If you’re a real estate consultant or hiring one, a well-crafted consulting agreement is essential for clearly defining the relationship and protecting both parties. This basic guide examines key considerations, provisions, and benefits of real estate consulting contracts.
The core of any consulting agreement is specifying exactly what services the consultant will provide. This helps set proper expectations and prevent misunderstandings down the road.
Some examples of specific real estate consulting services could include:
The agreement should outline the precise services in detail. This helps quantify the consultant’s responsibilities and creates accountability.
Consulting engagements can be structured in different ways:
The contract should stipulate the scope structure and terms. Project scopes tend to be more concrete, while retainers and hourly work allow flexibility to adapt as needs evolve.
Payment expectations should be clearly established upfront in the consulting agreement. Typical compensation structures include:
The payment schedule should also be defined – such as monthly, quarterly, upon completion of milestones, etc.
Expenses are typically billed separately from fees, with parameters for expense approval outlined in the agreement.
Real estate consultants are usually independent contractors, not employees. The agreement should explicitly state this relationship.
Key elements that establish an independent contractor relationship include:
Properly structuring the independent contractor relationship protects both parties from any tax, legal, or benefits implications of employment.
Liability insurance expectations should also be addressed. Requiring the consultant to carry errors and omissions coverage helps protect the client.
Real estate consulting often involves access to sensitive client information and data. Ironclad confidentiality is essential.
The agreement should:
Intellectual property considerations are also important. The client will typically want exclusive ownership and rights to any IP developed. Responsibility for obtaining proper licensing for any third-party IP should be clear.
Limiting legal liability risk is important for both the consultant and client. Key provisions include:
Well-crafted disclaimers, limitations, and indemnities protect against expensive legal claims. But reasonable caps on liability should be set.
The agreement should define an end date or circumstance for termination. Common termination provisions include:
Payment obligations for services performed before termination should be clear. Certain provisions like confidentiality may survive past termination.
Some additional sections to consider including:
Now that we’ve reviewed key elements of a thorough consulting contract, here is an example template to reference:
With a solid contract foundation in place, focus on building a collaborative working relationship. Try these tips:
Approach the relationship as a true partnership, not just a contractual transaction. The most successful consulting engagements result from mutual trust, transparency, and commitment to shared goals.
Real estate consulting projects come with risks and rewards for both consultants and clients. Invest time upfront to thoughtfully craft your consulting agreement. It sets the stage for a smooth engagement that meets your business needs and avoids preventable legal pitfalls.
Use this guide and sample template as a springboard. Consult an attorney to review your final contract before signing. Here’s to a successful, protected partnership that moves your real estate initiatives forward.
REAL ESTATE CONSULTING AGREEMENT
This REAL ESTATE CONSULTING AGREEMENT (the “Agreement”), is made effective as of ________________, 2022 (“Effective Date”) by and between ____________________________
(“Consultant”) and ___________________________ (“Client”).
WHEREAS, Consultant is in the business of providing real estate related consulting services, and
WHEREAS Client wishes to engage the services of Consultant on terms and conditions set forth in this Agreement, and Consultant wishes to accept such an engagement,
NOW, THEREFORE, in consideration of the covenants, terms and conditions hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
a) Client shall pay Consultant $________ fee for the first month of Services, due at the execution of this Agreement, and $________ per month after that. The Client can terminate the Agreement and stop paying any time after the first payment.
a) Consultant represents that Consultant has the expertise and is qualified, equipped, organized and financed to perform the Services required under this Agreement. Consultant shall furnish best skill and judgment and shall exercise maximum cooperation in furthering the best interests of Client.
b) Consultant will at Consultant’s sole and exclusive discretion determine the method, details and means of performing the Services.
c) Consultant’s Services shall be of a quality that is commercially acceptable in this industry and comparable to, or better than, globally recognized providers of similar services.
a) Except as otherwise provided in this Agreement, Consultant assumes no responsibility under this Agreement other than to render the Services called for in good faith and shall not be responsible for any action in following or declining to follow any recommendations of Consultant. Consultant, its directors, officers, stockholders and employees will not be liable to Client, any subsidiary of Client, its subsidiary’s stockholders or the unaffiliated directors for any acts or omissions by Consultant, its directors, officers or employees under or in connection with this Agreement, except by reason of acts or omissions constituting bad faith, willful misconduct, or reckless disregard of their duties under this Agreement or violation of law or applicable regulation.
b) Client and its subsidiaries shall reimburse, indemnify and hold harmless the Consultant, its directors, officers, stockholders and employees of and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever, including, without limitation, attorneys’ fees, in respect of or arising from any acts or omissions of Consultant, its directors, officers and employees made in good faith in the performance of the Consultant’s duties under this Agreement and not constituting bad faith, willful misconduct, or reckless disregard of its duties or willful violation of law or applicable regulation.
c) Consultant and its subsidiaries shall reimburse, indemnify and hold harmless Client, its directors, officers, stockholders and employees of and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever, including, without limitation, attorneys’ fees, in respect of or arising from any acts or omissions of Consultant, its directors, officers and employees constituting bad faith, willful misconduct, or reckless disregard of its duties or willful violation of law or applicable regulation.
a) It has the power and authority to execute, deliver and perform this Agreement and all obligations required. No consent of any other person is required in connection with this Agreement or the execution, delivery, performance, validity or enforceability of this Agreement and all obligations required. This Agreement constitutes a legally valid and binding obligation of each party.
b) The execution, delivery and performance of this Agreement and the documents or instruments required will not violate any provision of any existing law or regulation binding on each party, or any order, judgment, award or decree of any court, arbitrator or governmental authority binding on the party, or of any mortgage, indenture, lease, contract or other agreement, instrument or undertaking by which a party may be bound.
