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6 Things that Should be Included in a Property Management Contract

Posted by sonrise on January 11, 2019
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Property management contracts are designed to protect the interests of property owners and property management companies in a mutually beneficial relationship.

Property owners need to make sure that they understand their own responsibilities, the responsibilities of the property manager; and that they will be protected if the property manager does not satisfy their responsibilities. Property owners should carefully go over the property management contract before hiring a property manager to ensure that all relevant details are included.

6 things that should be included in a property management contract

1) Fees and services

The exact breakdown and total of all services and associated fees should be included in the property management contract. If given a contract with only a generalized management fee, a property owner should ask for a breakdown of the different services and the cost of each. Property owners should never make assumptions about what services are included. Full-service property management generally includes the following services: rent collection, payment of bills, evictions, tenant screening, advertising vacant units, ongoing maintenance to building exterior and landscaping, and drawing up tenancy or lease agreements.

2) The responsibilities of the property owner

It is important that the contract include a clause that lays out the expectations of the property owner and what they can and cannot do in their dealings with the management company. For instance, an owner could have the responsibility of setting up a bank account and maintaining a minimum balance for repairs, emergencies and general maintenance as well as obtaining and maintaining appropriate types and amounts of insurance.

This part of the contract should also include an owner’s restrictions. For example, it may be appropriate to state that the property owner may not find and sign an agreement with tenants on their own. Rather, the property management team would be in charge of placing listings for empty units and vetting potential tenants.

3) Equal opportunity housing

A property management contract should indicate that an owner and management company support and abide by state and federal Equal Opportunity Housing laws. Adhering to these laws prevents successful discrimination lawsuits which may be brought up by tenants claiming they were denied housing or asked to vacate because of their race, gender, disability, sexual orientation or other protected classes.

4)  Liability

The liability part of the contract limits the property manager’s liability. This is known as the “hold harmless clause” in a property management contract. This clause gives the management company protection by limiting their liability except in cases where the company has been negligent in fulfilling their obligations.

A property management company will not be held responsible or liable if a third party they hire acts negligently as long as they met their obligation to properly vet the third party. For example, if a handyman or other service provider failed to complete work they were hired to do or did not perform up to an expected standard, the property management company would not be liable unless they failed to meet the “reasonable care clause” to vet the candidate.

A property owner should protect themselves by ensuring this part of a property management contract includes the “reasonable care clause.”

5) Contract duration

Typically, property management companies sign contracts that will run for a minimum of one year. It is a good idea for property owners to engage a property lawyer to go through the clauses in a contract before signing on for a one year obligation.

6) Termination clause

A lawyer will look at the termination or cancellation clause and ensure the owner can terminate the contract before it expires should they wish to do so. Obligations upon termination such as payment of dues within a given period should also be indicated.

Son-Rise Property Management has been serving the property management needs of Bellingham and Whatcom County since 1996. Contact us today to see how we can help you find a rental property for your family or manage your rental properties.

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