Management agreements can also be difficult to get out of, further emphasizing the importance of the selection and negotiation process and the inclusion of performance and termination clauses, which are not easily negotiated.
The management agreement itself is the most important document entered into by the owner as it sets the rules that defines the long-term relationship (usually between 15 and 20 years) between the owner and the operator.
Through negotiations, HTI Consulting will introduce clauses to the management agreement that will add protection to the owner and transfer a certain amount of risk to the operator. Clauses such as progressive fee structures which place some of the risk on the management company, incentive fees which encourage better performance, GOP thresholds, performance measures and termination clauses amongst others. All of these elements, in past negotiations, have resulted in significant savings for HTI Consulting’s clients.
Our value add also results in elements being included (not typically included in base management contracts) which are vital to creating a mutually beneficial and long-standing relationship between the owner and operator.