Exhibit B-2 to Subpart C of Part 1930 - Requirements for Management Agreements

A completed and executed management agreement must be reviewed and approved by the Farmers Home Administration (FmHA) or its successor agency under Public Law 103-354 whenever a management agent is to be used. A management agreement must be submitted to FmHA or its successor agency under Public Law 103-354 for review as part of a project loan docket, whenever there is a change of management agents or ownership, or when a major revision of an existing agreement is necessary or required.

1A written management agreement is required for any project when the owner retains a management agent. A management agreement is not required when the project is managed by the owner as described in paragraph V E 6 of exhibit B of this subpart. However, a written management plan is required for all projects new and existing, except for on-farm labor housing units where rent is not required. Although the adviser to a cooperative board of directors is not the same type of agent as those who are now managing rental projects, a written agreement between the board and the adviser is required which sets forth their relationship and what the adviser is expected to do for the cooperative. Exhibits F, F-1, and G of subpart E of part 1944 of this chapter outline the functions and responsibilities of an adviser. The agreement may follow the content of exhibit B-3 of this subpart.

2The management agreement must address how FmHA or its successor agency under Public Law 103-354 requirements will be met. The owner may delegate to the agent any management duties which are not required to be performed by the owner. The owner may delegate selected ownership responsibilities, such as requests for review and/or appeal of adverse decisions by third parties that affect the owner. However, the owner remains totally responsible to FmHA or its successor agency under Public Law 103-354 for all aspects of management.

3The management plan is the primary management charter, constituting a comprehensive description of the policies and procedures to be followed in managing the project. The management agreement describes how the objectives and policies in the management plan will be carried out. The agreement should be clear and concise, should not merely repeat the management plan, but indicate how the management agent will implement the plan.

4The management agreement shall describe the management agent's organization and staffing structure, management controls, and any management company identity of interest relationship(s) such as the borrower, vendors, and suppliers of materials, labor, and services. When such relationships exist, the management agent shall prepare and sign the forms described in paragraph V B 2 a of exhibit B of this subpart as “applicant”.

5The management agreement sets forth the standards and expectations negotiated between the borrower and the management agent. The agreement should follow the guidelines of exhibit B-3 of this subpart. Each management agreement should be tailored to the specific conditions and staffing arrangements of the particular project. The site, design, size of the project, and fiscal constraints; market conditions; social factors; local law; and business practices are among the elements which may require variations to exhibit B-3 of this subpart.