Managing a property, whether it’s yours or you are doing it for a client, involves multitasking. It also involves a lot of different contractual relationships. As Oliver Hart, a Nobel prize winner in 2016, said “From shopping in a store to running a corporation, contracts and agreements matter everywhere. “.
As the founder of ContractStore, I certainly agree with Professor Hart. We also have a range of property agreements and leases and construction contract forms that can take a lot of the strain out of the management process
Whether you have a written agreement for some work or services or simply a handshake, you are still going to have contractual terms that both sides need to think about and, hopefully, agree.
For example, here are a few basics:
Description of work/services. What goods, work or services are actually covered by your agreement? If you are buying in a shop you can see what you will get for your money. But with work or services – building a new extension or managing an estate, both sides need to be clear about the details and this means writing it down.
Thanks to HGTV and the allure of passive income, many people dream of investing in rental properties. Of course, becoming a landlord can be a great way to build your wealth or to make use of a second property that you own. However, property management can take a lot of work, too. Whether you’re leasing your apartment to family friends or to tenants you just met, you need to understand one thing up front: You’re not a host. You’re a business owner. Read more
If you are buying online, you have a right to return the goods if they do not meet the description or are unsatisfactory. But if you are appointing a contractor to provide maintenance services, or you are building a new house or extension be sure to have the scope of work agreed before they start work.
Pricing and payment . While it may seem obvious that you need to know the price before you enter into a contract, all too often people will work on the basis of an estimate and if that is not put together too well, problems can ensue. In a construction contract, a builder will often have a firm price which includes some estimates or “provisional sums” e.g. the price for kitchen equipment in the new extension may not be decided at the start, so a provisional sum is inserted and that is then replaced by the actual price when the equipment has been selected.
As for the payment terms, where the price becomes due by instalments over a period, you want an arrangement where the value of the work and the amount being paid are harmonised. There are some exceptions, for example where a supplier of equipment wants an advance payment in order to place an order – and on large-scale contracts, this can involve an advance payment guarantee, in case things go wrong.
Practical matters. Contracts written by lawyers tend to have mainly standard clauses covering issues such as general skill and care, liability, termination, disputes procedure etc. A balance is needed between the legal and practical. A cleaning contract, for example, can have quite short T&Cs, with a schedule that concentrates on details of the services etc.
But some agreements need the operational provisions embedded in the contract. A prime example is a short hold tenancy agreement or commercial lease which sets out the rules regarding occupation and maintenance of the property. The same is true with more complicated contracts such as a limited liability partnership agreement.
Contract Changes. It is helpful to include a procedure for dealing with changes in any long term contract. This can be quite straightforward, the main point being to agree the cost and time implications before a change is implemented. This helps to ensure continuity and avoid argument. Also, without any change clause, the other side can refuse to agree any variation.
Termination. Not everyone realises that without a termination clause, it can be difficult to bring a contract to an end. So be sure to include one – and it should be fair to both sides. A supplier will want the right to terminate if they do not get paid and a client will want a similar if the supplier fails to perform as required.
So be sure to get the terms of your next contract confirmed in writing. ContractStore has more than 250 templates which can help you achieve this quickly and in a very cost-effective way. None of their contract templates cost more than £50.
Author: Giles Dixon, a solicitor and a founding director of ContractStore