Development management agreements serve as a vehicle for combining the financial resources of funds and other interested parties with the experience of development managers, who are frequently developers or former developers.
These agreements are different from more conventional development agreements in that the employer provides the funding and hires the professional and construction teams, while the development manager acts as a lead consultant.
The arrangement is advantageous to both parties because it gives investors access to the potential rewards of direct development without requiring them to form a team or assume all project risk, and it gives development managers the ability to use their experience to take on bigger projects without having to raise money or assume significant project risk. In this article, Property Development Management Agreement, we take a look at the process and mechanism involved.
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How does a DMA work?
The development manager, acting as the developer’s representative, is given overall management authority for a development project under the terms of a development management agreement (DMA) between the developer and an independent development manager. The development manager takes over the management and administration of the project on the developer’s behalf through the DMA.
Until construction is finished and the developer leaves the project, the development manager is hired to coordinate the project’s strategic planning. Typically, the DMA includes a schedule or an appendix with a comprehensive scope of services.
The Development Manager’s role, responsibilities, services, contract suspensions termination and reporting requirements are all outlined in the DMA. A company plan, budget plan, and work schedule are also included in the DMA. In all project meetings, a DMA will typically assign the development manager the responsibility of representing the developer to the project team and negotiating contracts on the developer’s behalf. Developers typically maintain some control over their projects by mandating that DMs secure permission or agreement for significant decisions, procedures, and purchases.
In cases where services might result in the exceeding of a certain financial threshold, developer consent will also be necessary. However, the manager may directly enter into contracts below the threshold amount by using delegated authority. DMs get a development management fee that is typically calculated as a percentage of the project’s total capital and development costs. Alternative payment schemes are widespread.
A DMA could also be governed by KPIs related to construction. If the development manager meets the construction KPIs, they could be eligible for a success fee; if not, DMA termination could occur. Effectively managing the parties’ relationship, reducing risk, and raising the project’s effectiveness and quality are all achieved through the DMA. Project risk exposures should be identified, and risk management and backup strategies should be implemented to minimise and/or completely remove the risks.
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We have a proven track record of helping clients with property development agreements. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
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It is important for you to be well informed about the issues and possible implications of a property development agreement. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Commercial Property solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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