A management agreement is the document that decides whether handing a portfolio to an agent works out. Most of them are two pages, most of those two pages are about commission, and almost every dispute that follows concerns something the document did not mention.
What it should settle
Scope. Which units, and which of: letting, rent collection, arrears management, repairs, service charge administration, statutory compliance, inspections. Ambiguity here produces the classic complaint, which is an owner who believed inspections were included and an agent who believed they were extra.
Authority. The one that matters most in practice is the repair authority limit: the shilling value below which the agent can instruct work without asking. Too low and the agent cannot function. Too high and an owner discovers a KES 90,000 job in a statement. Name the figure.
Money.
- Commission: a percentage of what, collections or billings, and charged when.
- Letting fee: how much, when earned, and whether it recurs on renewal.
- What is included in commission and what is billed separately: advertising, viewings, inventories, court attendance, statement production.
- Whether the agent takes any commission on repairs instructed. Where they do, it should be disclosed, because it changes their incentive.
Client money. Where collections and deposits are held, and whether that is a separate client account. This is the question that matters most and is asked least.
Reporting. What the owner receives and when: the remittance statement, the arrears position, the deposit balances held.
Term and termination. How long, what notice either side gives, and what happens to tenancies in place.
The exit clause, which nobody reads until they need it
This is the single most valuable paragraph in the document and the one most often left blank.
- What notice ends it, from each side.
- What is handed over: tenancy files, deposit records, the ledger, correspondence, keys, meter histories, and in what format.
- How quickly, and whether the owner keeps read access in the meantime.
- What happens to money held: deposits transfer to the new agent or the owner, collections in transit are reconciled, and a final statement is produced.
- Whether commission survives on tenancies the agent introduced. Some agreements provide for a continuing fee after termination for as long as that tenant remains. Know before signing, not after.
An owner who cannot get their records back is dependent on an archive they do not control, which is why the four things to keep your own copies of are the agreement, the statements, the tenancy agreements and the deposit positions.
Questions worth asking before signing
- Can you produce the ledger behind a single figure on a statement, within minutes?
- Are deposits held identifiably, per tenancy, as a standing liability?
- Do you issue receipts showing what each payment settled?
- Who at your end can edit a posted entry, and is the change visible?
- May I see a real statement, redacted, from another client?
The last one is the most revealing, and a good agency will produce one.
What goes wrong
Commission on billings rather than collections. The agent earns on money that has not arrived, which weakens the incentive to collect it.
Silence on client money. The default that follows is one account for everything.
No exit terms. The relationship ends badly, the records do not move, and the owner rebuilds a portfolio's history from their own inbox.
No repair limit. Either every dripping tap is a phone call, or a five-figure invoice appears unannounced.