There are elements of board service that can vex even the most committed, most intrepid volunteer—and negotiating a building’s management contract is probably at the top of that list. Vexing or not, however, the extent and quality of services available to your building community hinges on what’s in that contract; managers and management companies are obligated to provide what’s agreed upon in it—nothing more, nothing less. That’s why securing the appropriate terms for the appropriate price is an essential component of maintaining a sound, properly functioning building.
The Nuts & Bolts
“Management agreements are the basis from which managing agents assist and help operate properties on a day-to-day basis,” says Mark Hakim, an attorney with Manhattan-based law firm Schwartz Sladkus Reich Greenberg Atlas. “A management agreement is intended to be ‘soup to nuts,’ providing a roadmap of the agent’s duties and responsibilities, including administrative and financial matters. The agent is intended to be the arm of the board, generally handling all matters during the term of the agreement, while the board continues to make the actual material decisions. Some ministerial decisions, like purchasing of supplies and so forth, are delegated to the managing agent so the board can focus on the bigger-picture items.”
And while “management agreements for co-ops and condominiums contain many boilerplate provisions,” points out Dennis Greenstein, an attorney with the New York office of global law firm Seyfarth Shaw, “the devil is in the details. There may be unique physical, financial, and staffing considerations that should be considered and provided in the agreement to cover them.”
And while there are certain elements that are pretty much universal from one contract to the next, “it’s not a standard real estate contract—every management company has its own form,” says Scott Piekarsky, an attorney with Phillips Nizer in Hackensack. That being said, “items that should be included and should be standard include, but are not limited to: the fee, whether the fee may change and when, and by what fee schedule the client is to be charged for services outside of what the contract specifies. It’s also important to define when the contract ends, whether it’s cancelable with or without cause, and what the potential penalties for doing so might be.”
Ellen Shapiro, an attorney with Marcus, Errico, Emmer & Brooks in Boston, adds that once finalized, “management contracts are often sacrosanct—very little can be changed.” She explains this to her clients when they seek her expert advice before entering into a management agreement. “Like any contract, though, the standard management contract should contain start and end dates and financial considerations, as well as the role and duties of the manager.” The expectations of the client—in this case a co-op corporation or a condominium association—should be clearly delineated.