The art of good management

now is the winter of the management agreement. Never before have we been asked to draft, redraft, review or just please read ("by tomorrow, if possible") so many.

Management agreements are very much a social housing speciality. We have arm's-length management organisations managing local authority stock, tenant management organisations managing both local authority and housing association stock, and a whole range of charities, specialist agencies and housing associations managing special needs housing association stock.

Making a management agreement work smoothly can avoid many problems, disputes and phone calls to lawyers.

Problems I have seen recently include:

• agreements that are silent on certain tasks, like cleaning, lighting or heating common areas. Without clarification of who is doing these things and who's paying for it, how can anyone be sure the financial arrangements work?
  
• the owner and manager deciding that although the agreement said the agent would collect rent, it would be easier if the owner did it after all – but no one looked at the knock-on effect on the rest of the agreement
  
• agreements where the agent is responsible only for minor repairs, but with no definition of a "minor repair"
  
• the managing agent getting a fee rise each year, even though rent restructuring means rents may be going down.

The key to avoiding these mistakes is to make it clear who is responsible for each task. The real test is whether a third party can read the document and tell you who is doing what. Put yourself in the shoes of the person managing the scheme or homes and think of all the things that might come up in a week – does reading your agreement tell you who is meant to be dealing with each situation? Every agreement should have a catch-all clause saying that if the agreement is silent on a task, the owner does it, or, if you prefer, the agent.

Next, think about the money. You need to sort out the money in a way that people who have not been part of the negotiation can understand. Is the agent to get a fixed management fee plus a budget for certain tasks like repairs, or a percentage of the rents? If a percentage of rent, is that rent collected or rent receivable, and what about voids? Are you clear on the VAT position? How will the fee increase in future years, or fall if rent restructuring means rents go down?

One thing we lawyers are good at is reading long documents; non-lawyers tend to glaze over after the first five pages housing is a place of last resort

There are no answers that are right for all. On both sides there are risks: costs rising faster than income, costs that are not budgeted for, income that does not come in. The agreement needs to allocate these risks in an acceptable way.

Third, have a clear view that is shared by both sides about the overall effect of the deal. Is the owner going to play a minimal role with the agent taking on virtually all tasks – and having real autonomy in carrying them out, or does the owner expect to be closely involved in day-to-day decisions? If both organisations do not have the same view on this issue, you have a recipe for dispute.

Finally, understand the agreement before it is signed. Here, the model or template agreements that are often used are a mixed blessing. Yes, they cut out the need for a long process of multiple drafts, but organisations can end up signing them without a real understanding of how they work – and, dare I say, in some cases without actually having read them. Don't assume that because they are standard they must be OK. Some of the time and money that's been saved needs to go back into training for the staff who are going to have to work with the agreement.

So, do you need to spend money on lawyers to avoid these pitfalls? Probably not, if you're using an agreement you've used before and had no problems with. Probably yes, if this is a new area to you (one thing we lawyers are good at is reading long documents – non-lawyers tend to glaze over after the first five pages). Certainly, if the agreement covers a lot of properties and involves a lot of money and risk. You'd use a lawyer to buy 10 houses – shouldn't you involve one if someone else is collecting the rent on 500 or if you are taking on responsibility for collecting it?