If you manage (or own) a building, site, or portfolio of premises, you’ll know facility management can quickly get complex. Cleaning, security, maintenance schedules, contractor access, compliance tasks, emergencies, after-hours callouts - it’s a lot to coordinate.
That’s where a facility management agreement comes in. It’s the contract that sets expectations between you and your facility manager (or facilities management provider) so everyone’s clear on what’s included, what’s not, and what happens when something goes wrong.
This article is updated to reflect current expectations and risk areas we’re seeing in New Zealand right now, including higher scrutiny on privacy, health and safety systems, and service performance tracking.
What Is A Facility Management Agreement (And When Do You Actually Need One)?
A facility management agreement is a written contract between a client (often a building owner, landlord, body corporate, tenant, or business operator) and a facility manager (an individual or company) who will provide facility management services.
Those services can be “soft FM” (like cleaning, waste, security, reception, landscaping) and/or “hard FM” (like building maintenance, HVAC, fire systems coordination, compliance scheduling, contractor management).
You don’t always legally need a facility management agreement to hire someone - but in practice, you usually need one if you want to be properly protected from day one. Without a clear contract, it’s easy to end up with:
- Arguments about whether a service is included in the monthly fee
- Unexpected cost blowouts (especially for callouts, subcontractors, or urgent works)
- Unclear responsibility for health and safety duties on-site
- Disputes about performance standards (what does “clean” mean, and how often?)
- Problems enforcing deadlines, reporting, and rectification
- Messy exits when the relationship ends (handover, records, passwords, keys, supplier contacts)
In other words, the agreement isn’t just paperwork - it’s the operating manual for how the relationship runs.
A facility management agreement is especially important if:
- You’re managing a commercial building, retail premises, or multi-tenant site
- The facility manager will be engaging subcontractors (cleaners, electricians, security, etc.)
- You need measurable service levels and reporting
- The provider will have access to sensitive areas, tenant information, or security systems
- The relationship is ongoing (not a one-off job)
What Should A Facility Management Agreement Include?
Every facility is different, so the right agreement depends on your site, risk profile, and the scope of work. That said, there are some clauses we almost always recommend considering because they prevent the most common disputes.
Scope Of Services (And What’s Excluded)
This is the heart of the agreement. It should spell out exactly what the facility manager will do, how often, during what hours, and to what standard.
It’s also important to clearly list exclusions. For example:
- Major capital works (unless separately agreed)
- After-hours emergency callouts (or how they’re charged)
- Tenant-specific works (vs base building responsibilities)
- Specialist compliance inspections (fire, lifts, etc.) where third parties are required
A helpful approach is to include a schedule or statement of work with frequency tables (daily/weekly/monthly) and site-specific requirements.
Service Standards, KPIs, And Reporting
“Provide cleaning services” is vague. A good facility management agreement describes performance in a way you can actually monitor and enforce.
This might include:
- Response times (e.g. urgent faults within 2 hours)
- Preventative maintenance schedules and reporting
- Inspection checklists
- Monthly performance meetings
- Rectification timeframes for issues
Where the service is critical or multi-layered, a Service Level Agreement can be used alongside (or within) the main agreement to keep the operational metrics clear.
Fees, Pass-Through Costs, And Approval Rules
Facility management often involves third-party expenses - and this is where misunderstandings happen.
Your agreement should explain:
- Whether fees are fixed, variable, or a mix (base fee + hourly + margin)
- How subcontractor costs are handled (and whether a management margin applies)
- What needs prior written approval (e.g. any spend above $X)
- Invoicing timing and payment terms
- How urgent works are approved when you can’t be contacted
Getting this right upfront can prevent the “we thought it was included” problem later.
Subcontractors And Who Is Responsible
Many facility managers don’t personally do all the work - they coordinate a network of contractors.
