A property management agreement is a crucial document that outlines the responsibilities and expectations between a landlord and a property management company. Whether you’re a seasoned property owner or new to renting out your property, understanding the critical elements of this agreement is essential to protect your investment. In this guide, we’ll cover everything landlords need to know about property management contracts, from standard agreement elements to how to get out of one if you’re unhappy with the services.
A property management agreement is a legally binding contract between property owners and property managers, outlining the terms and conditions of their relationship and responsibilities. If you’re a landlord seeking professional services for your investment property, it’s essential to have a thorough understanding of management contracts. Property management agreements act as a roadmap for both parties, creating clarity and ensuring expectations and responsibilities are met on each end.
There are numerous types of contracts, depending on the type of property you’re investing in, the duration of the agreement, and more. Here are 4 common types of property management agreements you may hear about:
Residential management contracts cover single-family homes, condos, and apartment complexes, detailing the responsibilities of property owners and managers. A residential management agreement details duties like finding and screening tenants, handling maintenance, collecting rent, and more.
A commercial property management contract applies to office buildings, industrial properties, and retail spaces. It focuses on maintaining leases, ensuring tenant compliance, and overseeing building operations. Due to the nature of the property, tenants, and leases, commercial management agreements can be more complex and detailed.
Short-term or vacation rental management contracts, such as Airbnb rentals, are used for a shorter duration. These agreements typically include managing reservations, maintaining cleanliness between visits, and marketing the property to keep it full.
Multi-family management contracts pertain to apartment buildings or other multi-unit residential properties. These agreements cover handling multiple tenants and larger-scale maintenance and ensure compliance with local housing laws.
Every property management agreement is different. However, each contract usually includes the following elements:
The contract will include the property owner’s and manager’s contact information (phone number, address, email) and legal names.
The management agreement will outline a description of the property, detailing the type of building (single-family home, apartment, office building), address, and other unique amenities or additional features.
A term of agreement specifies the start and end date of the contract, as well as any terms or conditions regarding renewals or termination.
The contract must clearly outline the property management company’s duties. Services often include tenant screening and placement, rent collection, coordination of maintenance and repairs, tracking income and expenses, providing regular inspections, handling evictions, and more.
Compensation outlines how the property manager will be paid for their services, including:
It’s essential to clearly communicate in the management agreement what the property owner is responsible for. An owner’s tasks include maintaining property insurance, funding a maintenance reserve or emergency fund account, or approving more significant repair expenditures.
This section describes how either party can terminate the agreement, including a notice period (e.g., 30 days in advance), termination fees, and obligations after the contract’s end.
Handling maintenance and repairs is a vital role of the property manager. The contract needs to define the manager’s authority to handle essential repairs, including any monetary limits for maintenance without the owner’s pre-approval. This section also outlines the process for handling emergency property repairs.
This part of the agreement ensures that the property management company will comply with local, state, and federal laws regarding fair housing, landlord-tenant regulations, and safety protocols.
If a conflict occurs between the property owner and manager, this section will detail how the dispute will be handled. Conflict resolution can include mediation from a third party, arbitration, or even legal action.
Property management companies may require the property owner to provide particular insurance policies, such as property insurance and liability coverage. This agreement section clarifies the property manager’s insurance responsibilities, including requiring errors and omissions (E&O) insurance.
A property management contract will also include how the property manager maintains financial records and reports regularly to the owner, typically monthly or quarterly.
It’s crucial to clarify when and how the property manager can access the property and any conditions for regular inspections or tenant interactions.
Both parties sign and date every property management agreement, indicating a thorough understanding and acceptance of the terms and conditions.
Suppose you’ve signed a rental management agreement, but after about 3 months, you’re unhappy with the services and results. How can you effectively terminate your property management contract without complex legal action? Getting out of a property management contract often depends on the termination procedure and several additional factors.
Here are 4 steps you can take to end your management agreement the easy way:
Typically, a property management agreement lasts for 1 year, but select management agreements are month-to-month on a rare basis. Here at TrueDoor Property Management, we have the “Happiness Guarantee.” If our client is unhappy with us for any reason, they can terminate the management agreement with a 30-day notice, meaning a rental property owner can test us out without committing to an entire year.
If you’re a property owner partnering with a management company with a year-long contract, don’t worry. Property management companies are often willing to let you out of their management agreement if you ask them. Why would they do this? Property management companies prioritize a healthy and positive relationship with their clients, so they’re unlikely to make you stay if you’re unsatisfied. Whatever the case, ensure you’re comfortable with their termination regulations before signing the agreement if things turn sour.
A property manager becomes an authorized representative once the legally binding contract is signed by both parties, detailing the responsibilities of the manager and the owner’s expectations regarding the investment property’s managerial tasks.
As mentioned previously, property management contracts are usually for 1 year, but shorter or longer agreements do happen. Before signing a contract, diligently read through its duration.
A property management contract must include the terms and conditions of your business relationship with a company or manager. Elements like how long the contract will last, management fees every month, what services you’re entitled to, and more should be included in the agreement.
Do you need property management services for your property in Southern California? TrueDoor Property Management provides stellar, customized services, specializing in residential home and apartment management. Based in Orange County and the Inland Empire, we’ve provided clients 5-star management solutions for over 20 years. Our comprehensive services include diligent tenant screening, aggressive property marketing, prompt rent collection, seamless maintenance and repairs, constant support, and more. Contact us today to sign a contract with Southern California’s top-rated property management company.
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