If you own several properties located in different neighborhoods or cities of your state, hiring the services of a professional property management company is a wonderful idea. Such a company will look after the affairs of your properties and tenants and maximize your profits in the form of rental income. However, to make sure there are no disputes or confusion over allocating of duties, there are certain clauses that you must get included in the agreement you sign with the property management company.
Terms and mode of payment
Confusion over payment mode and terms leads to bitter disputes between managers and landlords. You can avoid such a situation by clearly mentioning the commission as a percentage of revenue. However, there should be clarity on what constitutes gross revenue and what cannot be included in this amount such as forfeited security deposits, tax refunds, and money received from insurance companies as compensation. If you instruct the manager to deposit all money in your account and pay him with check, a lot of confusion can be avoided.
Spell out the duties clearly
There should be a clear mention of all the duties and responsibilities of the property to be handled by the property manager and his team. Tenant screening, marketing, routine maintenance, and tenant complaints are usually handled by managers. They also collect rents late fees etc and deposit it in the account of the landlord. If you want him to handle insurance and payment of property taxes, make sure you mention them in the agreement.
Reimburse of expenses
There are many instances where property managers must spend money out of their own pocket for either repairs or to pay advances to their employees. Many landlords are surprised by the huge invoices sent to them by their property managers and this leads to confusion and bitter disputes. The agreement should clearly mention the maximum amount of money that the manager can spend without asking for permission from the landlord. This agreement should also describe how the manager will be reimbursed for all such expenses made by him.
Do not forget insurance
Many landlords prefer to arrange insurance for their property themselves. On the other hand, the insurance of his employees is the responsibility of the property manager. If you want to hand over the responsibility of insurance completely to your property manager, make sure you mention this point in the agreement. Also, the agreement should mention the coverage for employees as well as automobile coverage and liability. You will never have to pay late fee on account of non payment of premium if the responsibilities of the property manager are clearly mentioned in the agreement.
How the relationship will be ended
It is all too sweet and sugary at the time of starting a relationship. The same is the case with a property manager where the landlord is happy and satisfied for the initial few months. The trouble starts when this relationship begins to sour, and disputes arise on various issues. There should be a clause in the agreement that should mention how a party can end the relationship if he is not happy and satisfied. These agreements are usually for duration of 1-5 years but there is a mechanism to end the contract if the landlord is not satisfied with the performance or efficiency of the management company. Even the property manager should have the option of ending the relationship if he has some issues. This mechanism should clearly spell out the obligations of both parties in case of ending the contract. The agreement should stand dissolved in case the owner decides to sell the property in between the duration of the contract.
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