Either party may change the notices address by giving notice thereof to the other party in the manner set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the Effective Date.
By: _________________
Name, Title: __________
Date: ________________
By: _________________
Name, Title: __________
Date: ________________
Here are the FAQ questions and answers formatted together:
The ideal consulting agreement term can range from a few months to a year or more, depending on the nature of the engagement. Tactical projects with clearly defined scopes can have shorter 3-6 month terms. More strategic engagements that are focused on high-level analysis, planning, and implementation may require 12-24 month terms.
When deciding on term length, consider the full scope of the project, complexity of deliverables, and how long it will reasonably take to execute. Also factor in the working style and availability of the consultant.
Build in flexibility by outlining provisions for term extension if mutually agreed upon. For instance, the initial term is 6 months, but the parties can opt to renew for an additional 6 months. This allows you to re-asses and extend if needed. Clearly define notice periods and renewal decision timeframes.
For project-based consulting engagements, take time to thoughtfully identify deliverables and target completion dates to provide clarity for both parties. However, don’t make the timeline overly rigid, as adjustments are often needed as the nuances of a complex project emerge.
Striking the right balance is key – put stakes in the ground but allow room for agility. Outline the process and cadence for deliverable review and approvals. For example, the consultant will submit deliverables every 2 weeks for client feedback. Quick approvals or redirection will ensure the project stays on track.
Being overly rigid on deliverables can constrain the consultant’s creativity. But being too loose can create uncertainty. Defining major milestones provides structure while still being flexible. For example, require a market analysis report by end of month 1. The consultant can shape the specifics as they see fit.
The fee structure itself should be very clear in the main body of the consulting agreement – for example, that it is a fixed project fee model vs. hourly billing. However, you can attach the specific fee amounts, rates, and payment installment particulars in a separate exhibit or schedule rather than detailing it in the agreement.
This keeps the focus of the main agreement on higher-level duties, responsibilities, and legal protections. The exhibit provides granularity on dollars and cents. This also simplifies updating the fee details over time, while keeping the agreement framework constant. Make sure the payment frequencies and procedures align with the invoicing operations on both sides as well.
Grant the consultant access to data that is reasonably required for them to deliver on the scope and key objectives outlined. Avoid giving them free rein across all company systems and information if not essential.
Consulting projects often have sensitive elements, so confidentiality is crucial. Require consultants to handle data with care, only use it for purposes of their project work, and not retain any copies post-engagement. You can limit their access to read-only systems or specific shared folders rather than full networks.
Data security should also be addressed – such as requiring password protection and encryption for company data. Strike a balance between providing what they need to succeed while still protecting your most valuable information assets.
It is reasonable to include a provision restricting the consultant from directly soliciting your employees for a set period post-engagement, such as 12 months. You invest substantial resources into attracting and developing talent. A consultant you bring in should not then be able to turn around and immediately recruit away your best people using insider knowledge.
However, you generally can’t – and shouldn’t – prohibit normal advertising of job openings or indirect recruitment through general channels. The provision should focus on targeted direct solicitation. And you must still ensure employee rights are protected – they remain free to apply and move where they choose. But instituting a reasonable buffer between the consultant engagement and direct solicitation helps protect your team.
Requiring a consultant to work exclusively with your company on projects can provide focus, priority, and protection of intellectual capital. However, mandating exclusivity is rare and usually comes at a premium price – after all, you are limiting their potential business.
Only negotiate for exclusivity if it is truly critical to the success of your project, and if the consultant is amenable based on the engagement size, scope, and compensation. Because it imposes constraints on them, expect to pay around a 10-20% markup for exclusivity. Offer it selectively for your most strategic initiatives where undivided focus matters.
Certain provisions of a consulting agreement live on even after the formal engagement ends. Confidentiality obligations should certainly continue indefinitely – no preset end date. The consultant should never be able to freely disclose your proprietary information.
Non-compete clauses are controversial but, if included, are often effective 6-12 months post-termination. This prevents the consultant from immediately joining or advising key competitors once your engagement concludes. Similarly, non-solicitation of customers or employees lasts 6-12 months typically.
Tailor the duration based on your comfort level, industry dynamics, and nature of the work involved. But do set reasonable expiration periods – perpetual restrictions won’t stand up. The goal is short-term protection, not perpetual constraint of the consultant’s livelihood.
Here are a few more potential FAQ questions and answers to consider adding:
For sensitive engagements, consider including a provision permitting a background check on the consultant before finalizing the agreement. This allows you to validate credentials, experience, and confirm no criminal history that raises red flags.
Any background check should be strictly limited to what is directly relevant for assessing consultant qualifications. Get their written consent beforehand and share the results. Handle personable data responsibly and confidentially.
Work with the consultant to define major project phases and milestones at a high-level while allowing flexibility on detailed execution and timing estimates. For example:
Avoid strict due dates but use reasonable estimates to scope the timing. The consultant can then refine the project plan as they get into the details.
Requesting that a consultant maintain errors and omissions or professional liability insurance (in reasonable amounts) helps ensure they can cover any damages. Require them to provide a certificate of insurance evidencing active coverage.
Adding a mediation clause provides an intermediary step before formal litigation to work through any disputes. You can require good faith efforts to mediate before filing lawsuits. Mediation is less costly than court proceedings.
Outline provisions for handling non-payment of legitimate consulting invoices like:
This encourages prompt payment while allowing flexibility if genuinely disputed.
