What are the services?

The cornerstone of any PMA is a clear definition of the services to be provided. A PMA should include a comprehensive services schedule outlining the agreed property-specific services. This has become even more critical with the introduction of the Building Safety Act 2022 (BSA).

The last thing any owner wants is a dispute over responsibilities, scope, or fees – yet this is something we frequently encounter where services and BSA responsibilities have not been properly defined, for example, in relation to fire risk assessments and incident reporting systems.

Incentivising good performance

For any property owner, the effective performance of property management responsibilities is crucial to overall business success. Whether a purpose-built student accommodation or build-to-rent developer, or a corporate with a property portfolio, the successful management of real estate assets is key to revenue generation.

A well-thought-out and properly drafted KPI mechanism helps incentivise strong performance from the property manager. Equal consideration should be given to remedies for failure to meet KPIs, including service credits, step-in rights, and the ability to change providers.

Planning for exit

Termination or expiry of a PMA can feel like a distant concern at the outset, and we often see that plans for a smooth exit aren’t fully considered or documented.

It’s essential to think through the transfer and exit requirements before signing, and to document a process for the smooth handover of data, equipment, and other materials. It is far better to agree these terms while relations are amicable, rather than leave them to be negotiated when termination – potentially a hostile one – becomes a realistic prospect.

Setting limits on authority

Even a fully outsourced service requires boundaries and controls, including clear limits on the extent to which the property manager can contractually bind the owner without express consent. Reputational considerations – particularly in dealings with tenants – should also be taken into account. Being explicit about authority limits and the approach to third-party interactions from the outset will help avoid unnecessary management time spent resolving issues on an ad hoc basis.

Preparing for change

As with any commercial arrangement, various changes can occur over the life of a PMA. The nature of the owner’s business, industry practices, and the law itself may evolve – as seen with the introduction of the BSA. It is therefore important to include a documented procedure in the PMA for dealing with such changes. This should specify the level of seniority required to discuss changes and, in some cases, pre-agree who will bear the cost of adapting services in response to legal or regulatory developments.

Having this clearly set out enables both parties to adapt efficiently to changing circumstances and ensures the continued effective management of the property.

ESG requirements

There is increasing emphasis on the ESG credentials of businesses and their supply chains, and property management companies are no exception. It is therefore more important than ever to ensure that PMAs incorporate ESG policies and strategies – whether relating to carbon reduction, community engagement, or fair labour practices.

Proptech

Proptech is widely recognised as a transformative force in the real estate industry – whether through dynamic pricing tools for PBSA providers or software that aids regulatory compliance. The growing use of technology by property managers offers potential cost savings for both parties, but it is essential to consider how this technology will be used. Appropriate controls must be in place, particularly around data analysis, to ensure data is used both legally and in a manner acceptable to property owners.

How we can support you

An inadequate PMA is likely to cause problems for property owners further down the line. If you invest the time to ensure your PMAs are robust, you can take comfort in the likelihood of a long-lasting, adaptable relationship – with the added benefit of having clear procedures in place should things go wrong.

For many property owners, it is beneficial to maintain a standard-form PMA to use at the outset of any tender process or property management negotiation. This helps you to clearly set out the scope of services, liability positions, indemnities and other key elements, streamlining and expediting contract execution.

Our Property Management Team has extensive experience advising clients on property and infrastructure management from both the owner and manager perspectives. If you require advice or assistance or have any queries regarding the points raised in this article, please contact Ryan, Micha or Fraser, who will be happy to help.