The Trojan Horse in Your Bottom Drawer
Why most management agreements set you up to fail and how to fix them
I can’t resist a good animal metaphor (what can I say, I have pets on my mind). But guys, can management agreements be more of a Trojan Horse? They roll in looking like a pal, all chilled and no big deal. “Don’t worry, I’ve got your back,” they say. Yeah right. ‘Cos when the going gets tough and the owner gets difficult, those supposedly pro-you terms are not worth the PDF they rode in on.
In an unregulated industry, your contract is the one aspect in your complex legal relationship with your clients that you have the most control over. It always blows my mind how often management agreements are treated like an afterthought. Let’s put it this way: if deers get to set wolves’ hunting hours, do you think they will still be in the business of running away?
In the post-Hamouda world, managers are as liable (within the tenancy jurisdiction) as the owners. One sloppy instruction and you’re it. If an owner can expose you that easily, then at least make it hard and expensive for them to do so.
A thoroughbred or a rocking horse?
Planning to succeed is different to planning to not fail. One is about growing alongside sensible risk management, while the other concerns itself with petty nitpicking and offloading perceived ‘inconveniences’.
A lot of management agreements I’ve reviewed are like rocking horses, fine for play-play, no good on race day. Their propensity to over-spec the wrong clauses ends up giving the manager no material control:
Baroque contractor panels: Exclusive supplier lists that are nothing more than a fancy term for related entities read like self-dealing and fly in the face of your fiduciary obligations. Real control is the authority to instruct the lowest compliant fix with an audit trail.
Punitive exit math: Early-termination penalties make your fees look like revenage, not recovery of loss. Good owners are not interested. You end up with angry ones and a giant stain on your brand.
Nuclear indemnities: “All care, no responsibility” reeks of incompetence and insecurity. As if care is not already the bare minimum. No thanks!
Fee fog masquerading as contractual sophistication: Fees are fees, not a game of Where’s Wally. Grown-up finance is a single, complete fee table with objective triggers.
Trust-account shortcuts: Don’t. Just don’t go there. When in doubt, err on the side of over-disclosing.
These are just some examples of the sort of design specs that lead you to overbuild on optics and underbuild on control. If the horse can’t stand when the gate drops, then what’s the point of the horse?
When all is said and done, the jockey is just a man (or woman or [insert gender appropriate term])
Take a clear-eyed view of human nature: people follow stated defaults (especially when printed on company letterhead), avoid friction, and respond to visible signals more than to sermons. Build your agreement around that reality.
Default over debate: Set the base case to the lowest lawful action. Repairs that meet the legal floor proceed within named time frames, funded by a repair float. Owners can opt for betterment. They should not be able to quietly opt down to breach.
Friction the heck out of behaviours you want to discourage: Non-compliant instructions should be slow and paperwork-heavy: written direction, short risk notice, and explicit right for the agency to decline. Don’t make it easy for clients to put you at risk. It works. People want easy. People love easy. When’s the last time you changed your utility providers?
Signal with guarantees: Publish service-level promises with small, automatic credits if you miss. It’s the Bunnings effect: few claims, big confidence. The promise disciplines your team and telegraphs seriousness.
Decent repair float indexed to reality: Set it to today’s trades and materials, auto-replenish monthly and build in annual review and automatic adjustments (such as CPI).
Two good choices, never one illegal one: Offer Option A and Option B, both compliant. A runs Friday unless B is selected by 3 pm. Choice architecture beats argument.
Expense rules and trust funds: State what costs you may pay, in what order, and from where. If using funds held in trust before disbursement, require owner consent, written notice, and clear caps. No surprise, no casual offsets.
Probation and termination with teeth: State the standards, run a time-boxed probation for difficult owners, then offboard clearly if the behaviour doesn’t change. Your team’s bandwidth is a business asset, not a public utility.
Show the enforcement ladder: Warn once. Act on the second breach. People behave when the line and consequence are visible.
Fair limits, not fig leaves: Pair a reasonable liability cap with clear duties and a blunt right to refuse unlawful instructions. Carry proper professional indemnity and public liability insurance, say so in plain English, and offer a certificate of currency on request. Confidence beats cowardice.
Reins in your hands, not on your wrists
Want parity with landlords? Stop turning up like a note-taker. Power flows to the side that writes the defaults and enforces them. A robust management authority is the governing document of the relationship. Make it intentional and materially consequential, then live by it.
Saddle up
Rewrite your management authority this quarter. Make compliance the default. Make bad choices hard. Publish small credits for missed promises. Be transparent about insurance and fair about limits. In a joint-and-several world, professionalism you can see is the only antidote to risk you can’t.
General commentary, not legal advice. Even where the usual consumer-style protections (CGA and unfair contract terms under FTA) often don’t apply to these B2B arrangements, it is worth getting tailored legal advice for your document and your client base.