Your agreement should clarify:
- Whether the provider can appoint subcontractors without approval
- Minimum requirements for subcontractors (licensing, insurance, inductions)
- Who is responsible if a subcontractor causes damage or injury
- Whether you’re contracting with the FM provider only (preferred for simplicity) or directly with subcontractors
This is also where liability and insurance clauses become essential (more on that below).
Term, Renewal, And Exit/Handover
It’s not just about starting the relationship - it’s about ending it cleanly.
A well-drafted agreement usually covers:
- The initial term and any renewal/extension process
- Notice periods for termination (for convenience and for breach)
- Handover requirements (logs, manuals, service records, contractor lists)
- Return of keys, access cards, alarm codes, and site documentation
- Final account reconciliation and unresolved works
If you’ve ever had to “take back” a facility from a provider without a proper handover, you’ll know how painful this can get.
What Laws And Compliance Areas Matter For Facility Management In NZ?
Facility management is practical work, but it sits right in the middle of legal compliance. Even if your FM provider is doing the day-to-day tasks, you still need to be confident your site is being managed in a legally safe way.
Health And Safety Duties (HSWA)
In New Zealand, the Health and Safety at Work Act 2015 (HSWA) places duties on a PCBU (Person Conducting a Business or Undertaking). Depending on your situation, both you and your facility manager could be PCBUs with overlapping duties.
That means a facility management agreement should clearly set out:
- Who is responsible for site inductions and contractor management
- Who maintains hazard registers, incident reporting, and safety documentation
- How notifiable events are handled (and who notifies WorkSafe)
- How you’ll consult, cooperate, and coordinate where duties overlap
This isn’t about “contracting out” of health and safety obligations (you generally can’t) - it’s about avoiding gaps, duplication, and confusion that can lead to real harm and serious liability.
Facility managers often handle personal information without anyone realising it. Think:
- CCTV footage
- Visitor logs
- Access control records and swipe data
- Tenant contact details
- Incident reports involving individuals
The Privacy Act 2020 applies if personal information is collected, used, stored, or disclosed. Your contract should address privacy responsibilities, security controls, breach notification processes, and what happens to data on termination.
Where you’re collecting personal information as part of operations, it’s also common to align your contract approach with your external-facing Privacy Policy so your real-world practices match what you tell people.
Consumer And Fair Trading Risks (Depending On The Site)
If your facility is consumer-facing (for example, a retail site, gym, hospitality venue, or serviced accommodation), you’ll also be conscious of obligations under the Fair Trading Act 1986 around misleading conduct and representations.
While facility management isn’t “marketing”, issues like signage, safety notices, and communications to tenants/occupiers can still create risk if they’re inaccurate or poorly managed.
Security, Surveillance, And Call Recording
Many facility managers oversee security providers and CCTV systems. If the FM provider is involved in surveillance decisions, you’ll want clear rules around placement, access, retention periods, and who can request footage.
If your operations include security control rooms or recorded phone lines, it’s also worth being aware of practical compliance considerations around recording communications, as discussed in call recording guidance.
What Are The Biggest Risks Of Not Having A Facility Management Agreement?
Plenty of businesses “start informal” - a few emails, a quote, maybe a purchase order. Sometimes that works for small, simple arrangements.
But facility management usually grows legs. The scope expands, different contractors get involved, and suddenly you’ve got a long-term operational relationship without clear guardrails.
Common risks we see when there’s no proper agreement (or the agreement is too vague) include:
Scope Creep And Budget Blowouts
Without a precise scope, you may end up paying for tasks you assumed were included, or you may find critical tasks weren’t being done at all.
Disputes Over Who Authorised Work
Emergency repairs are a classic example. If the FM provider approves a contractor to carry out urgent work, who pays? What if you would’ve preferred a different contractor or a cheaper fix?
Liability For Damage Or Injury
If a contractor damages tenant property, or someone is injured due to a maintenance failure, you’ll want contractual clarity on responsibility, notification obligations, and insurance.
Loss Of Control Over Site Knowledge
If a provider leaves and takes all operational knowledge with them (maintenance logs, compliance schedules, contractor contacts), you can be left scrambling - especially if there’s an audit, insurance event, or safety incident.
