News for the Hospitality Executive |
Hotel Management Contract Disputes:
By
Jim
Butler
of the Global Hospitality
Group®
Author of www.HotelLawBlog.com January 18, 2012 Hotel
Lawyer on Hotel Management Agreement disputes between Owners and Hotel
Operators. I believe that most owner-operator disputes stem from the owner's belief that the operator is not operating the hotel in a satisfactory manner and is treating the owner unfairly. A bad economy drives the parties to take action. When discussions fail to resolve the issues, litigation or arbitration claims often result. Operators
as fiduciaries: Why is this important and what does it mean? I discussed these important concepts in a sidebar recently published in an article by Jason Freed of HotelNewsNow (a division of Smith Travel Research) in his article, Economic woes drive owner-operator disputes. I have reprinted that sidebar below with a few formatting edits to make the reading a bit easier. So what if an
operator is a "fiduciary"? The difference between an ordinary
contract and a contract with a fiduciary In contrast to the typical business contract, the hotel management agreement creates a completely different type of legal relationship between the hotel owner and the hotel operator. It has repeatedly been held by the courts to create an "agency" relationship. Operators originally crafted this relationship because they wanted total control of the hotel without ever having to get approval of the owner. They got this control by being designated the owner's agent to hire all employees, set up all bank accounts, enter into all agreements for the hotel, set marketing strategies, and so on. Fundamental
rules apply to every agency and fiduciary relationship Every
hotel manager is the agent and fiduciary of the owner Morals
of the marketplace versus fiduciary duties One of those fiduciary duties is the obligation of the agent to prefer the principal's interests (i.e. the interest of the hotel owner) over its own. This is certainly not a novel claim in agency law, but has not been that common in hotel management agreement litigation to date. Hotel
Management Agreement Audit™ At JMBM, we do this with something we call the Hotel Management Agreement Audit™. This is not a financial audit performed by accountants and auditors, it is a legal and business analysis performed by experienced lawyers and hotel advisors. More
resources on Hotel Management Agreements Also
see The HMA Handbook:
Hotel
Management Agreements for Owners, Developers, Investors and Lenders. Articles
about terminating hotel management agreements More
on
M Waikiki Edition lawsuit against Marriott - What Marriott's General
Counsel
says M
Waikiki's Edition lawsuit against Marriott and Ian Schrager - an
owner's HMA
dispute with Marriott Terminating
hotel operators: Turnberry Resort drops Fairmont flag Hotel
management agreement terminations -- Is there a better way? Terminating
hotel management agreements when things don't work? Not easy, but not
impossible either. Ritz-Carlton
Bali hotel management agreement termination further court order How
to terminate a hotel management agreement when an operator really
deserves it! This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We've done more than $60 billion of hotel transactions and have developed innovative solutions to help investors be successful in bidding for hotel acquisitions, and helping investors and lenders to unlock value from troubled hotel transactions. Who's your hotel lawyer? ________________________ Our Perspective. We represent hotel lenders, owners and investors. We have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,300 properties all over the world. For more information, please contact Jim Butler at [email protected] or +1 (310) 201-3526. Jim Butler is a founding partner of JMBM, and Chairman of its Global Hospitality Group® and Chinese Investment Group™. Jim is one of the top hospitality attorneys in the world. GOOGLE "hotel lawyer" and you will see why. Jim and his team are more than "just" great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them. JMBM’s Global Hospitality Group® The hotel lawyers in the Global Hospitality Group® of Jeffer Mangels Butler & Mitchell (JMBM) comprise the premier hospitality practice in a full-service law firm and are the authors of the Hotel Law Blog. We represent hotel owners, developers, investors and lenders and have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,000 properties worldwide. For more information about the Global Hospitality Group®, go to www.HotelLawBlog.com. For more information about full range of legal services provided by JMBM, go to www.JMBM.com. |
Contact:
Jim Butler
|