Page 8 - CooperatorNews Chicagoland Winter 2022
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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. SIDRANSKY  BOARD OPERATIONS  continued on page 15 

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