The Fine Print

Details, details. The first thing you should look for in a management contract is the delineation of the scope of employment — that is, the tasks that the company will handle. Often, the scope is very broadly defined, so you need to make sure each and every bit of work that you want management to be responsible for is specifically worded. 

Setting limits. You can give your management agent autonomy to pay bills and collect revenue, but I suggest that you don’t. Instead, have the contract state that he or she will not be able to make a payment over a set dollar figure — say, around $2,000 — without board approval. That will allow you to not only monitor the inflow and outflow of money but also make determinations on whether your vendors are the right ones for your needs.  

Severing ties. While it might be painful to contemplate the end of a relationship when it’s just starting, you’ll want to consider the termination terms — what kind of notice you have to provide and how much time you have to give before the actual termination. Check to make sure there isn’t a penalty for ending the business relationship. If you’re six months into a one-year contract and things aren’t going well, a company might ask you to pay for the entire year. Additionally, you’ll want a clause in there that all of your documents — payroll, board minutes and so on — have to be returned to you in a timely manner.

Reset time. If management isn’t fulfilling the terms of the contract, catalog and document it. That gives you the ability to go to them and say, “We need to renegotiate this or I’m going to claim breach.” Large co-ops that pay management a lot of money will have more leverage than small ones, but that doesn’t mean you shouldn’t try.