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.
Defining the Scope of Services
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:
- Market research and analysis
- Site selection and acquisition support
- Financial modeling and investment analysis
- Development planning and project management
- Brokerage and sales services
- Property management oversight
- Due diligence and risk assessment
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:
- Project-based – Services are tied to delivering a defined project or outcome.
- Retainer – The consultant handles an ongoing, agreed-upon scope of services.
- Hourly – The consultant bills for time spent on variable tasks.
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.
Setting Payment Expectations
Payment expectations should be clearly established upfront in the consulting agreement. Typical compensation structures include:
- Fixed fee – A set dollar amount for the defined scope of work. This provides cost certainty for the client.
- Hourly rate – The consultant bills an agreed hourly rate for time spent. More uncertain for the client but adaptable.
- Value-based – The consultant receives a percentage of the overall value or profit from a project or transaction. Risky for the consultant but aligns incentives.
- Milestone-based – Payment is tied to completion of project milestones or deliverables. Helps ensure consultant accountability.
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.
Clarifying the Independent Contractor Relationship
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:
- Freedom to work on other projects – The consultant can take on other clients and is not exclusive.
- Lack of direct supervision – The consultant decides how best to deliver the work.
- Consultant’s own equipment and materials – The consultant supplies their own tools, gear, and resources.
- Temporary duration – The engagement has a defined end date vs. being open-ended employment.
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.
Confidentiality and Intellectual Property
Real estate consulting often involves access to sensitive client information and data. Ironclad confidentiality is essential.
The agreement should:
- Define what constitutes confidential information. This includes business data, financials, plans, intellectual property, etc.
- Require written consent before any confidential info is shared.
- Limit internal access to confidential data to employees who “need to know.”
- Allow legal disclosure only when required by law or court order.
- Stipulate that obligations remain in effect after agreement termination.
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 Liability Risks
Limiting legal liability risk is important for both the consultant and client. Key provisions include:
- Disclaimer of warranties – The consultant cannot guarantee specific outcomes. Services carry no express or implied warranties.
- Limiting damages – The consultant’s liability for damages is capped at a set amount – often the value of the contract.
- Indemnification – Each party indemnifies the other against third-party legal claims related to negligence or misconduct.
- Force majeure – Unforeseeable events beyond a party’s control may excuse or delay performance.
Well-crafted disclaimers, limitations, and indemnities protect against expensive legal claims. But reasonable caps on liability should be set.
Defining the Term and Termination
The agreement should define an end date or circumstance for termination. Common termination provisions include:
- Expiration date – The agreement ends on a set calendar date.
- Notice period – Either party can terminate with 30-60 days written notice.
- Early termination for cause – Breach of contract terms allows immediate termination.
- Project completion – The agreement ends once the defined work or deliverables are finished.
Payment obligations for services performed before termination should be clear. Certain provisions like confidentiality may survive past termination.
Other Key Provisions
Some additional sections to consider including:
- Governing law – Specifies which state’s laws govern the agreement.
- Force majeure – Defines unforeseeable events that may excuse a failure to perform.
- Dispute resolution – Sets a process for resolving disputes, like arbitration.
- Assignment – Limits the ability to assign duties under the agreement to third parties.
- Modification – Requires written agreement for any amendments.
- Entire agreement – States the contract represents the entire understanding of the parties.
Real Estate Consulting Agreement Template
Now that we’ve reviewed key elements of a thorough consulting contract, here is an example template to reference:
Best Practices for Productive Partnerships
With a solid contract foundation in place, focus on building a collaborative working relationship. Try these tips:
- Communicate frequently and openly
- Align on project planning and timelines
- Celebrate small wins and milestones
- Share relevant documents and data quickly
- Provide prompt feedback and course-correct if needed
- Be reasonable and pragmatic if issues arise
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.
Protect Your Project with an Effective Agreement
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 TEMPLATE
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:
- SERVICES. Consultant shall provide the following Services to Client:
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.
- COOPERATION. Client shall promptly provide Consultant with such information, data and documents as reasonably required and requested by Consultant in the performance of the Services contemplated by this Agreement. Client will fully cooperate with Consultant in its performance of Services and Client understands and agrees that without timely and effective cooperation, Consultant will not be able to perform.
- MUTUAL CONFIDENTIALITY. To the extent permitted by applicable law, the parties shall maintain all information concerning this Agreement and any pending or subsequent negotiations between the parties as confidential, disclosing information only to those individuals and representatives as designated by the other party, provided that such individuals acknowledge and agree to maintain the confidentiality of such information.
- TERM AND TERMINATION. This Agreement shall commence on the Effective Date hereof, and will continue to be in effect unless terminated by either party upon not less than five (5) days advance written notice. Client shall pay Consultant’s fees for the Services as set forth in this Agreement through the date of termination.
- DISCLAIMER OF WARRANTY. EXCEPT FOR THE EXPLICIT REPRESENTATIONS, WARRANTIES, AND CONDITIONS PROVIDED IN THIS AGREEMENT ANY SERVICES ARE PROVIDED “AS IS”, WITHOUT ANY WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY, BY USAGE OF TRADE, OR OTHERWISE. CLIENT’S RESULTS CAN VARY AND ARE NO GUARANTEED. PARTIES SPECIFICALLY DISCLAIM ANY AND ALL REPRESENTATIONS, WARRANTIES, AND CONDITIONS OF MERCHANTABILITY, PROFITS, NON-INFRINGEMENT, TITLE, SATISFACTORY QUALITY, OR FITNESS FOR A PARTICULAR PURPOSE. NO CLAIM, SUIT OR ACTION CAN BE BROUGHT AGAINST A PARTY AFTER MORE THAN SIX MONTHS FROM THE DATE THE UNDERLYING CAUSE OF ACTION HAD OCCURRED. IN NO EVENT SHALL EITHER PARTY’S AGGREGATE LIABILITY EXCEED THE FEES FOR SERVICES.
- LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES OF ANY KIND IN CONNECTION WITH THIS AGREEMENT, EVEN IF CLIENT HAS BEEN INFORMED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.
- FORCE MAJEURE AND DELAYS. Neither party shall be liable for delays or failure to perform in accordance with the terms and conditions of this Agreement on account of strikes, lockouts, accidents, fires, delays in manufacturing, delays of carriers, disruption in communications, disruption in banking services, acts of God, governmental actions in the United States, state of war or any other causes which are unforeseeable or are beyond the control of the parties, whether or not similar to those enumerated. The party so affected shall give prompt notice to the other party of such cause and shall take whatever reasonable steps are necessary to relieve the effect of such cause as rapidly as possible. Consultant shall not be liable for delays in its performance of services in accordance with the terms and conditions of this Agreement if caused by the failure of Client to provide timely cooperation to Consultant as set forth in this Agreement.
- WAIVER. The parties to this Agreement acknowledge that a party to this Agreement shall not by act, delay, and admission or otherwise be deemed to have waived any of its rights and remedies unless such waiver is in writing.
- ASSIGNMENT. Either party may assign any right, interest or benefit under this Agreement, to a subsidiary or an affiliated entity, with the prior written consent of the other, which consent shall not be unreasonably withheld.
- GOVERNING LAW. This Agreement shall be governed by, construed and interpreted exclusively in accordance with the laws, rules and regulations of the State of California, without regard to any conflict of laws that would result in application of any other law. The courts of the State of California shall have, and the parties irrevocably consent to the sole jurisdiction over any matter related to this Agreement.
- RELATIONSHIP OF THE PARTIES. Consultant will be acting at all times as an independent contractor and not as an agent, representative or employee of Client. Consultant represents that it is generally engaged in performing consulting services and seeks other consulting engagements. Consultant is not authorized to and agrees not to make any representations or commitments or to hold itself out as an agent of Client, except to the extent specifically authorized in writing by Client. It is understood and agreed that Consultant will indemnify and hold harmless Client for and against any claims for damages, compensation or injury made against Client or any of its subsidiaries or employees, by any person, including any person in Consultant’s employment or any subcontractor, for any willful misconduct, gross negligence or for willful violation of law or applicable regulation in the performance of the services contemplated by this Agreement by Consultant or any subcontractor. Anything in this Agreement to the contrary notwithstanding, no party hereto assumes nor shall it be liable for any of the liabilities or obligations of the other party, whether past, present or future.
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.
- REPRESENTATIONS AND WARRANTIES. Each party represents and warrants to the other party that:
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.
- REMEDIES. Except as otherwise expressly stated herein, all rights and remedies of the parties under this Agreement shall be cumulative and not exclusive.
- MODIFICATIONS. This Agreement shall not be changed, modified or amended except by an instrument in writing signed by or on behalf of the parties hereto.
- NOTICES. All notices, demands, requests or other communications (collectively, “Notices”) which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered or transmitted by telecopy (with the original to be sent the same day by Federal Express or other recognized overnight delivery service) or by Federal Express or other recognized overnight delivery service addressed to the recipient at its address set forth below (or at such other address as the recipient may theretofore have designated in writing). All notices shall be addressed as follows:
If to Client: If to Consultant:
Either party may change the notices address by giving notice thereof to the other party in the manner set forth above.
- SEVERABILITY. If any provisions of this Agreement are held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of the other portions thereof, all of which provisions are hereby declared severable.
- HEADINGS. All section headings and titles are inserted herein for convenience and ready reference only and are without contractual significance or effect and shall not be considered in the interpretation of the respective sections.
- COUNTERPARTS. This Agreement may be executed in multiple counterparts.
- ENTIRE AGREEMENT. This Agreement is the complete, final and exclusive statement of the agreement between the parties, and supersedes all prior proposals and understandings, oral or written, including all prior drafts and negotiations, relating to the subject matter of this Agreement. The parties expressly disclaim reliance on any representations, warranties or other agreements not specifically set forth in this written Agreement. No change, amendment or modification of any provision of this Agreement shall be valid unless set forth in writing and signed by the party to be bound thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the Effective Date.
Name, Title: __________
Name, Title: __________
Here are the FAQ questions and answers formatted together:
How long should the agreement term run?
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.
Should project deliverables and timelines be detailed?
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.
How deeply should fees and payment details be spelled out?
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.
How much access to company data should be granted?
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.
Should you require consultant non-solicitation of employees?
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.
When does it make sense to require exclusivity?
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.
How long should post-termination obligations remain in effect?
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:
Should the agreement include a background check provision?
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.
How specific should project milestones and estimates be?
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:
- Phase 1: Market Research (Est. 2 weeks)
- Phase 2: Site Analysis and Selection (Est. 1 month)
- Phase 3: Financial Modeling and Projections (Est. 3 weeks)
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.
Should you require professional liability insurance?
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.
Can any agreement disputes be mediated?
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.
What’s the best way to handle unpaid invoices?
Outline provisions for handling non-payment of legitimate consulting invoices like:
- Assessing reasonable late fees (e.g. 1% per month)
- Freezing work after 30 days of non-payment
- Terminating for breach if invoices remain unpaid after 60 days
This encourages prompt payment while allowing flexibility if genuinely disputed.