It’s important that you look over your management agreement very carefully when you’re hiring a property manager, so that you’ll have an in-depth understanding of the terms you are agreeing to. Listed here are six essential sections to include in a management agreement:
#1. Services and Payment
This is the first and most vital part of the property management agreement that you must understand, as it will detail the services your prospective estate manager will render and the fees you will be expected to pay. You need to comprehend which services are included for the management fee, which services can be rendered for an extra payment and which services will not be rendered under any condition.
Liability is the vital part of the agreement that limits the asset manager’s responsibility. Known as the “hold harmless” clause, it protects the property manager, excluding in cases where they have clearly been negligent.
The property manager is also not responsible for the carelessness of any third parties they hire provided they have exercised reasonable care.
You should make sure there is a “reasonable care” clause in the agreement in order to hold your estate manager to some standards of care, otherwise you might not be able to hold them accountable if they hire sub-standard contractors who end up destroying your home.
#3. Duties of the Property Owner
This is the second part of the contract that you must understand: the duties of a landlord. This area of the contract will describe what you may or may not do, as the property owner.
Two examples of property owner obligations are:
- Setting up and Mmaintaining a reserved fund
- Obtaining and maintaining the proper insurance
Two examples of property owner restrictions are:
- Most contracts will prohibit the property owner from placing a tenant in the property, themselves. This is done to protect the assets manger from having to manage a tenant with whom they do not have an understanding.
- The property owner may not enter the property unless they inform the tenant or get consent from the property manager.
#4. Equal Opportunity Housing
You have to be certain that the management contract has a section that states they support equal opportunity housing. This is in order to ensure that you are in compliance with the relevant state and federal fair housing laws.
#5. Agreement Duration
You would definitely want to avoid signing a long-term contract unless you have proven results from the estate management company. Unfortunately, the majority of management companies will not sign an agreement for a period of less than a year. In such a case, you will want to cautiously assess the termination clause, making sure you are able to end the contract if you are unhappy.
#6. Termination Clause
Be certain that the agreement has a good termination or cancellation clause. The possible reasons for cancellation should also be stated along with information on when and why the property manager or management company has the right to end the agreement and when you, the owner, have the right to end the agreement.