Negotiating Management Contracts Outline Expectations Before Signing

Drawing up a contract for management services looks at first glance like a simple task. Such contracts usually follow a particular format and outline services for condos, townhomes and co-ops regardless of size. But what about contract areas where there’s room for negotiation? How can an association board and a management company arrive at a contract that helps foster a cooperative relationship?

Tough Times, High Expectations

Even in a turbulent economic situation, the job of a property manager comes down to a set of key functions: collecting maintenance and other income, and paying bills on behalf of the HOA. Everything else is usually some variation on those two jobs, with other, extra services to be outlined in the management contract (and probably paid extra for as well.)

Negotiating those variations is where—as with so many things, communication is the key to success. The discussions that take place before anyone signs on the dotted line can help fill in the gaps on boilerplate management contracts. This is where it's crucial for each side to understand the expectations of the other.

"The board of directors has to speak with one voice," says Herb Rose, president of Herb Rose Consulting, a management consulting firm in Manhattan. "Otherwise, you'll have somebody from the board saying, 'We want this,' and somebody else from the same board saying the exact opposite. Beyond that, there should be an understanding as to what the fees would be for special projects. Will they be paid by time, or will they be paid by project? Because there are all kinds of miscellaneous projects that have come up that are not part of regular work. The list is endless, but I still come back to the first thing, which is that the board has to speak with one voice and work with their management contact."

A Lengthy Process

With so much at stake, choosing a management company can be a lengthy and detailed process. Prospective management companies are often called back for multiple interviews, and boards frequently go beyond the basic checklist of services and delve into specific line items in contracts before signing with a particular management firm.

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