A property management contract is between a property owner and a company or person involved in property management. This contract covers all the responsibilities that the management company assumes to its owner.
The property management contract does not only explain the responsibilities of each party. It should also include legal obligations.
A well-designed contract contains a clause on the type of insurance the builder must take for the building. Property managers must take out their insurance to secure their business - this can also be provided for in the contract.
It is important that both parties know what is in the contract. Managers and property owners often have verbal discussions about duties and responsibilities. The contract replaces everything that was agreed orally.
A good property management contract outlines all the specific responsibilities for renting out a property, managing property, and complying with local property and tenant regulations.
A verbal agreement can be made about this type of partnership. An oral agreement may be enforceable by law, but it will be difficult to prove what an agreement is without a written record.
A handshake contract works well as long as the business partnership is running smoothly. Written contracts offer both parties better protection in the event of a dispute.
The first important part of a management contract that you need to understand is what services the property manager has promised and how much they will charge for the services. You will need to determine which services are included in the administration fee, which services can be provided for an additional fee, and which services are not provided under any circumstances.
Management fees are the most common type of fee charged by property managers. Pay particular attention to how these costs are distributed.
Don't take out property managers right away as they seem to charge a higher fee. Property managers who charge a lower start-up fee may charge more for "additional obligations" such as filling vacancies, paying bills, maintenance issues, and eviction procedures. You should read the management agreement very carefully to determine which services are included in the management fee and which services are additional and must be paid for in addition.
For services that qualify as additional services, the agreement must clearly state how you will be billed for these fees. Are flat fees, percentage fees, or fees set on a case-by-case basis before the service is rendered?
Also, think about services that a property manager will not provide under any circumstances. This varies from company to company, but often the exception is real estate refinancing or major renovations. Ensure the manager doesn't rule out anything you deem necessary, such as finding tenants, collecting rent, or handling emergencies.