If you are planning to hire a property manager, it is necessary to review the management contract carefully. Here are some important terms that you need to consider to ensure everything goes smoothly.
1. Fees and services
The first part of a management contract that you should understand is which types of service the property manager must do and how much they charge for those services. It is necessary to know which services are already included in your management fees, which services could be done for additional fees, and which services won’t be performed in any cases.
Pay attention to the management fee. Do not rule out a service just because they charge you a higher fee. Some property managers with lower initial fees might charge extra ones like paying bills, eviction procedures, maintenance problems, or filling vacancies.
2. Property owner responsibilities
The second thing you should understand in a management contract is the responsibilities of a landlord. This part will determine your obligations and restrictions.
For example, property owners are obligated to set up a reserve fund which can be used for emergencies, maintenance issues, and daily obligations. Also, you need to ensure that this fund will always be kept above a specific amount. Also, most contracts will prevent property owners from finding tenants themselves. This will protect property managers from managing those who haven’t chosen based on their guidelines.
This clause is created to limit the liability of property managers. In general, it will provide protection for property managers, except in circumstances where they are negligent. However, the property managers aren’t responsible for any negligence of a third party that they hired. For instance, a property manager won’t be responsible when they hire a contractor who causes damage to your property.
To protect yourself, it is necessary to add a “reasonable care” term in the contract. For instance, property managers should do careful research and not hire contractors with a bad history.
4. Contract duration
It is advisable to avoid signing a long-term contract until you get promising results and have confidence in the service. Unfortunately, many management firms won’t sign a contract in less than one year. In these cases, you need to check the termination clauses carefully to ensure that you can terminate the management contract when you are unsatisfied with their service.
5. Termination clause
Make sure that the management contract has a clear cancellation or termination clause. It should specify when and why 4rooms Property Management or property manager has the rights to cancel the contract and when the owner has the rights to cancel the contract.
6. Termination notice
In most cases, you should give from 30 to 80 days of notice before terminating the contract. Ensure that the agreement also specifies that the property managers should give you 30 days of notice before terminating the contract. This will ensure both parties have enough time to deal with possible issues.