What Elements Should Be Included in a Management Agreement Contract?
Management contracts are documents that outline the responsibilities and expectations between two parties. These contracts can be used to manage projects or businesses for a fee.
Typically, a management contract involves a business handing over operational control of one or more departments to a contracted company. There are several issues that need to be addressed in a management agreement.
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Defines the roles and responsibilities of the parties
A management agreement contract is a legal document that sets out the roles and responsibilities of the parties involved in managing a property. It can reduce misunderstandings and disputes by clearly establishing expectations, goals and deadlines. It can also help improve accountability by making sure that the promises made are kept.
It should contain the full legal names of all parties signing it, including their job titles and business affiliations. It should also include the date of the agreement. The term can be as short or long as the parties agree, with extensions (or early terminations) stipulated if certain targets are met.
A well-drafted agreement should also have a non-compete/non-solicitation clause to prevent the management company from competing with the business or soliciting its clients and employees. This clause is critical for preserving the integrity of a business and its confidential information. It should also establish obligations for both parties to keep private financial data, strategic plans and other proprietary information confidential and secure.
Defines management fees
Management fees are one of the most important elements of a management contract. They should be negotiated and agreed upon by both parties. In addition, they should be clearly defined in the contract to avoid misunderstandings. Generally, management fees are calculated as a percentage of the rent or a flat fee.
The management agreement also outlines the scope of services to be provided by the property manager. It should specify the responsibilities and services that the property manager is expected to perform, including tenant screening, leasing, maintenance, and emergency response. The contract should also include the length of the term, renewal options, and termination procedures.
It is also common for the agreement to set out whether Value Added Tax (VAT) is payable on the management fees or not. If VAT is included, the leaseholders may be able to challenge the level of fees at an FTT. However, the law states that the level of fees must still be reasonable.
Defines non-compete/non-solicitation clauses
Often included in management agreements, non-compete and non-solicitation clauses protect both parties from significant legal ramifications in the event of a breach. These restrictive covenants prevent departing employees from working in a field or practice that directly competes with their former employer and prevents them from soliciting clients or customers from the company. They also typically apply to a specific geographic area and for a certain time period after employment ends.
These provisions can sometimes be challenged in court as overly restrictive. However, if the agreement is limited to a reasonable amount of time and territory, it should be enforceable in most states. In addition to non-compete and non-solicitation provisions, the contract may include confidentiality and no-sale clauses to protect both parties. The terms of these clauses are usually determined on a case-by-case basis. They can also cover confidential information such as property data, financial reports, and operating records. Manager will not share this information with any third party without the express consent of Owner.
Defines termination terms
There’s a good chance that you will find a cancellation policy within your management contract that stipulates how and when you can terminate the agreement. It may also go into detail about any fees associated with this action and how long you need to inform them of your intention to cancel before they’ll pay out for any remaining funds.
Most management contracts have a certain time period that defines how long the contract will be active, with extensions (or early termination) stipulated based on performance. You’ll also want to include a clause that specifies reasons for which the owner can terminate the contract before this time period ends, including misconduct, violations and misappropriation of funds.
Your management contract should also spell out that the agreement is binding upon and inures to the benefit of the parties, their respective successors, assigns and legal representatives, and that no other person may be a third party beneficiary of the agreement or have any rights hereunder.
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