Standard contract terms and conditions checklist

As the task of maintaining the common areas of multi-unit developments can be time consuming and specialised, many management companies employ a professional firm to administer the maintenance of the common areas on their behalf.

Managing agents are firms who are contracted to administer, coordinate and provide management services such as the repair, maintenance, and insurance of the common areas, the collection of service charges on behalf of management companies.

Where a management company decides to employ a particular managing agent it is recommended that the services provided always are clearly set out in a written contract between the two parties. At present, there is no standard contract which management companies and the managing agents that they employ are obliged to use.

Through the work of the Multi-Unit Development Stakeholder Forum, the National Consumer Agency has developed this checklist for consumers unfamiliar with what should be considered and agreed between both parties and what should be set out and covered in the contract.

The management company should ask the agent to provide clear and precise information in plain English as to the services they are agreeing to provide, how they propose to provide them and the frequency and quality with which they will be delivered.

The management company should ensure that all owners are aware of this information. It is important to note that the contract should always be between the management company and the managing agent – and not between any individual owner(s) and the agent.

It is understood that arrangements for the regulation of managing agents will be formalised under the auspices of the National Property Services Regulatory Authority.

All references in this document to the role and functions of managing agents and management companies is subject to any relevant existing regulations or legislation and subject to regulatory measures as introduced by the NPSRA or other relevant statutory bodies.

The guidance provided is an outline of the subject matter only. It does not constitute legal advice or supersede any existing legislation. To ensure that the terms and conditions of the contract safeguard their interests, management companies should consider seeking independent legal advice before entering into a contract with a managing agent.

Contract terms and conditions checklist

1. Identification of property

Specify the name and address of the property and include a detailed written description and where available, a map, clearly identifying the common areas for which the managing agent will be responsible for managing and maintaining.

2. Names of parties to contract

Specify the names and contact details of the parties to the contract as registered with the Companies Registration Office. The agent’s qualifications, membership of a professional body and licence details when introduced by the National Property Services Regulatory Authority should be outlined where applicable.

3. Authorisation to act on behalf of management company

Specify the directors' authority to enter into contract; the extent of the agent’s authority to act on behalf of the management company in providing services under the contract.

4. Commencement and expiry date

Specify the contract start and expiry dates, outlining the period for which the contract remains in force.

5. Renewal of contract for fixed term

Where the contract is for a fixed term, any provisions to renew the contract for a subsequent fixed term should be disclosed. Renewal should be subject to the written consent of the directors.

6. Termination of contract

Specify the terms and conditions (e.g. breaches of contract terms) under which both parties can terminate the contract in advance of the agreed expiry date. Specify a timeframe for serving written notice e.g. 1-3 months.

7. Mediation of disputes

Specify that where a dispute arises relating to breaches of the terms and conditions of the contract, the parties should first resolve the dispute through bilateral discussions and then proceed to submit the matter to mediation. The parties should jointly name an acceptable mediator and will share equally in the cost of such mediation.

8. Post termination of contract

Specify the procedures to be followed by both parties upon notice of contract termination being served. At a minimum the following should be outlined:

Timeframes
Service provision
Lead in time for new agents
Upon termination, the management company should furnish to the agent, save in the case of legal action outstanding fees, commissions and expenses due under terms of the contract
Upon termination, the agent should furnish to the management company all company records including for example the membership register, minutes files, invoices, contracts, receipts, books of account for the current financial year and preceding years.

9. List of services provided

Specify (as appended contract schedules) the relevant services provided by the agent on behalf of the management company. The list should include:

Services provided by the managing agent
Services it may provide or procure from third parties at an extra cost
Services it does not provide (or is not suitably qualified to provide)

9.1 Examples of services provided by managing agents
NB It is not possible for this list to be comprehensive, as the range of services required will differ between developments. The services below are highlighted for broad guidance only
Examples of services provided by managing agents may include:

Day-to-day maintenance

Repairs to and maintaining common property or engaging tradespersons to do so (provide supplementary list specifying all services e.g. window cleaning, refuse collection etc)
Maintenance of equipment for fire safety (in particular fire detection and alarm systems, emergency lighting). In some instances this may be included as an exceptional service (see below)
Routine site inspections and repairs

Exceptional Maintenance Services

The management company may require external professional advice and supervision on such projects. Unless specified in the contract, the agent may not provide these services and may need to procure third party services. These may involve the charging an additional fee for procuring and/or supervising such works. Examples of such work may include:

