In one sentence
The contract governing third-party management of a property, often subordinated and assignable to the lender.
The longer version
Lenders review and frequently require subordination of management fees and the right to terminate management on default. The agreement affects cash flow and the lender's control if it takes over.
The management agreement, its subordination, and any assignment are diligence and closing items on managed properties.
Common questions
- Why does a lender review the property management agreement?
- Because the manager runs the collateral. The lender checks fees, termination rights and whether the agreement is subordinated to the loan.
- What is a subordination of management agreement?
- An agreement subordinating the manager's fees and rights to the loan and letting the lender terminate the manager in certain circumstances, such as default.
- Can a lender require a manager change?
- Many loan documents let the lender require a replacement manager after a default or performance trigger.
Keep reading
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- The due diligence checklist, built to be runChecklists as systems, not documents.
- The commercial loan closing processThe five stages from term sheet to funded.
- Commercial loan softwareWhere this sits in the lending stack.