The Management Agreement
Setting the Relationship Management Policy
When a professional property management service is contracted, the managing agents will find themselves in a uniquely challenging situation. It is often said that the managing agent of the CID has many bosses, because beyond the multiple-member board, which itself produces conflicts of opinion over the direction of the property, each individual owner naturally feels that the managing agent is his or her employee. This course will cover boards, committees, and governance in depth on day two, but it is discussed here as a defining feature of the relationship management the CID managing agent performs.
Because the management agreement is the contract by which the managing agent navigates the relationship between owners, boards, and employees, management agreements should be written in clear and simple language. The benefit of a management agreement is that it lays the foundation for a cordial and lasting relationship with the CID. The management agreement is a legally binding contract that:
- Defines terms of agreement
- clearly identifies all parties and the property contracted
- identifies responsibilities relegated by Board
- fiscal
- physical
- administrative
- agent's fee (predicated on the amount of work to be done)
- states fiduciary responsibility
- clarifies to whom the managing agent reports, whether it be to one individual (e.g., the board president), or a group
- emphasizes that the managing agent acts as the agent for the entire association
- defines agent indemnification
- includes clauses that protect the management agency and the association
- acknowledges the board as fully responsible for the operation of the association
- Protects the board against gross negligence or willful misconduct by the managing agent
Managing agents of the CID can experience difficulty if the language of the management agreement is unclear regarding lines of reporting from the managing agent to the CID/Board of Directors. Without this reporting component spelled out clearly, the managing agents may find themselves engaging with each member as if each member was their full time supervisor. Thus it is essential that the management agreement clarifies to whom the managing agent reports, whether it be to one individual (e.g., the board president), or one alternate. It should also emphasize that the managing agent acts for the entire association.
Comments
Defining the Agent's fees can be most challenging. Over the past 20 years of managing Association's I am still working on perfecting that. One might consider adding a provision into the Agreement to address the "amount of time anticipated to be expended each month" to the monthly management agreement. Example, if the hours worked exceeds the agreement, you can be easily compensated without having to go back to the Board for additional approvals.
This article was very thorough indeed.
Very helpful information. After having managed leased properties in the past, moving into the management of an association was a new experience. It's clear that the management company does indeed have many bosses, not just one owner.
I like Lor's idea of limiting the base fees to a specific number of hours and then billing an additional fee for work above those hours. However, I think that most markets would have a tough time accepting that!
This article is very helpful for me. I work in property Management company that handles privately owned homes and this is the first time I worked in this kind of industry. I am still learning and this information helped.
This posting clearly summarizes the binding contract between the HOA and the property management company, further defining the role of the management agent. Very concise!
- Owen Ahearn | Flag this comment for review