Organising building inspections and reports
Major refurbishment or repair work
Arranging consultation services with a chartered surveyor for the completion of a sinking fund analysis report or to complete a snag/dilapidations report
Coordinating and reviewing and where requested procuring third-party service providers to ensure compliance with fire safety or health and safety requirements
Legal and planning matters

Administrative

Arranging and undertaking administrative duties in relation to annual general meetings, other meetings and returns to the Companies Office if the agent is engaged as company secretary
Maintaining management company records (for example, the members’ register, minutes of meetings). The contract should specify how many meetings the agent will attend annually, their role and function at these meetings and where possible the dates of when these meetings will be held

Financial

Drafting the annual budget for the management company’s approval
Estimating and apportioning service charges and the sinking fund in accordance with the terms of the lease
Billing and collecting of service charges from owners
Administrating the management company’s accounts
Arranging insurance cover for the common areas and the development
Paying creditors (for example, accounts for water charges, council rates and maintenance)
Any arrangements with regard to responsibility for the collection of service charges arrears will be clearly outlined, e.g., engagement of legal services/charging of late payment fees

Legal

Undertaking steps necessary to recover any money owing in relation to unpaid service charges in accordance with an agreed (as agreed between company and agent) debt collection policy
Appointing legal services/representing the management company in legal proceedings and responding to requisitions on title (these may be subject to an additional fee).

Emergency services

Mechanical and electrical repairs
Reactive repairs and emergency services

10. Service levels

Specify the frequency and timing at which the listed services will be provided; the procedure for directors (and owners) to enter into correspondence with the agents and the remedial actions they will take in relation to queries regarding service delivery.

11. Payment of agent for services rendered

Specify how the agent’s services are to be invoiced; the amount that the agent is so entitled to; the calculation and payment method; a payment schedule and whether the fees are inclusive/exclusive of VAT.

12. Service charges

Specify that service charges shall not be used to remedy development level snagging or completion related issues. Where responsibility for estimating the likely service charge budget has been delegated to the agent, specify that the directors shall be provided with due notice of changes to the service charge levy and provided with a written notice clearly setting out the basis for the change. The directors must thereafter approve the budget before the service charge is charged out to owners.

13. Service charges collection

Specify whether the agent shall be authorised to collect on behalf of the management company service charge payments payable to the management company due, or to become due, from owners. Where such an arrangement is in place, the following at a minimum should be outlined:

All monies received in relation to service should be lodged directly in bank accounts under the name of the management company
The timeframe for collection notice should be as set out in the lease and sufficient notice that service charges are due should be clearly communicated to owners in advance
The agent should provide receipts for service charge payment to individual owners upon request and retain a copy of said receipt for the management company’s records

14. Service charges arrears collection
Specify the role of the agent in relation to the recovery for non-payment of service charges by owners. If a late payment fee is to be charged for non-payment of service charges indicate the interest rate, where applicable in accordance with the lease. Owners should be clearly informed of any such arrangements.

15. Sinking fund
Where the management company decides to provide for a reasonable and adequate sinking fund, the sinking fund should be based on a professional assessment (e.g. a chartered surveyor);
Specify:

The agent’s role in coordinating, reviewing and where requested procuring, third-party service providers to ensure an adequate sinking fund is provided
The agent’s role in administering and managing the sinking fund monies on behalf of the management company
The maintenance items the sinking fund will be used to cover. As far as possible these should relate to specifically identified expenditure (e.g. roof, boiler, plant, lift, etc.) having regard to the anticipated life cycle of the development rather than unidentified future liabilities
The directors will provide the agent with a register of the principal capital items in the development outlining their location, warranty periods, anticipated useful life and service records
The timeframe for the sinking fund estimate, for example 25-30 years;
The terms under which access to sinking fund monies will be allowed and expenditure authorised
Where substantial planned works (expenditure in excess of a stated percentage of annual service charge budget) are planned, the results of tenders should be communicated to the management company, together with full information on the programme of works, costs and the process to be adopted for keeping owners informed on progress
The sinking fund, its expenditure items and its annual closing balance will be clearly identified in the audited accounts (this amount should be distinct from the closing balance)

16. Service providers
Specify that the agent shall employ service providers based on a competitive and transparent tendering process. The details of which should be made available to the management company upon request.

The basis for the selection of third-party service providers should be set out e.g. checking for insurance, competence, competitive terms and rates. Where alternative procedures for awarding contracts are adopted, the agent should justify and disclose the basis for the adoption of these procedures if requested by the management company.

