A property management agreement template comes in handy when you want to seek the services of a property management company. This agreement makes sure that you remain protected in case the property manager doesn’t fulfill their responsibilities.
Table of Contents
- 1 When do you require a property management agreement?
- 2 What are the different types of property management agreements?
- 3 What responsibilities the property management agreement contain?
- 4 What to include in a property management agreement?
- 5 The advantages of using a property management agreement:
- 6 Conclusion:
- 7 Faqs (Frequently Asked Questions)
- 8 What is the purpose of the property management agreement?
- 9 How to end a property management agreement?
When do you require a property management agreement?
You need a property management agreement when you have a property and you want somebody to manage it for you and this can be a single individual or a company. If you are an employee in a property management company then you have to make this agreement in order to keep your company protected. This agreement makes the responsibilities of both parties very clear.
All management companies don’t offer the same services. For instance, some companies just take over the responsibilities of marketing rental properties and leave other responsibilities to the property owner. This agreement clearly states the responsibilities that the management company provides throughout the duration of the contract.
Moreover, the agreement protects your interests if you are the owner of the property. On the other hand, if you are the owner of a property management company then this agreement protects your interests and gives written documentation of the terms you have discussed with the owner.
What are the different types of property management agreements?
Let us discuss below some different types of property management agreements;
Residential property management agreement
This type of the property management agreement contains information about rent, collecting rent, and creating remittances to the owner. Liability clauses are also included to assign responsibility to either party in specific circumstances.
Commercial property management agreement
As its name implies, it is used to manage commercial properties. It contains the kinds of businesses the landlord allows on the property and the parties who are responsible for repairs and maintenance.
Industrial property management agreement
It is used for manufacturing processes and storage. The person who is responsible for any damages to the fixed structures should also be mentioned in the agreement.
Special-purpose property management agreement
The structures that don’t fall in other categories are managed by this agreement. In this category, the agreement includes provisions that state the party who is responsible for paying advertising costs relevant to the properties.
What responsibilities the property management agreement contain?
The property owner should assign the responsibilities of managing the property to a property manager or a company. You should completely read the agreement and rewrite any item you aren’t comfortable with. The agreement should incorporate the following points;
Property management responsibilities:
This includes the following;
- Finding tenants
- Maintaining the property
- Collecting rents and anything else depending on your needs.
Fees of the property manager:
This includes how you calculate fees and how and when you will pay the fees.
Additional services provided by the property manager:
These are the services that aren’t covered by the standard management fee but the property manager can agree to provide as required. The contract should state the details of these additional services and their related fees.
Limitations of the agreement:
Include all the things as your responsibilities that the property management company won’t do.
Other relevant details:
- You should also clearly state that there should be no contracting with other property managers or property management companies during the duration of the contract.
- Without providing you appropriate notice first, the property manager can’t enter the premises.
- Without the approval or involvement of the property manager, you can’t sign in a tenant as an owner.
- You should also include a reserve fund that property manager require for daily management expenses.
- The agreement should include the coverage amount in order to obtain Liability Insurance. In the coverage of the insurance terms, you must include the property management company. You may also like Estoppel Certificate Forms.
What to include in a property management agreement?
Your property management agreement should include the following;
This section contains all of the services of the agreement and demonstrates the responsibilities of the management company. All these are part of the fees agreed upon within the agreement.
Services that isn’t included:
The agreement should also contain the services that aren’t covered by the property management company. This means the company isn’t responsible for services not covered with regard to the property.
Depending on the area or state, this section covers the costs of the services. However, some may contain flat rate fees per month. When you are researching on fees against the current market then you should focus on the services covered by the property management company. A higher fee indicates more comprehensive services.
This section is made for extra costs. You can add this section in order to engage the property management company for extra responsibilities. These responsibilities are not in the standard contract.
Property owner responsibilities:
This section demonstrates the responsibilities of the property owner. Also, include a clause that discusses the exact kind of insurance you require to carry out at all times.
The limitations of the property owner:
The property management agreement should specify what you cannot do as a property owner. These limitations are important so that the property management company easily deal with all of the features of the regular management of the property.
Length of the agreement:
The standard duration of the agreement is one year. This is especially for those where the partnership has lasted for many years. A yearly review of the agreement is significant to ensure that all of the relevant issues are covered sufficiently. Furthermore, you can also add new services and fees may increase.
The legal liabilities and indemnifications with regards to the property are covered under this section. Liabilities may include;
- A statement that stipulates the management company’s liability in a situation when there is any personal claim or injury against the property.
- Sometimes Management Company has knowledge about a risk but they didn’t do anything to deal with it. In such situation, they may have liability for it.
- In this section, for different cases, specify who gets the liability that may arise when dealing with the property.
- Also, include a liability when tenant breaks their leases that in result may lead to your financial distress.
There are some compliance issues during renting properties to residents or commercial enterprises. For such issues, this section identifies the responsibilities of the property management company. You have to provide description about equal opportunity housing and discussions about local laws and codes in this section.
Funding or advances:
Include funding for the day-to-day management of the property here. This is your responsibility as a property owner. You should also check Subcontractor Agreement Templates.
The advantages of using a property management agreement:
Here are the advantages of using a property management agreement;
- This document specifies the duties and responsibilities of the property manager clearly.
- It contains the circumstances which allow when the property manager or owner can terminate the agreement. It also specifies the method of termination.
- This agreement proves very useful to protect you from liability.
- It gives a structure for a beneficial partnership among the owner and the property manager.
In conclusion, a property management agreement template is a helpful document in case you have a property and you don’t have time to look after it or you don’t know how to handle it. You have to create a written property management agreement in order to seek the services of a property management company.
Faqs (Frequently Asked Questions)
What is the purpose of the property management agreement?
The main purpose of the property management agreement is to meet the parties’ expectations and in case of any conflict, provide them a straight forward solution.
How to end a property management agreement?
The first step to end a property management agreement is to review the cancellation policy. The cancellation policy specifies fees and notice requirements regarding cancellation.