Understanding Service Agreements in Condominium Management
A service agreement is a legally binding contract between a condominium corporation and a service provider, such as a condominium manager. The agreement outlines the scope of responsibilities, duties, and authority granted to the service provider.
Key Components of a Management Service Agreement:
A. Core Contract Details
Names & Contact Information – Identifies both the condominium corporation and the management provider.
Contract Duration & Renewal Terms – Specifies the start and end date of the agreement and whether it auto-renews.
Termination Clause – Outlines how either party can end the agreement, including required notice periods and any associated penalties.
B. Roles & Responsibilities of the Condominium Manager
Scope of Services – Defines day-to-day responsibilities, including financial administration, maintenance oversight, and enforcement of bylaws (if applicable).
Duty to Act in the Corporation’s Best Interests – Confirms that the manager must prioritize the corporation’s financial and legal well-being.
Handling of Complaints & Disputes – Specifies how complaints, violations, and owner disputes are managed.
C. Financial Administration Requirements
Handling of Funds & Financial Controls – Defines whether the manager has access to reserve funds, operating funds, or trust accounts and how funds must be handled.
Fee Structure & Payment Terms – Specifies management fees, additional service charges, and reimbursement policies.
Financial Reporting Obligations – Requires the manager to provide regular financial updates, including income and expense reports.
D. Record Keeping & Document Handling
Document Retention & Ownership – Clarifies that all corporate records belong to the condominium corporation, not the manager.
Transfer of Records Upon Termination – Ensures that when the contract ends, all financial and corporate records must be returned within a specified timeframe.
Confidentiality & Privacy Protection – Outlines how unit owner information and corporate records must be protected under privacy laws.
E. Limitations on Authority & Board Approval Requirements
No Unauthorized Decision-Making – The manager cannot sign contracts or make major financial decisions without board approval.
Bylaw Enforcement Limitations – The manager may issue bylaw violation notices but cannot impose fines without board approval.
Limitations on Signing Authority – The agreement must specify whether the manager has authority to sign cheques or enter into contracts.
A condominium manager must act in the best interests of the condominium corporation and ensure compliance with the Condominium Property Act and its regulations.
Analyzing Service Agreements for Best Practices
Condominium corporations should ensure that service agreements align with best practices to protect their interests and establish clear expectations.
Best Practices for Service Agreements:
Clearly define roles and responsibilities to avoid misunderstandings.
Include specific performance standards (e.g., response times for maintenance requests).
Outline procedures for dispute resolution between the board and service provider.
Specify board approval requirements for major decisions (e.g., issuing bylaw fines).
Define financial reporting expectations, including access to bank accounts and reserve funds.
Comparing Different Types of Service Agreements
Type of Agreement | Scope of Responsibilities |
Full-Service Management Agreement | Handles all aspects of condominium management, including financials, maintenance, and bylaw enforcement. |
Financial-Only Agreement | Manages budgeting, financial reporting, and reserve fund contributions. |
Administrative Agreement | Covers record-keeping, meeting coordination, and correspondence with owners. |
Type of Agreement | Common Features |
Full-Service Management Agreement | Broad scope, defined fees, access to corporation accounts. |
Financial-Only Agreement | Limited to financial services, does not include maintenance duties. |
Administrative Agreement | Focuses on governance support rather than operations. |
Type of Agreement | Potential Issues |
Full-Service Management Agreement | Risk of over-delegation if board oversight is weak. |
Financial-Only Agreement | May require separate contracts for maintenance and legal services. |
Administrative Agreement | No authority over financial or maintenance decisions. |
Evaluating Risks in Service Agreements with Undefined Agency Roles
When agency roles are not clearly defined, condominium corporations face risks, including:
Mismanagement of Funds – If financial controls are not outlined, the board may have difficulty tracking expenses or detecting unauthorized transactions.
Liability Issues – If the service agreement does not specify insurance coverage, legal disputes may arise over damages or negligence.
Exceeding Authority – Without clear limitations, a condominium manager may make decisions that require board approval, leading to legal challenges.
Difficulty in Contract Termination – If termination terms are vague, the board may face financial penalties or legal barriers when attempting to end the agreement.
Case Study: Poorly Defined Service Agreement
A condominium board enters into a full-service management agreement but fails to specify that board approval is required for bylaw enforcement fines. The condominium manager imposes fines without consulting the board, leading to legal disputes with owners. The board is ultimately held responsible for improper enforcement.
Solution: Ensure the service agreement clearly states that all bylaw fines must be approved by the board before issuance.
Best Practices for Reviewing and Negotiating Service Agreements
Seek Legal Review: Before signing, the board should have a legal professional review the agreement.
Ensure Transparency: The agreement should clearly define fee structures and reporting obligations.
Retain Control Over Key Decisions: The board should maintain control over bylaw enforcement, financial transactions, and major repairs.
Require Regular Performance Reviews: Set benchmarks for service quality and review the manager’s performance annually.
By ensuring service agreements are well-structured, condominium corporations can minimize risks and establish clear governance practices that align with Alberta’s condominium management regulations.
