Understanding Your Agreement with the Property Management Company

contract termination

 

When you sign a contract with property managers, the document must not be taken lightly! The contract is much more than a formality. It will act as a determiner of the services you will receive and will not. The contract will give you an overview of your rights and the kind of relationship you will have with the property manager.

Not reading the contract is similar to hiring a random property manager. The contract is meant to eradicate confusions and conflicts. In the long run, you will be able to build a strong relationship. Even when your property manager creates a promising first-impression, you must pay close attention to the contract. You should review all the terms and conditions carefully.

Reading contracts is a tedious task. That is because you should go through many pages and hundreds of lines. Luckily, property managers prepare organized contracts. The document is broken into three major sections.

  1. -The responsibilities and representations
  2. -Termination terms
  3. -Boilerplate items and indemnification

These are three important sections that can define your experience with the property manager. When you request for special services or drop existing terms, the contract will be modified.

Section #1 – Responsibilities and Representation

This section focuses on the services you will receive from the property manager. In most cases, the property manager takes care of the following:

  1. -Marketing and screening tenants
  2. -Retaining high-quality tenants
  3. -Fixing and collecting rent from tenants
  4. -Inspecting and maintaining the rental property
  5. -Handling deposits, owner funds, and tenant requirements

At all times, the property management company would give their best effort and maintain your home. When you want them to perform extra duties, you should mention them in the contract. Many contracts are designed with services that exceed normal duties. Without these clauses, you cannot expect the property manager to perform beyond-normal duties.

Just like the property manager, owners have duties and responsibilities. Common responsibilities of the owner are:

  1. -Transfer security depots to the property manager
  2. -Make sure contracts are not signed with several property managers
  3. -Never jeopardize the property manager’s ability to perform his/her tasks
  4. -Never pose restrictions on how and when the property manager enters the property
  5. -Inform the property manager before making big decisions
  6. -Never rent the property to someone without prior consent from the property manager
  7. -Manage home insurance and its premiums

Contract Termination

Most agreements terminate in 1 to 2 years. The actual duration depends on the landlord and the property manager. In many cases, landlords extend their agreement with quality property management companies. Deciding how long the initial agreement would last is a challenge. Property management companies allow landlords to decide the duration and the notice period. Generally, the notice period ranges between 15 and 30 days.

Contract termination can happen at any time! Both the property manager and the landlord can decide to terminate the contract. Without a proper exit plan, the entire agreement becomes difficult and complicated. Some landlords believe that the agreement becomes a trap without proper exit plans. When you draft an agreement, check for the following details:

  1. -How much should the landlord pay on early contract termination?
  2. -Does the property management company charge flat fees?
  3. -What are the worst case scenarios? Can early termination affect the landlord beyond financial aspects?

There will be scenarios where the property management company decides to terminate the contract. You must pay close attention to these lines. The agreement must discuss the financial implications and notice period. Contracts without an agent termination clause are dangerous.

Liabilities and Boiler Plate Items.

In general, contracts are incomplete without a section on boilerplate items and liabilities. You must be aware of situations when a management company can be held liable. Most property management companies offer a comprehensive account of liabilities and boilerplate items.

For example, the property management company will not be liable when a person experiences injuries or loss.

Boilerplate items are found at the end. These are clauses to handle the entire agreement, all assignments, and modifications. These terms can be directly written by the stakeholders.

  1. -Entire agreement declares that all the clauses were decided orally and in the word.
  2. -Assignments refer to instances where the contract is transferred from one property Management Company to another.
  3. -Modifications include clauses that can be written and re-written by both the stakeholders.

Finally, you will come across a comments section in the agreement. This is where the entire agreement concludes.