17. Bank accounts for service charges and sinking funds

Specify that service charge and sinking fund payments will be held in separate designated client accounts in the management company’s name and the type of account monies will be held in.
Any interest earned should be clearly identified in the audited accounts and after any appropriate deductions made (bank charges etc.) credited back to the account. The names of persons entitled to access the accounts and the terms and conditions regarding access to the accounts should also be set out.

18. Access to accounts and authorised spending limits

Specify that the agent shall secure the prior approval of the management company for expenditures in excess of stated percentage of the annual service charge budget) except where this expenditure is a monthly or recurring operating charge and/or essential/emergency or reactive repairs necessary to protect the property from damage.

19. Financial reporting (ownership of records)

Specify that all books of accounts/accounting records are and shall remain the property of the management company and be freely available for inspection by the company directors, secretary, auditor and legal advisors. In addition the following should be outlined:

Audited accounts will be prepared in a format which is consistent and comparable with previous and future accounts and in conformity with standards as set out by Irish accountancy bodies
Where the agent has undertaken the administrative duties in relation to filing annual returns to the Companies Registration Office on behalf of the management company, the accounts shall be provided in due time to the directors for examination and approval and the directors shall return them in sufficient time to allow for the convening of the AGM and for filing the accounts with the Companies Registration Office
Where the agent is responsible for filing the returns to the Companies Registration Office, any late payment fees imposed for non-compliance shall not be borne by the company where it is not responsible for the delay

20. Rebates, discounts or commissions
Specify that the source and amount of all rebates, discounts or commissions, if any, received by the agent in respect of expenses payable by the company for services provided or arranged by the agent will be disclosed and accounted for in the trading profit and loss sheet.

21. Communications process
Specify the frequency and methods of communication (e.g. email, meetings) between parties. In particular, the contract should clearly outline how any requests/complaints from owners are to be facilitated and timeframes and guidelines should be set out in relation to:

Meetings with board of directors/owners
Routine and ad hoc inspections
Responding to requests/complaints
Dealing with emergencies

22. Information provision

Specify the format and frequency with which the agent shall provide the management company and owners with information statements (e.g. monthly/quarterly/bi-annual financial statements of receipts, expenses, charges, any expenditure of a capital nature, statement of income and expenditure, work progress reports etc).

In addition to fulfilling statutory obligations in relation to keeping a register of members, the management company should liaise with the agent to arrange a process whereby an up to date register of members contact details can be maintained. Agents should provide the management company with contact details of personnel responsible for managing the development and their roles and responsibilities.

23. Good practice

Specify that the agent shall use due diligence in the management of the development and the common areas and shall act in the management company’s best interest at all times in accordance with the principles of good estate management all applicable codes of practice.

24. House rules

Specify the procedures in relation to complaints in relation to the house rules. The directors and agent should agree a process whereby all owners and tenants are made aware of the management company’s procedures as regards breaches of house rules.

25. Disclosure of interest

Specify that the agent shall not continue to act, as the company’s agent if doing so would place the agent’s interests in conflict with the management company’s interests.

Specify that agents shall in accordance with the Companies Acts and disclose whether they have a personal or commercial relationship with any service provider or the management company directors. The following are examples of a personal or commercial relationship:

Family relationship
Business relationship
Relationship in which one person is accustomed, or obliged, to act in accordance with the directions, instructions or wishes of the other person

26. Confidentiality

Specify that the agent shall ensure that the collection, storage and use of all personal or confidential information are in accordance with data protection legislation.

27. Records access and transfer

Specify that the agent shall maintain a comprehensive system of records with respect to the activities and operation of the management company. Arrangements concerning the length of time such records shall be maintained and procedures for access by directors and owners to the records should be set out. In addition, the following should be outlined:

The directors should furnish documents and records as requested by the agent to undertake their duties
All records should be subject to examination by the management company directors, and its solicitors and accountants
The agent should make access to the records reasonably available (according to law and within timeframes) to the members and
Arrangements to facilitate the transfer of the records between agents

28. Agents insurance

Specify that the agent must furnish a copy of and confirmation of their professional and employee liability status and that certification shall be provided if requested
Where the agent subcontracts work to be undertaken on behalf of the management company, require confirmation that professional and employee liability for subcontractors exists and is up-to date and adequate for the services undertaken on the site. The process for making insurance claims should also be set out and clearly communicated to owners and tenants