We have chosen an agent and been sent a management agreement to sign. It is eight pages and mostly reads like boilerplate. What should directors actually be checking before we sign?
Ask for the draft management agreement before choosing an agent, while you still have alternatives. Check the exact legal entity you are contracting with; the scope of services and what is excluded from the annual fee; the level of expenditure the agent may commit without board approval; the complete fee position including additional charges, VAT and how fees are reviewed; any commission or third-party income; how client money is held and reported; the inspection and reporting commitments and the year-end accounts timetable measured against your leases; any liability cap or indemnity you are asked to give; the term, renewal mechanism, notice provisions and exit charges; and what the agent must do on termination to transfer records and funds. Take advice on anything unusual before signing.
The draft agreement is part of the offer. Requesting it while you still have alternatives gives you leverage that disappears the moment you have told the other agents no.
Check the exact legal entity you are contracting with, and that it matches the company whose credentials, insurance and redress membership you verified. Confirm your own party is correctly named: the RTM company, the RMC or the freeholder as appropriate.
The core question is which services are covered by the annual fee and which are charged separately. Look for a clear list, and read the exclusions carefully. Common exclusions include major works project management, Section 20 consultation, insurance claims handling, arrears recovery beyond a first stage, company secretarial work, out-of-hours attendance and leaseholder sales enquiries. Exclusions are not unreasonable; undisclosed exclusions are.
What can the agent commit without board approval? A stated financial limit per item, and a clear statement of what always requires a decision regardless of value, such as legal proceedings, statutory consultation, insurance placement and engaging consultants. Include a workable emergency provision with a reporting obligation afterwards.
The annual fee, the basis of every additional charge, whether VAT applies, and how and when fees increase. An automatic indexed increase is common; an open-ended right for the agent to vary fees on notice is worth negotiating.
Look for an express statement on whether the agent, or any connected company, receives commission, rebate or mark-up from contractors, from buildings insurance placement or from communal utility supply. If the agreement is silent, ask for a clause. Silence is not a promise.
In whose name the service-charge and reserve accounts are held, who has visibility, the reporting frequency, and what happens to balances on termination. Where the agent holds client money, check what protection applies.
Frequency of site inspections, what written report the board receives, financial reporting intervals, and the timetable for the year-end accounts. Check the accounts timetable against what the leases require, because the lease governs.
Look at any cap on the agent's liability and any indemnity the company is asked to give. A broad indemnity from the client company in favour of the agent deserves scrutiny. Confirm the professional indemnity cover level is stated or evidenced.
The initial term; whether it renews automatically and on what notice; the notice each side must give; whether termination requires fault; and any exit or handover charges expressed in figures. Notice periods and exit charges vary widely between firms, so read the wording rather than assuming a market standard.
What the agent must do on termination: transfer of records, funds and reserve balances, timescales, and cooperation with the incoming agent. This clause matters most at exactly the point when goodwill has run out.
Who is controller and who is processor for leaseholder data, and how the agent handles subject access requests.
Directors are agreeing terms on behalf of a company and, indirectly, the leaseholders funding it. Where the agreement contains a broad indemnity, an unusual liability cap, a long tie-in or an unclear fee mechanism, take professional or legal advice before signing. This answer is general information, not advice on any particular agreement.
A management agreement is read twice: once when you sign it and once when the relationship is ending. Draft-stage attention to the exclusions, the delegated authority and the exit clause is what makes the second reading uneventful.
Signing before comparing
The agreement is part of the offer; requesting changes is easiest before the other agents are declined.
Ignoring the exclusions list
Excluded services are where the real cost difference between proposals usually sits.
Leaving delegated authority unstated
Most board-agent disputes are about spending decisions nobody defined in advance.
Assuming silence means no commissions
If the agreement does not address third-party income, ask for a clause that does.
Overlooking exit obligations
Transfer of records and funds is the clause you will rely on when goodwill has gone.
Accepting a long automatic renewal
Automatic renewal with a short cancellation window can lock a board in unintentionally.
Most questions on this topic are management questions rather than legal ones, and the two are worth separating. A managing agent can tell you how something works day to day and what it will cost. A solicitor tells you what your rights are and how a Tribunal is likely to view them.
East Valley Properties provides management expertise, not legal advice. Where a matter turns on the wording of your lease or on formal proceedings, we will say so and work alongside your solicitor.
The official material behind this guide. We summarise it in plain English rather than reproducing it.
Service charge information rights that reporting arrangements should support.
Statutory trust over service charge contributions, relevant to client money clauses.
The duties directors owe when agreeing contracts on behalf of the company.
Guidance relevant to the data protection clauses in a management agreement.
We manage small and medium residential blocks across Greater London and Essex from our Romford office. Fixed fees, no insurance commissions, and directors deal with us directly.
Answered by Romain Maillard - Director, East Valley Properties
Affiliate member of The Property Institute
Romain manages residential blocks and estates for RTM companies, residents' management companies, share of freehold developments and freeholders across East London and Essex.
Published · Updated
Based on the legislation and official guidance cited on this page.
General property management information, not legal or professional advice. Where a decision depends on an individual lease, building, dispute or technical assessment, obtain specialist advice. See our editorial standards.
This answer has been anonymised. Personal details, addresses and company names have been removed. Guidance is general and does not replace advice from a solicitor or surveyor on your specific block. East Valley Properties is a managing agent, not a firm of solicitors or legal advisers.
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