potential "collection" fees for late payments.
The amount of time that is allowed to pass before the owner is penalized with fees.
Any additional fees (such as for storage of the vehicle) if the vehicle is not picked up after a set period.
In addition to these vital components, towing contracts should also include a liability clause, such as:
The ability of the property owner to dictate, for example, if the contract can be terminated with 14 days’ notice.
Liability disclaimers.
Indemnification (setting the limits of how much damage or loss the guilty party will have to pay).
Who will pay for attorney’s fees if the contract is broken (usually the guilty party).
There should also be a clause stipulating that the towing company will have to comply with all local and state laws (such as hours of operation), particularly if the contract gives the towing operator exclusivity over the property. Finally, it should be noted that the contract must be signed by both parties and all terms must be agreed upon before a legal agreement has been solidified.
Advantages of Towing Contracts for Owners
A Towing Contract is Beneficial For Property Owners
First, in exchange for grading the parking lot, the towing company will likely be allowed to park its trucks and trailers on your property. Second, the towing company will have a marked (and clean) place to keep its vehicles in the area of your lot. Third, because the towing company will likely install a sign or two advising the public that you have a towing contract with the company, potential offenders will think twice before parking any vehicle on your property without your permission. Fourth, most contracts require the towing company to keep a schedule of vehicles towed off your lot. That means if anyone ever sues you or your company for conspiracy or something like that, you’ve got proof that you didn’t tow that particular car.
Legal Considerations When Towing on Private Property
The specter of legal action can loom large for uncertain property owners, particularly with a new development or the introduction of a new lease. Depending on the area, state and particular private property, there can be any number of state or local ordinances to follow to remain in compliance with the law. Understanding those ordinances, and abiding by them, is essential to remaining above-board in the eyes of the law when it comes time to remove a car. The following is a list of some of the requirements you may run into:
- Depending on your state or municipality, you may have to acquire a parking permit regard to the number of spaces you have on your property. Many places mandate that commercial properties need at least one-per 20-spot ratio.
- Some locales specify signage must be posted on the property about how long a car can remain without being towed, and how much the owner should pay to recover the car once it has been towed. Often, the sign has to be in plain view at eye level, and you may even be required to get a police officer to sign off on it.
- Some ordinances can stipulate how far away your facility must be from the property service in your area. That means if you are part of a local Tow Alliance organization, or the like, you must have a certain distance away from the property to be considered legal under local law.
This is not an exhaustive list, and you may find other regulations that govern how, when and where you can tow cars from a private parking lot – there’s no such thing as too much precaution.
Selecting the Right Towing Company
Every private property owner has options when it comes to a towing company, so it is crucial to choose the one that best meets your needs. Towing companies can be evaluated on several metrics.
Experience You certainly should select an experienced company. The last thing you want to do is to hire a company that gets into a legal battle over how vehicles must be towed.
History Check online reviews and news accounts. You should also contact the Better Business Bureau. Legal issues and complaints are much more easily ascertained by these means. Successful companies will have an excellent track record with these organizations.
Staffing You should evaluate the qualifications of the towing staff. When possible, you should look at the truck drivers’ record for commercial driving violations and driver training programs .
Towing equipment Companies with high-quality towing equipment are more likely to be equipped to deal with most situations.
Service An important element in your decision is customer service. You’ll want a company that is highly responsive to both you and the public.
Complaints Research complaints against towing companies on state government websites. Check the company’s website for responses to complaints and resolutions.
Fees You may want to compare fees charged by area towing companies.*
Licenses You will want to ensure that the towing company is properly licensed in your area(s).
Regulatory compliance You need to ensure that the company is in compliance with local, state and federal regulations.
Personal referrals It is a good idea to ask other private property owners for a referral to a towing company with which they have an ongoing successful relationship. Your experience should be similar.
Negotiating the Terms of a Towing Contract
While many towing contracts are industry "standard" contracts that allow the towing company to essentially dictate the terms to the property manager, in reality there can be a lot of flexibility in negotiating a towing contract. Understanding most of the typical terms in a towing contract can provide leverage in negotiating any potential amendments or changes to the contract.
An important aspect of the towing contract is the scope of services. Consider what will be covered under the contract as that could save money on the services that you actually need. Many towing contracts include a blanket provision that covers "all areas of the property." While that makes sense for some properties, consider whether that applies to the entire complex or only the common areas.
