The importance of well-drafted Terms of Appointment for managing agents

The hard work has been done and the beauty parade is over. Brady Solicitors’ Sam Andrews considers the value of well-drafted Terms of Appointment for managing agents who have acquired a new block.

Agreeing to take over a new block shouldn’t be done with an informal chat and a quick handshake. There’s a lot for managing agents to consider when taking on the management of a new block beyond the handover process. Whilst there are a number of things you can do to ensure everything runs smoothly, a key document you will need during this period is a well-drafted Terms of Appointment.

Terms of Appointment are not as common as you might think. It is surprising the amount of managing agents who do not have any type of formal signed agreement in place. Failing to have a signed contract means you could be opening yourself up to significant risks, particularly if a dispute arises.

Template or a more bespoke option?

Some managing agents may be happy to rely on a standard form template. A template could save you time but this template may not look to address the specific requirements of the block you are going to be managing and the challenges you may be dealing with.

As every block comes in with different needs, we would always recommend that you should consider having your Terms of Appointment drawn up by solicitors experienced in block management as these terms can reflect both your and the freeholder’s needs.

It’s a matter of timing

During the tendering process it might seem that asking to set out the terms and conditions of the managing agreement would adversely affect a managing agent’s chances to secure management, but the tendering process is the ideal time to approach the RMC or Freeholder with the proposed terms.

What should you include in your Terms of Appointment?

Below are some key terms that should be included as standard in any Terms of Appointment:

  • Set out the charging structure- what is included in the basic fee and can your fee be reviewed?
  • Set out what extra services you will need to charge for
  • Ensure you have permission to serve demands and issue proceedings on behalf of the freeholder
  • Consider whether or not the Terms of Appointment will be for more than a year, as this will likely make it a Qualifying Long Term Agreement
  • Protect yourself with an indemnity clause- this could protect you from being out of pocket during your appointment and after, if it is terminated
  • Set out your service standards so your client knows what they can expect from you- what works will you carry out at the site? What won’t you do?
  • Make it clear that any action you take is taken in the name of the client and not in your own name
  • Clarify what steps must be taken to terminate your appointment and how much notice must be given

Remember, your Terms of Appointment can be used as evidence of what is, or is not, a reasonable management fee if a dispute arises.

You don’t want to think about losing the block before you’ve even officially taken over but there is some value in being prepared for the worst case scenario. If your appointment is terminated, your terms and conditions should set out the point to which your fees will be paid and that you will be indemnified for any costs you have incurred to date in managing the property.

The importance of a bespoke expert approach

It’s important to use solicitors who understand the challenges of property management to draw up your Terms of Appointment as they are the written evidence of the commercial relationship of the block and managing agent should any disagreement or disparity arise. Indeed these terms may be viewed by a Tribunal or Court as part of a property management dispute.

Brady Solicitors are experts in reviewing and drafting Terms of Appointment for managing agents. If you would like someone to take a closer and commercial look at your current Terms of Appointment give us a call on 0115 985 3450 or drop us an email, we’d be happy to help.

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With hundreds of years’ worth of combined experience, our experts have dealt with nearly every leasehold property matter you can imagine. If you’re currently in need of legal support or advice, please get in touch.

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