Managing multiple properties is a tricky task; the more properties a landlord has, the harder it is to make sure they’re all taken care of properly. Hiring a property manager can help alleviate that pressure.
Before a landlord a property management company can work together, they both need to sign a property management agreement. As with any contract, it’s important that both parties fully understand the document.
It’s all too easy for unscrupulous people to create unfair, manipulative contracts, so you need to read a property management contract carefully before signing; but what do you need to look for?
Read on to learn six key things to look out for before signing a management contract for any property.
1. A Clear Fee Structure
The most important aspect of a management contract is that it outlines the services and fees that property management companies will provide. Clarity is key here; you need to know exactly what the property manager charges.
Most services that the property manager provides are part of the management fee. There may be additional services that cost extra. Walk through the management fee so you’re clear on what it covers.
2. The Owner’s Responsibilities
Even after a landlord hires a property manager, they still have responsibilities to the property. A property management contract should list exactly what is expected of the landlord.
Common landlord responsibilities include maintaining insurance keeping a reserve fund to cover property expenses.
3. The Property Manager’s Liability
A property management contract will include a clause that limits the property manager’s liability. This protects the manager if the property is damaged while under their care.
Make sure that the manager is still liable if they are negligent, or if they don’t take reasonable care when hiring contractors to work on the property.
4. The Duration of the Agreement
Contract duration can be a difficult thing to navigate. On the one hand, you don’t want to sign a long-term contract with a company you haven’t worked with before. On the other, you may not have a choice.
One year is the standard agreement. If you can manage a shorter contract, you should do so–you can always renew it if you get good results.
5. Clauses Regarding Termination
Sometimes, you sign a property management contract only to find that the property manager does a poor job. What then? Do you just have to suffer until the contract is up? You don’t if there’s a termination clause.
A termination clause will let you out of the contract early, making it invaluable if you’re unsatisfied with your property manager. Check that the termination clause in your management contract is reasonable.
6. Equal Opportunity Housing Support
Make sure that your contract mentions that it supports Equal Opportunity Housing. Every property needs to follow state and federal housing laws, so this clause should not be left out!
Get a Great Property Management Agreement
Signing a property management agreement is a big decision; don’t jump into one without carefully reading over every page. Get a thorough understanding of the owner and manager’s duties moving forward.
Contracts are often complicated, and signing one you don’t understand can be catastrophic. For a better understanding of how legal contracts work and how to read them, visit our law page!