Reading a villa management contract

A villa management agreement is short, usually four to eight pages, and almost all of its financial consequence sits in about five sentences.

How to read the numbers on this page. A figure with no marker is quoted from a primary source and linked at the foot of the page. ^reported means the company that charges it publishes no public rate card, so the range comes from trade reporting rather than from the charging party. ^modelled means it came out of the model set out on the methodology page, which you can disagree with line by line.

Clause 1: what the commission is charged on

Find the definition and read it twice. The candidates are gross booking value, net of platform commission, net of taxes, or a term like “rental income” left undefined. Every published rate card read for this build charges on the gross — wording varies from “per booking” to “of rental income” to “from your published rate”, and all of them mean before the platform's cut.

That is defensible as an industry norm. What is not defensible is a contract that uses an undefined term and leaves the interpretation to the party issuing the statements. If the contract says “rental income”, add a sentence defining it. It costs nothing at signing and it is unarguable afterwards.

Clause 2: at cost, or cost plus

This is the clause this entire site would tell you to read if it could only tell you to read one. The manager buys things for your villa: cleaning, laundry, a plumber, a replacement pump, linen. The question is whether those are rebilled to you at what the manager paid, or at what the manager paid plus a margin.

The model puts that margin at 10–25%^reported. On USD 6,000 of monthly gross, the distance between the tight and loose ends of this model — most of which is this clause and the cost bands it applies to — is USD 1,040 a month, or about USD 12,474 a year.

If the contract is silent, it permits cost plus. The sentence to add is: third party goods and services procured on the owner's behalf are recharged at the supplier's invoiced cost, with copies of supplier invoices supplied on request.

Clause 3: the statement

Most contracts promise a monthly statement and say nothing about what is in it, which makes the promise worth very little. Specify the contents:

• Gross booking value per reservation, with the channel named.
• Platform commission per reservation, as an amount.
• The management commission and the base it was calculated on.
• Each operating cost as its own line, with the supplier named and any markup shown.
• Tax withheld, with the reference it was paid under.
• The closing transfer, the date it was made, the currency and the exchange rate used.

A statement with a single line called operational costs is not a statement. Ask for a specimen — a real one, from another villa, with the owner's details removed — before signing rather than after. A company that cannot produce one does not produce them.

Clause 4: term, notice, and the trigger

Twelve months is a normal minimum and a manager takes real setup cost in the first quarter, so resisting a minimum term outright is usually the wrong fight. The fight worth having is about when notice may be served. “Three months' notice” and “three months' notice, to expire on an anniversary of commencement” are different contracts. The second one can trap you for fifteen months.

The clause to ask for alongside it is a performance exit: a defined shortfall against an agreed forecast, sustained over a defined period, allows termination on shorter notice. Managers resist it, and a reasonable compromise is to make it mutual.

Clause 5: the tail

What happens to commission on bookings that exist when the relationship ends? Three versions, in increasing order of how much they cost you:

1. Commission on bookings already confirmed. Fair — they made those.
2. Commission on bookings by any guest introduced during the term, for a fixed period after termination. Negotiable; twelve months is long, three is arguable.
3. Commission on any booking by any guest who ever stayed, indefinitely. This is worth a great deal of money on a villa with strong repeat business, and it is usually removable because most owners never read it.

Clause 6: who owns what at the end

This is the one owners discover too late, and it is decided entirely at signing:

Clause 7: who is registered for what

Accommodation tax and the final income tax on rent are not the manager's liabilities unless the contract makes them so, and even then the tax authority's view of who owes it does not change because two private parties agreed otherwise. Establish who is registered, who files, who pays, and who holds the evidence. Then ask for the filing receipts to be attached to the monthly statement. The tax stack in full.

The five sentences to ask for

1. “Commission is calculated on gross booking value as defined in Schedule 1.”
2. “Third-party goods and services are recharged at invoiced cost, with copies of invoices available on request.”
3. “The monthly statement will contain the items listed in Schedule 2.”
4. “Either party may serve notice at any time, expiring after three months.”
5. “Copyright in photography paid for from villa revenue vests in the owner.”

None of these is aggressive and none of them costs a good manager anything, which is itself the test. A company that will not write down what it already says it does is telling you that it does not intend to keep doing it.

Common questions