We have extensive experience of advising and assisting our clients with a wide range of property management agreements, particularly in the affordable housing sector, from agreements for the management of individual blocks to agreements for the management of several thousand units.
We recognise that the scale and scope of services to be provided by the property manager under the agreement can vary enormously from one agreement to the next. For example, some agreements may simply cover tenancy management, whereas others will also include responsibility for repairs and maintenance services, health and safety compliance / testing, and in some cases even capital works.
The scope of service to be delivered under the agreement very much dictates what the terms need to cover, and the considerations that need to be borne in mind when preparing and negotiating the agreement.
We have experience of acting both for landlord commissioners of management services, and also for management service providers.
With the increase in for-profit registered providers and other new entrants into the affordable housing market over the last few years, there has been a growing demand for property management services offered by organisations with a strong reputation and successful track record. Demand for such management services offers existing housing associations the chance to diversify sources of income.
Issues to consider when dealing with these management agreements, and on which we regularly advise include:
- KPIs and performance management mechanisms: Resident experience of property management is a key priority. Reputation is important for both landlords and property managers, particularly if the manager is a housing association. The agreement should contain clear and measurable KPIs which properly incentivise the manager to perform to the required standards, with robust provisions to enable the landlord to address any poor performance including step-in rights and, where necessary, termination rights;
- Allocation of risk and liability: The management agreement needs to be clear about allocation of risk between the parties, including matters such as void risk, liability for repairs/ tenant damage and any irrecoverable costs of enforcement action. Any limits on the manager’s liability under the agreement need to be properly considered and drafted, including the interaction with insurance obligations under the agreement;
- No fault termination: The landlord will often want to include a right to terminate the agreement on a no fault basis, by giving notice to the manager. Issues that need to be considered here include the length of the notice period and whether any form of compensation is payable to the manager in these circumstances;
- Exit and handover: How exit and handover is managed can be very important to the resident experience in practice, so the agreement should contain provisions which ensure there is an orderly handover to a new manager. This will require provisions for co-operation on handover of documents, notifying tenants, financial reconciliation, and possibly more complex matters such as transfer of employees under TUPE and destruction of data;
- The Regulator: A failure to ensure that management standards are met could result in action being taken by the Regulator. This could ultimately result in a downgrade by the Regulator for breach of the regulatory standards. This is a further reason why the management agreement will need to contain robust performance management mechanisms and remedies for poor performance;
- Funders: If security has been granted over properties owned by a for-profit provider to obtain funding, the funder may have its own management requirements which will need to be reflected in the agreement. The funder may also want a duty of care deed / collateral warranty from the property manager;
- Health and safety issues: The management agreement will need to be clear about each party’s health and safety responsibilities, including duties arising under the Building Safety Act and associated legislation.
The above gives a flavour of the types of issues that need to be considered when dealing with management agreements for affordable housing, a number of which are sector specific. We bring to bear our in-depth knowledge and understanding of the social housing sector in advising clients on these arrangements.