If the site “just isn’t being managed well”, you’ll need a contract mechanism to require improvement. That typically means service standards, rectification rights, and termination rights that are clearly written.
It can feel like a lot to document upfront, but it’s usually much easier (and cheaper) than trying to fix a dispute once everyone’s frustrated.
How Do You Set Up A Facility Management Agreement The Right Way?
If you want a facility management agreement that genuinely protects you, the key is to treat it like a practical operating document - not a generic template.
1. Get Clear On The Operating Model
Before drafting, clarify:
- Is the provider managing everything end-to-end, or just coordinating?
- Are you supplying preferred contractors, or is the provider selecting them?
- Do you want one bundled monthly fee, or a cost-plus model?
- Who has authority to approve spend, and at what thresholds?
These decisions change the risk profile and the clauses you’ll need.
2. Document The Scope In A Schedule
Most disputes in facility management come back to scope. A good schedule can include:
- Asset lists (equipment, systems, locations)
- Planned preventative maintenance (PPM) schedules
- Cleaning and waste schedules
- Compliance calendars (inspections, certifications)
- Reporting templates and meeting cadence
If you want the flexibility to adjust services over time, you can build in a change process (variation process) so you can add sites or tasks without renegotiating the whole contract.
3. Align The Agreement With Your Other Key Documents
Facility management often touches multiple parts of a business, so it helps to make sure your legal documents aren’t working against each other.
For example:
- If the provider will do works on-site, ensure it aligns with your existing Commercial Lease Agreement obligations (especially around repairs, maintenance, and permitted works).
- If the provider will engage contractors, consider whether you also need a clear Sub-Contractor Agreement template for key trades (depending on how your procurement is structured).
- If the provider supplies staff who work on your premises, make sure roles and supervision are clear so you don’t accidentally treat a contractor like an employee. If you are hiring directly, a proper Employment Contract matters.
4. Don’t Ignore Insurance And Indemnities
Insurance isn’t the exciting part, but it’s where many facility-related disputes land.
A facility management agreement typically addresses:
- Public liability insurance requirements
- Professional indemnity (if advice/management decisions are being made)
- Contract works insurance (where relevant)
- Who covers damage to property (and what counts as “wear and tear”)
- Indemnities (who compensates who if things go wrong)
This needs to be drafted carefully. Overly broad indemnities can be unfair and unenforceable in practice, while overly narrow ones can leave you exposed.
5. Get It Reviewed Before You Sign
Facility management agreements are often long-term and operationally critical. A quick legal review can catch issues like:
- Hidden auto-renewals or harsh termination rights
- Unclear service levels (making enforcement difficult)
- Uncapped cost increases or open-ended “expenses”
- Gaps in privacy, security, and handover obligations
- Liability clauses that don’t match your real risks
It’s tempting to use a free template or a recycled contract from another site - but facility management is so site-specific that generic documents often miss the details that matter most.
Key Takeaways
- A facility management agreement isn’t always legally mandatory, but it’s usually essential if you want clear scope, cost control, and enforceable performance standards.
- The agreement should clearly set out services, exclusions, service levels/KPIs, fees and approval rules, subcontractor responsibility, and a practical exit/handover process.
- Health and safety duties under the Health and Safety at Work Act 2015 can overlap between you and the facility manager, so the contract should spell out how you’ll coordinate and who does what day-to-day.
- Privacy risks are common in facility management (CCTV, access logs, visitor records), so your agreement should include confidentiality, data security, and breach processes that align with the Privacy Act 2020.
- Without a proper agreement, you’re more likely to face disputes about scope creep, unexpected costs, liability for contractor mistakes, and messy transitions when the relationship ends.
- Because facility management arrangements are highly site-specific, it’s worth having the agreement drafted or reviewed so it actually reflects how your premises operate.
If you’d like help putting a facility management agreement in place (or reviewing one before you sign), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