Additionally, be careful if the scope of services includes "removal of abandoned vehicles." What is an abandoned vehicle? This can often be defined as any car without a license plate or with a license plate that has expired. However, such a rule could cause you to call for a vehicle to be towed after one day for no tags or for an expired tag. Before signing the contract, understand what is considered an abandoned vehicle and be prepared to negotiate that definition to provide some latitude. For example, consider allowing a longer period of time (like 3-4 weeks) before a vehicle will be considered abandoned. Also reconsider how the property manages abandoned vehicles. You may want to consider removing the vehicles yourself after receiving that required notice and then contacting the towing company only to pick up the vehicle.
There can be hidden costs in a towing contract depending on how the services are used. For example, you don’t want the towing company showing up every week to remove abandoned vehicles, so the contract needs to make it more difficult for the towing company to bill you for that service. The contract should limit the number of vehicles that can be towed per month, or at least per day. There should also be advance notice requirements before the towing company will be dispatched to your property. There needs to be sufficient advance notice that the towing company has time to determine whether they have dispatched a truck in error. The contract should also provide for reasonable and timely communication from the towing company with your property manager or management company.
Fees, fees, and more fees. Read through the contract carefully and make sure that any and all fees are reasonable. For example, a contract should not allow a company to charge double or triple the normal rate for an after-hours dispatch. Additionally, any fees to the property should not be a percentage or otherwise tied to the number of vehicles or the charges paid by the owner. These agreements should be revenue-share agreements, where your property receives a percentage of the proceeds from the towing companies. Additionally, the contract should not provide for fees for competing with other tow companies for the business of the property manager.
Additionally, some towing contracts will agree to provide for minimum charges. For example, a minimum charge for a vehicle that is towed to the tow company’s yard. No matter whether the vehicle is small or large or whether the property manager requires the minimum at that property.
Understand whether the contract provides liability insurance for the towing company. If there is a parked car that the tow truck accidently hits while removing a vehicle, make sure the contract covers damages caused by the towing company to other cars during the service.
In the current world of litigation, it is important to make sure that the liability provision of the contract is reasonable. In the past, it was common to see unlimited liability in many contracts. However, consider placing limits in case the towing company does not live up to its end of the bargain.
Additionally, consider placing limits on when the towing contract can be assigned to another party. This can prevent situations where the contract is assigned to a company controlled by the owner of the towing company.
Finally, understand what would happen if any provision became unenforceable. Putting these limits in the contract will allow for the continuation of the remainder of the contract.
Resolving Problems and Conflicts in Towing Contracts
Like any business relationship, it is important to clearly outline the agreement and understand the obligations of both parties. Many property managers recognize the need for a contract with a towing company, and many property managers require their contract to have additional clauses around certain issues. Through our experience, the following are the most common issues with Towing Agreements, and how they were resolved:
- Overlapping Agreement with another towing company. Property owners often enter into contracts with another company to provide a specific service. Sometimes the overlapping or competing services can be identified up-front, but sometimes it becomes an issue later down the road. Once the owner recognized the overlap, the new agreement was signed, the property manager was to inform the existing existing company about the new contract within a couple of weeks. The new contract would then be terminated without liability. This allowed the property owner to obtain the benefits of both contracts until the new company could negotiate a contract that met its requirements.
- Expiration of the contract at the wrong time. Property Managers will often enter into contract which expire in the fall. Most properties hire a provider because it is needed at that time of year. The problem arose when the contract expired during the spring month. We summarized the history of the problems, and the owner informed the provider in writing that the contract was no longer in force and another provider had been chosen.
- Disputes over location of the signs. A property manager wanted the signs to be located on the same sign post as the county sign. The towing provider wanted them to be on a different post . We contacted the provider and pointed out that the provisions of their license required the signs to be on the property. As a result, the towing provider agreed to remove the signs.
- Lack of licensure to operate in that county. An existing provider was not licensed in the county where the property was located. Its license was in two adjacent counties. The property owner subsequently decided that they no longer wanted to utilize that company. This was not because of the licensing issue, but because they preferred another provider. The owner created a new contract with a new provider, and informed the old provider to stop acting under the prior contract. The old code allowed the owner and the new towing company one week to install the signs.
- Lack of clarity on who is to notify the towing company when there is no parking sign, cars are double parking or blocking fire lanes. A parking sign had been knocked down during a storm, and a car was parked on the lawn blocking access to the dumpster. The towing provider received a call from the property manager and the truck was removed. The provider only saw the car once, but realized that it has been parked on the lawn for some time and was well past the area of "no parking". Once the provider recognized that the parking pattern was increasing, it installed new parking signs which helped the situation.
It is essential to memorialize the relationship between property managers and tow providers in a written contract. Through our experience, the most common issues involve changes in the relationship, expiration of the contract at the end of the season, and disagreements regarding signage. In some cases, these issues are unavoidable. However, with a reasonable amount of communication, most issues can be avoided.