11.2 Management Agreements, Delegated Authority & Client Direction

The management agreement as an operating map

A property management agreement is the contract that states what the owner has hired the manager to do and how the parties govern the relationship. Staff should translate its provisions into approval workflows, calendars, controls, and reports.

Review provisions addressing:

• property and parties;
• term, renewal, and termination;
• services and excluded services;
• authority to lease, collect, hire, purchase, contract, and litigate;
• operating and capital spending limits;
• bank accounts and client funds;
• staffing and payroll allocation;
• fees and reimbursable expenses;
• insurance, indemnity, and risk-transfer duties;
• budgets, reports, records, audits, and owner access;
• emergency powers; and
• transfer and final accounting after termination.

Read the agreement with the approved budget, operating policies, bank resolutions, ownership approvals, and applicable law. If they conflict, do not improvise; escalate to an authorized decision-maker or counsel.

Delegated versus reserved authority

Delegated authority permits routine action without separate approval each time. Examples may include standard leases, budgeted supplies, rent collection, routine work orders, or approved vendors below a limit.

Reserved authority remains with the owner or board. Examples may include unbudgeted capital work, refinancing, sale, settlements, related-party contracts, large write-offs, changes to standard lease terms, or litigation.

The table is illustrative; the actual agreement controls.

Spending controls

Spending authority concerns the whole commitment, not invoice size. Splitting one purchase to avoid a limit defeats the control. Document:

1. need and scope;
2. budget status;
3. competitive pricing or an approved exception;
4. vendor qualification;
5. authorization;
6. receipt or completion;
7. invoice approval and coding; and
8. warranty, lien, or closeout records.

A budget is not automatically a purchase order. Some clients require separate approval for budgeted capital work; an agreement may allow routine repairs within a limit.

Emergency authority

An emergency clause should define what qualifies, what management may do, and how notice occurs. Immediate threats involving fire, gas, uncontrolled water, security, or major damage require action. Protect life, contact emergency services when appropriate, stop further damage within staff competence, engage qualified help, and record the reason.

Emergency authority is not unlimited. Control cost, preserve evidence, and notify the client and insurer under the plan. Ordinary approval rules resume after the threat is contained.

Client direction and judgment

Loyalty operates within lawful, ethical, and contractual boundaries. When direction is questionable:

• confirm the instruction and who issued it;
• compare it with the agreement, policies, law, and IREM Code;
• explain the effect;
• propose a compliant alternative;
• document the response; and
• escalate to authorized leadership or counsel.

Do not hide a material issue to improve a report. Do not execute discriminatory, unsafe, or fraudulent instructions. An indemnity clause does not make unlawful conduct acceptable.

Contract calendars

Calendar renewal, fee-change, audit, insurance, budget, and termination notice dates. Missing a date may extend a contract or impair a right even when daily performance is strong.

Track vendor performance against scope, service level, price, insurance, change-order, warranty, and termination provisions. Accept work only after verification. Resolve deficiencies through the contract rather than informal side deals.

Termination handoff

Depending on the agreement, management may need to:

• stop new commitments after a cutoff;
• reconcile cash and resident ledgers;
• transfer leases, deposits, contracts, keys, access credentials, warranties, permits, and records;
• identify open work orders, claims, disputes, and compliance matters;
• prepare a final accounting; and
• protect confidential information.

For exam questions, identify authority before deciding whether an action is attractive. A low price does not cure missing approval. An owner request does not cure illegality. An emergency may justify prompt action but does not eliminate documentation and notice.

The strongest answer preserves client interests by acting within the agreement, escalating exceptions, and leaving an auditable record.

Commitment tracking

Maintain a commitment log for approved purchases and contracts, not only invoices already received. Record the vendor, scope, original authorization, committed amount, change orders, invoices, remaining commitment, and required closeout evidence. Comparing committed cost with the budget exposes overruns before cash is disbursed. It also prevents a manager from authorizing new work against budget dollars that are already promised elsewhere. Reconcile the log with accounts payable and the capital schedule during each reporting cycle.