Page 8 - CooperatorNews Chicagoland Winter 2022

8 COOPERATORNEWS CHICAGOLAND —WINTER 2022 CHICAGO.COOPERATORNEWS.COM There are elements of board service that can vex even the most committed, most in- trepid volunteer—and negotiating a build- ing’s management contract is probably at the top of that list. Vexing or not, however, the extent and quality of services avail- able to your building community hinge 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 “At its core, a management contract es- tablishes \[two things\]: the fee the associa- tion will pay to the management company, and what services the management compa- ny is obligated to provide for that fee,” says Kristofer Kasten, senior legal counsel for Altus Legal, a community association law firm based in Chicago. “However, manage- ment contracts will address many other details along with those two fundamentals. Most management companies have their own standard form contract that they use, but they often do negotiate with a prospec- tive association client on certain terms that the association may want changed, deleted, or added.” “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 New York City-based law firm Schwartz Sladkus Reich Greenberg Atlas. “A man- agement agreement is intended to be ‘soup to nuts,’ providing a roadmap of the agent’s duties and responsibilities, includ- ing administrative and financial matters. The agent is intended to be the arm of the board, generally handling all matters dur- ing the term of the agreement, while the board continues to make the actual mate- rial 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, the devil is in the details,” points out Dennis Greenstein, an attorney with the New York office of global law firm Seyfarth Shaw. “There may be unique physical, financial, and staffing considerations that should be considered and provided in the agreement to cover “For example, the management company in a dispute involving the contract is en- them.” Ellen Shapiro, an attorney with Mar- cus, Errico, Emmer & Brooks in Braintree, ance covering the association, which poli- Massachusetts, adds that once finalized, cies are approved by the board and are in mended that only the management compa- “management contracts are often sacro- sanct—very little can be changed.” She with related premiums being paid by the fees and costs. The contract should provide explains this to her clients when they seek association.” her expert advice before entering into a management agreement. “Like any con- tract, though, the standard management agement contract should include, among common sense, but with more national contract should contain start and end other things, clearly delineated termina- dates and financial considerations, as well tion rights, party indemnification, notices, look at whether the contract refers to an- as the role and duties of the manager.” The fee shifting, and applicable law. “The con- expectations of the client—in this case a tract should clearly state how and under co-op corporation or a condominium as- sociation—should be clearly delineated. What’s Typically Included According to Kasten, “Services and du- ties of the management company typically the applicable term for any reason, or only ees. For example, many boards will allow covered in a management contract include, for cause. The contract should limit the agents to enter into contracts—for repairs but are not limited to, things like collect- ing assessments from owners, maintaining agement company to situations in which without the board’s involvement, though the association’s books and records, pay- ment of association obligations (e.g., utili- ties, landscaping, contractors, and vendors The association should not indemnify the vert back to the board for small decisions providing goods or services to the associa- tion), preparing an annual budget for the ment company’s own wrongful acts. The erations.” board’s review and adoption, common ele- ment/area maintenance, hiring and super- vising association employees, and obtain- ing and maintaining insurance. “Those duties and services are generally party, and clearly state the time in which board the right to demand a change if it is performed at the direction of the board and the notice must be given. The contract not happy with that person after \[they’ve at the association’s expense,” he continues. should provide that the prevailing party may work with an insurance agent to pro- cure general liability and property insur- the name of the association as the insured ny be given the right to recover attorneys’ From a more purely legal perspective, der the laws of Illinois \[when\] that is where Kasten advises his clients that their man- what circumstances either party may ter- minate the contract,” he says. “For exam- ple, the contract should provide whether payroll, to transfers and sales, to repair it can be terminated prior to the end of matters, to the supervision of employ- association’s indemnification of the man- it is reasonable for the association to be that figure may vary depending on the size responsible for a claim, loss, or damages. of the building. Not having to stop and re- management company for the manage- contract should clearly state how notices required under the contract should be de- livered (e.g., certified mail, personal deliv- ery, email, private courier, etc.) to the other pany,” along with “a provision giving the titled to recover attorneys’ fees and costs from the non-prevailing party, which is a fair fee-shifting provision. It is not recom- that it will be interpreted and enforced un- the association is located. This may seem management companies, it is important to other jurisdiction.” “Management agreements are used to exclusively appoint the agent to run and operate the building,” says Hakim, “from and supplies costing up to $2,500, say— facilitates more efficient and effective op- Greenstein recommends that a contract “designates the individual to be assigned to the building by the management com- Management Contracts 101 Negotiating Your Community’s Most Important Contract BY A. J. 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