The times have been financially challenging to say the least. Investors continually seek new revenue streams. The real estate market is proving to be a burgeoning revenue stream. Surprisingly, many landlords and investors overlook the property management agreement, which is one of the essential documents that can make or break your investment.
We care about your investment. In this post, you will find useful tips and best practices for a property agreement between a realtor and the owner that ensure seamless property oversight.
What Is a Property Management Agreement?
A property management agreement is a legally binding document that outlines responsibilities and obligations a realtor or a property manager takes on when they sign the agreement with a property owner. The document also captures fees and services, among other elements crucial to property management.
What Is a Property Management Agreement Template?
A property management agreement template is a fillable document that serves as the foundation for your property management contract. You fill the template with aspects that protect your contractual relationship. A template essentially saves you the hassle of designing a property management agreement from scratch.
Note: Do not use a one-size-fits-all template for your property management agreement. Each property is unique, and so are the needs. Tailor the templates to meet your client’s needs.
Property Management Agreement Templates & Examples
How Can Reading Sample Property Management Agreements Be Helpful?
“If I have seen further, it is by standing on the shoulders of giants.” The famous statement by Isaac Newton illustrates the importance of drawing insightful information from existing resources. Developing a property management agreement is costly if you employ an attorney. Reading property management contract samples will help you better understand the format and essentials to design your agreement from scratch.
We all need a beacon, especially for such a sensitive matter with many intricacies. Read the best samples, and you will be on your way to writing a reliable property agreement template.
When Is a Property Management Agreement Needed?
If you have multiple properties, you will need a property management agreement to ensure that the management company duly performs its duty. Also, if you own a management company, you would need the contract to outline clear obligations you will assume after signing the agreement. In both situations, the agreement protects either party.
We’ve had issues with ‘informal’ agreements, which have unwritten terms that come to bite back in the future. To avoid legal disputes, you need a property management agreement. The agreement covers everything from fees to how to solve disputes. Property management contracts will save you legal fees that are high in real estate litigation.
Why Have a Property Management Agreement
Property management agreements provide written proof. Written proof builds watertight cases than ‘he-said-she-said’ verbal claims.
However, the property management agreement provides fees terms and termination clauses, overlooking the legal importance. The termination clause is essential if either party wants to terminate the contract.
Also, the contract outlines clear responsibilities and liabilities. Detailing the duties enables each party to partake in their duties with little fuss.
Essential Elements of a Property Management Agreement
At a minimum, a good property management agreement should include:
1. Parties contact
State the property owner’s names and the management firm names and contacts. Also, state the effective date of the contract.
2. Property management services
Enlist the scope of services the management firm offers. Services include rent collection, leasing services, screening tenants, late fees, and non-compliance compensation.
The most important section of the agreement is the management firm’s monetary benefits for offering property management services to the client. Enlist any extra fees.
4. Owner responsibilities and restrictions
Clearly define the owner’s responsibilities. Also, indicate the insurance obligations the owner should cover. If there are any restrictions, such as the right of entry, it is important to name them.
5. Duration of the agreement
Clearly state how long the agreement is valid. Lease duration varies from month to month agreements up to 24 months.
6. Termination clause
Include a termination clause if any party wants to end the contract prematurely. Also, enlist the fees and the expected duties during the termination process.
7. Owner liability
The owner still maintains some liabilities even if they transfer managerial functions to the firm. Enlist the reasonable liabilities the owner maintains.
In case of maintenance or running day-to-day operations, the management firm and the landlord need to understand when the firm will receive the funds and the associated timeline.
The Termination Clause of a Management Agreement
For many reasons, property management usually has disputes, some unsolvable. It is important to include a termination clause to guide the termination process in such cases. General details to include in your termination clause are:
- Termination notice is usually 30-90 days. The minimum for termination notice is 30 days.
- Early termination charges when the client terminates the agreement before it expires. Termination fees vary significantly depending on the initial agreement.
- Reasons for termination. Valid reasons why the contractual relationship cannot continue are a must-have.
- Transfer of obligations upon termination details the duties and obligations each party is supposed to undertake and the timeline during the termination process.
- Termination clauses help you avoid expensive lawsuits. Additionally, if the client or the management company feels infringed on, they can follow the termination provisions to end the contract prematurely.
Best Practices for Using a Property Management Agreement
Turn prospects into clients through your agreement. Pitching to your client’s how you help landlords along your unique service provisions will surely get you a mention in ballroom meetings. We all know a satisfied client is the best marketing tool.
Identify unique selling points in your presentation. The end goal of your presentation is to secure a property management job, right? You need to wow your clients by describing your unique points. Is it your top-level tenant screening, or is it your timely remittance? What will make your clients sign on the dotted line?
Don’t go cheap today to pay expensively tomorrow. Determine your fees based on market trends. However, do not make the fee too little since it will catch up with you. Set a reasonable quote in your draft agreement.
What is the difference between a lease and a management agreement template?
A lease is a contractual agreement between the lessor (owner) and the lessee to use a property for maximum ROI, make periodical payments, and return a preset percentage to the owner. A management agreement is a wholesome service where the management company takes up more obligations and is concerned with the day-to-day running of the real estate.
What is the standard term for a property management agreement?
The standard term for a property management agreement is one year. After one year, both parties must review the fees per market trends and reconcile any balances.
What is not included in a property management agreement?
You should not include extra services outside the scope of services you offer within typical property management duties. Also, do not include the purchase letter and any essential financial document.
What should a manager do prior to entering into a management agreement?
A manager should calculate the return on investment the client expects and the rent bead on market value and tune it to the fees they will be charging. Also, managers should do background checks on the client to avoid entering into a contract with shady clients.
Statistics show an increase in real estate purchases. However, there’s an increase in real estate disputes in a similar proportion. A good property management agreement protects the owner’s investment and the management company-which is what you are aiming for.
Disclaimer: This article is for educational purposes only and should be treated as such. You should not use this post as a substitute for legal counsel.