The property covered by the agreement and the limits of services

Before signing, first establish which buildings, facilities and areas the services cover. This may be particularly important for associations comprising several buildings. Particular attention should be paid to garages, internal roads, playgrounds, refuse areas and systems serving several properties.

The property description and plan should distinguish the common property from separately owned units and neighbouring land. Where the association’s duties arise from additional arrangements, attach a list of those arrangements and specify how costs are allocated. Residents’ use of an area does not, by itself, explain the basis for the association funding it.

Sample contractual provision:

“The scope of services covers the common property identified on the plan attached as Schedule 1. Services relating to areas or facilities outside its boundaries are limited to activities arising from the arrangements listed in Schedule 2, within the scope of the Association’s obligations under those arrangements.”

The administrator’s duties and property service standards

 A general contractual provision referring to ‘ongoing administration of the property by the administrator’ may prove insufficient and fail to protect the association’s legal interests. The scope of services should enable the board to establish exactly which tasks the administrator must perform, by when and for what fee.

The administrator provides ongoing organisational, technical and accounting services within the scope of its agreed duties. These may include keeping cost records, preparing accounts, arranging maintenance, receiving residents’ reports and monitoring arrears. The agreement should specify the types of activities as well as the standards and methods for performing them.

It is worth specifying reporting deadlines, rules for access to supporting documents and the division of tasks between the administrator and the board. For technical services, establish which work the administrator performs itself and which it arranges through external contractors, at whose expense and subject to whose approval.

Sample contractual provision:

“The Administrator shall keep records of common property maintenance costs, advance payments made by unit owners and settlements on other grounds relating to the common property. By the 15th day of each month, it shall provide the Board with a statement for the preceding month, including information on liabilities and arrears.”

Technical services may, in turn, be described as follows:

“The Administrator shall arrange routine maintenance and repairs of the common property and measures to remedy breakdowns. It shall ensure that emergency reports can be received around the clock and shall promptly inform the Board of any breakdown, the action taken and the anticipated costs.”

These clauses are examples. Deadlines, on-call coverage and cost allocation rules should be tailored to the needs of the individual association.

Entering into contracts on the association’s behalf and powers of attorney

Clearly establish whether the administrator merely prepares quotations and draft contracts or also enters into contracts on the association’s behalf. Signing contracts requires appropriate authority; administrative services alone do not confer an unrestricted right to incur obligations.

It is worth specifying limits on contract value and duration, the procedure for obtaining board approval, and the obligation to disclose links with contractors. Reviewing terms before a contract is signed avoids situations in which the board learns of an obligation only after it has been incurred.

Sample contractual provision:

“The Administrator shall prepare draft contracts relating to property services and submit them to the Board for approval. Any contract entered into by the Administrator on the Association’s behalf requires prior approval of its terms by the Board and a power of attorney covering the relevant transaction. This provision does not replace any resolution of unit owners required by law. The Administrator shall provide the Board with a copy of the signed contract within 7 days of its conclusion.”

For major refurbishment works, it is also worth specifying the number of quotations to compare, how contractors are vetted and how the selection is documented. The agreement should also explain who monitors the work and participates in its acceptance.

The administrator’s fees and additional charges

Fees may be agreed as a fixed amount or by reference to a specified basis, such as floor area. In the latter case, clarify which area is used for billing, whether it includes garages and storage rooms, and when a change in area affects the fee.

The agreement should distinguish services included in the basic fee from activities charged separately. It is worth agreeing an exhaustive price list for extras and requiring approval before they are performed. Where indexation is provided for, specify the index, adjustment frequency and date of the first adjustment.

Sample contractual provision:

“For performing the activities listed in Schedule 3, the Administrator shall be entitled to a monthly fee of PLN […] net, plus VAT at the applicable rate where payable. The fee covers all activities specified in that Schedule. Only services listed in the price list attached as Schedule 4 may be charged separately, provided that the Board has commissioned them in advance in documentary form.”

The association’s bank account and expenditure control

The agreement should give the board ongoing access to information on the association’s funds and control over bank transfers. Clearly specify the account holder, the scope of the administrator’s authority and the payment approval rules.

The administrator should not be given unrestricted authority to collect its own fees and additional charges independently, particularly where the amounts are disputed. A safer approach is to provide for verification of billing documents and an agreed expenditure approval procedure.

The following provision may be used in practice:

“Transactions relating to the Association shall be processed through a bank account held by the Association. The Administrator shall use the account only within the scope of the authority granted to it. Payments require approval in accordance with the procedure set out in Schedule 5. The Administrator is not authorised to debit the account independently for its own fees in circumvention of that procedure.”

The administrator’s liability and liability insurance

The agreement should clearly specify the required standard of care and the administrator’s responsibility for persons through whom it performs its duties. Before signing, also review limitations of liability, exclusions of particular types of loss and procedures for reporting failures.

