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Real Estate Glossary

Management Contract – Prerequisites for Making the Appointment of a Manager Legally Effective

If a home owner association (HOA) decides to appoint a manager, it is of the essence to sign a management contract with a manager rather than just appointing one. Otherwise, the appointment will be legally ineffective. The contract must be negotiated with the manager, and then approved by majority vote at the meeting of owners. Afterwards, the manager and one or several owners authorised for this purpose by the home owner association sign the contract. Not until then does the manager's appointment become legally effective.

Contents of the Management Contract: Responsibilities, Term, and Remuneration

In addition to explicitly identifying the parties to the contract, the management contract should specify the contract term and the notice period A manager may serve for a maximum term of five years – though there is the option to re-appoint the manager again. If a manager is re-appointed, a new management contract is rarely required. The first-time appointment of a manager by a home owner association (HOA) is legally limited to three years.

One of the key aspects in the management contract is the section defining the manager's responsibilities and duties. Some of these are set forth in the German Condominium Act (WEG), whereas others are governed by the respective condominium regulations and the resolutions passed by the meeting of owners. Among the main responsibilities is the management of the home owner association's finances. The finances, especially the investment of the maintenance reserve, should also be regulated in the form of contractual provisions. It makes sense to use a trust account toward this end.

The management contract should also clarify vis-à-vis which entities the manager has power of representation: These are usually authorities and courts, among other entities. Another aspect to be governed by the contract is the amount of remuneration along with the mode of payment. On top of that, the contract should specify under what circumstances the owner may view the manager's files and how often the managers should appraise the condition of the property at issue. Finally, the management contract frequently grants the manager the right to authorise another person to perform his duties.

Whether Prior to an Acquisition...

Even ahead of an acquisition, the Accentro Real Estate Encyclopaedia offers interesting facts and decision guidance: We will coach you through the first steps on your path to homeownership. For instance, it provides information on the process flow of a condominium purchase. It will also tell you what sort of documents you need in order to buy property, and where to obtain them.

... or after – Our Real Estate Encyclopaedia Provides the Answers You Need

Once you have bought a property, you may wonder who is going to manage your condo and how. After all, caretaking your property is one of your main obligations as a condominium owner. In addition to numerous tips and suggestions, you will find answers here to many questions involving the property management subject, such as: What does “individual freehold ownership” mean? What exactly do “condominium regulations” govern? And what does the term “condominium fee” imply? In addition, we elaborate subtle differences between terms such as “real estate management” and “corporate real estate management.”

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