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When you hire a property management firm to represent your property, you are allowing them to handle all of the vital day-to-day operations of the residences and the tenants that live in them. Additionally, you are making a considerable - but wise - financial decision.
Hiring a property management company provides you with a substantial amount of help with running your rental properties and ensuring every aspect of your investment operates smoothly.
One part of the process of employing a management firm that you must take very seriously and pay attention to is the property management agreement you and a company will sign.
According to some experts regarding the layout of property management contracts, there are some basic pieces of information property owners and management businesses generally agree to include in an agreement.
Note: For a broader overview of property management agreements, beyond legal considerations, check out our in-depth guide.
Duties Performed by Management
All responsibilities and tasks related to taking care of tenant needs and requests, as well as the maintenance of a property, are the main duties owners mandate from management teams in a standard contract.
From hiring inspectors to look at your property and dealing with marketing efforts, to interviewing prospective tenants and collecting rent from current tenants, managers are typically accountable for the intricate details regarding the daily operation of a property.
Additionally, ChoiceOfHomes.com says it's common for property owners to mandate in an agreement that a manager handle evictions of renters when necessary to do so.
Dealing with Fees
Generally, a contract's stated fees are charged to managers on a monthly rate are usually based on gross rent collected, according to PropertyManagementBlog. Additionally, the site states some management companies require added-on fees for large properties and the type of properties they may work with.
Experts advise owners to negotiate these prices, though, as many managers are willing to compromise about rates based on several factors, such as a property owner's expenses and comparable rates charged by managers to other property owners.
Manager's Legal Liability
According to the legal resource website NoLo, property managers are held legally liable for a handful of issues per the typical contract. Specifically, these liabilities pertain to serious concerns including bed bugs, injuries, vandalism and crimes at a property.
Regarding any of these potential problems which may arise with tenants, an agreement should clearly state in what situations a property management company is legally at fault. Managers are usually adamant about including language in a contract that distinctly states what they are and aren't liable for.
Laws.com states a management firm will likely want some things added to the contract regarding liability - chiefly, a mandate about the property owner having sufficient liability insurance.
Owner's Responsibilities
Essentially, anything you don't want to handle for your property are things you need to add to a property management agreement. Otherwise, those responsibilities fall on your shoulders, not a manager's, PropertyManagementBlog says.
For example, if you want a management team to handle 100 percent of marketing and advertising of a property, you should clearly state so in an agreement.
Term of Contract and Grounds for Termination
The term of contract should clearly define all specific dates for the tenure of a management firm in your services, including the start date and end date, if known prior to the signing of the contract. Oftentimes, property managers sign deals on a one-year basis with owners, the blog states.
Though you hopefully won't have to terminate a contract with a management firm due to poor revenues or a lack of quality on their part, the website states there may come a time when you don't need their services any longer. This is why it's vital to expressly indicate in an agreement that you have the right to end a contract during a given period.
