Negotiating Management Contracts

August 2023

Anyone providing condominium management services must have a written contract and deliver services in accordance with the contract.  Negotiating these management contracts is one of the most important tasks of the condo board.  The quality of services available to your community depends on these negotiations and the written contract which should identify services to be provided by management and how they are to be evaluated.  Nothing more than what appears in the contract is to be provided, and nothing less.

Management contracts between one and three years is typical.  Services provided can range from basic to comprehensive.  Managers may be required to work on site, off-site, or some combination for a specified number of hours.  Fees are usually a fixed amount payable monthly.  Additional services may be provided on request according to an agreed-upon fee schedule.  Some services provided by other parties may be charged to the corporation.  While these are the basic terms that should be addressed, much more should be included in the management contract.

The importance of this contract and what it contains should not be understated.  Focusing more on price at the expense of good management and a properly functional community leads to disagreements and problems.

Certain elements of a management contract are universal. This includes the fee, under what situations the fee may change and when, fee schedule for additional services, contract termination date, early termination terms and potential financial penalties.

Management agreements should identify what is to be done on a day-to-day basis.  Duties and responsibilities inclusive of administrative and financial obligations should be incorporated.  There may be staffing and other considerations unique to the community.

Focusing more on price at the expense of good management and a properly functional community leads to disagreements and problems

Contracts should include the role and duties of the manager, performance expectations and performance reviews.  Many contracts fail to include these important yet optional items.

A manager should be required to notify the board of violations placed on the property, and conditions where the building or property is known to be unsafe or in violation of any government agency.

Some boards allow the manager to make purchases or enter into contracts without board involvement, or may specify maximum dollar amounts that don’t require authorization.  Allowing these smaller financial decisions to be made without board authorization can be more efficient and reduce the burden on all parties.

Another consideration is inspections or site visitations by the management company.  It can be helpful to have a fresh set of eyes to identify what others may have missed.  The number and frequency of visits should be clearly stated.

The board may desire the right to replace their manager if dissatisfied.  If so, this should be stated in the contract along with specific terms necessary to trigger this option.  Such a requirement may be desirable within the first 90 days, or after a performance review where specific concerns have not been addressed.  Should a replacement manager be necessary, the board may desire the right to interview candidates rather than having one assigned.

A job description can better detail condo board expectations and should exist prior to signing a management contract.  It specifies specific requirements of the job, working hours, and tasks the manager is expected to undertake.

Negotiating a good management contract takes time.  Failing to take the time to do so is to be avoided.

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