Condo Media - November 2019 - 24

It's in the Details
When entering
into a property
management
contract, a
condominium
association should
keep the following
in mind to ensure
that the board's
expectations
are met and to
establish a good
and functioning
relationship from
the start:

STATE DUTIES CLEARLY.
This may seem axiomatic, but it
is important that the contractual
obligations are clearly spelled out to
avoid later disputes. A condominium
association may have a different
expectation than the property
management company with regard to
the duties that the company will, or
should, undertake. Clearly identifying
the tasks that are included in the
management fee, and the scope of
the management company's agency
relationship with the association,
will inform both parties' expectations.
Moreover, duties that may be
performed for an additional fee should
also be identified. Tasks that, under
no circumstance, will be performed by
the property management company
should also be clearly stated, to
the extent identifiable, so that the
condominium association knows
that it needs to handle such matters
without assistance should they arise.
IDENTIFY A SCHEDULE OF FEES.
The property management
agreement should clearly identify
the management fee. To the extent
it includes the option for the
management company to perform
tasks that are not covered within
the base management fee, there
should be a schedule of fees (or
identified hourly rate) included in
the contract that clearly sets forth
the fees that will be charged to the
condominium association for such
work. It is common (and fair!) for a
property management agreement to
contemplate payment for projects
that go beyond the day-to-day
management duties, such as litigation,
casualty loss, and the like.
LIMIT DUTIES TO TASKS THE
PROPERTY MANAGEMENT
COMPANY WILL ACTUALLY
PERFORM.
While a condominium association may
think it better to be over-inclusive in
identifying the property management
company's responsibilities under the

24

CONDOMEDIA November 2019

contract, this is not necessary and
may lead to issues down the line.
For example, if a manager is not
taking steps to confirm that all
elements of a building comply with
the building code (a duty that is
almost impossible to perform), then
the contract should not include such
duty. A manager can be liable to third
parties based upon the negligent
performance of its contractual duties,
so limiting the scope of such duties is
advisable and to the benefit of both
the condominium association and
its managing agent.
LIMIT DUTIES TO WHAT THE
MANAGER CAN ACTUALLY DO.
In entering into the property
management agreement, the
board should be mindful that it
is contracting with the property
management company to perform
work that the board, itself, is
empowered to perform. The board's
powers and duties are typically set
forth in the condominium's bylaws
and should be consulted to ensure
that the retention of a property
management company, and the work
contemplated in any such agreement,
are within the province of the
board. Always keep in mind that the
condominium's governing documents
provide the "rules of the game" and
that the provisions should be reviewed
to ensure compliance with same.
PROVIDE DEFENSE
AND INDEMNIFICATION.
The property management agreement
should include provisions providing
defense and indemnification to the
property management company.
The scope and trigger for defense
and indemnification should be clear
and unequivocal. While specifics are
likely subject to some negotiation
between the board and the property
management company, they should
be as detailed as necessary to reflect
the agreed-upon business terms.
It is common to include exceptions
for willful and reckless conduct.
Condo Media - November 2019

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