It is worth attaching a current liability insurance policy showing the sum insured and scope of cover. A mere declaration that insurance is held does not allow the association to assess the actual protection available.

Sample contractual provision:

“The Administrator shall perform its duties with due care appropriate to the professional nature of its business and in accordance with the principles of sound property management. It shall be liable under the general rules for failure to perform or improper performance of the agreement, including acts and omissions of persons engaged by it in performing the agreement.”

The obligation to document insurance cover may be expressed as follows:

“Throughout the term of the agreement, the Administrator shall maintain liability insurance covering the activities performed under it, with a limit of indemnity of no less than PLN […]. A copy of the current policy is attached as Schedule 6. The Administrator shall provide the Board with a document confirming continuity of cover before the existing insurance period expires.”

Termination of the administration agreement and handover of records

The rules for ending the engagement must be agreed when the agreement is signed. Specify the notice period, how it is calculated, how notice is served and the circumstances justifying termination without observing that period.

Sample contractual provision:

“This agreement is entered into for an indefinite term. Either party may terminate it on three months’ notice, effective at the end of a calendar month. Notice of termination must be given in writing to be valid.”

The administrator’s duties after the services end are equally important. The agreement should regulate the handover of records, the electronic archive, information on ongoing matters and the final accounts. It is worth specifying the data export format and how the association will be given access to systems. This does not always mean handing over employees’ personal passwords; granting new access rights may be the appropriate solution.

Sample contractual provision:

“Within 7 days after the agreement ends, the Administrator shall hand over to the Association, or an entity designated by it, all records and data concerning the services provided to the Association that are in its possession, as documented in a handover report. It shall submit the final accounts within 14 days. Documents and information necessary to ensure continuity of services shall be handed over no later than the date on which the agreement ends. The release of records may not be conditional on payment of disputed fees.”

These deadlines are examples of contractual time limits. They should be tailored to the size of the archive and the way services are provided. The handover report should allow any missing items and the deadline for supplying them to be recorded.

We describe the steps to take if records are withheld in our publication: The Previous Board of a Residential Owners’ Association Will Not Release Records – What Can Be Done? The publication also covers the end of an engagement with a property manager or administrator.

Servicing a new development and relations with the developer

When taking over a new development, it is worth separating the costs of maintaining the common property from the costs of the developer’s work and the fit-out of individual apartments. Rules should also be agreed for documenting defects and providing the board with the information it needs to decide on claims.

Any previous or concurrent engagement between the administrator and the developer requires transparency, particularly where the administrator participates in defect inspections or gathers records. The agreement should require it to disclose links that could affect how it performs its duties.

Sample contractual provision:

“The Administrator shall inform the Board of links with the developer or contractors that may give rise to a conflict of interest in performing the agreement. It shall record reports of defects in the common property and forward them to the Board, together with the documentation in its possession, without undue delay. It is not authorised to waive the Association’s claims or enter into a settlement without separate authority.”

Schedules to the property administration agreement

There is no universal list of schedules suitable for every agreement. However, to ensure transparency in the engagement with the association, we recommend preparing the following set:

Schedule	What should it specify?
Property description and plan	Buildings, plots, facilities, service boundaries and neighbouring areas covered by additional arrangements.
Detailed scope of services	The administrator’s activities, their frequency, service standards and the division of duties with the board.
Fees and price list for additional services	Calculation basis, rates, VAT, external costs and indexation rules.
Expenditure procedure and powers of attorney	Limits, board approval, authorisation of transfers and scope of representation.
Service takeover report	The status of records, funds, accounts, keys, equipment and ongoing matters, together with any identified deficiencies.
List of contracts and arrangements	Suppliers, contractors, notice periods, obligations towards neighbours and rules for sharing infrastructure costs.
Technical service schedule	Inspection and maintenance dates, persons responsible and emergency procedures.
Liability insurance policy	Scope and period of cover, sum insured and obligation to provide updates.
Data protection rules	The parties’ roles and, where the administrator processes data on the association’s behalf, an appropriate data processing agreement.
Reporting and engagement termination procedure	Report templates, data export format, handover deadlines and a final handover report template.

Schedules should be identified by number and date or version, and clearly linked to the agreement. Also establish which amendments require a formal addendum and which may be made under an agreed working procedure.

Reviewing the agreement before signing

An imprecise agreement most often reveals its weaknesses during a breakdown, a dispute over additional fees or a change of administrator. It then emerges that the parties understood the scope of services, expenditure limits or the obligation to release records differently.

The review should cover the entire working arrangement: the agreement, schedules, powers of attorney, payment rules and the process for ending the services. If the terms of engagement are to be approved by a resolution, attention should also be paid to its wording and the materials presented to the owners. We discuss the grounds for challenging such decisions in more detail in our article on challenging a resolution of a residential owners’ association.