How a Property Management Contract Looks Like

Property management is just like any other management contracts.

It is a contract where the owner would allow another person to manage his
real property. The property manager would then administer and generate
revenue from that property. Usually, a fee or a percentage of the revenues
collected are retained by the property manager in exchange for his services.
Entities that are engaged in this business are called property management
companies.

Purposes of Property Management

The most common purposes for entering into a property
management contract is to lease the property to prospective tenants,
generate revenue and make improvements. The property manager may also
represent the owner in legal cases involving the property.
Property management would be helpful to an owner who is unable or
lacks expertise to manage his real estate. It would be difficult to supervise
several apartments or large tracts of land. Property management
companies may also assist real estate owners who reside in another place.

What to Look for in the Contract

Most property management contracts are written in fine print and in
legal jargon. While they may be burdensome to read, doing so may help
clear misunderstandings regarding certain aspects of the contract. This may
be, but not limited to, fees, services, responsibilities and contract
termination. The owner must ask questions about anything that is doubtful
or difficult to understand. Clearing up things wont hurt. Hiring a lawyer is
unnecessary. However, it is recommended especially if the owner wants to
clarify the legal jargon and to make sure that there has been no stipulation
left unexplained.
In general, the laws of the place where the contract was agreed into
would govern. However, the following are the parts which are usually
included in a property management contract.

Representations and Responsibilities

Representation is the part where the owner would disclose his

personal information and facts about the property. It also provides that the
parties have the ability to enter in to the agreement. It states that laws have
been complied therewith. This section also specifies the services that the
property management company would provide. It enumerates the duties and
obligations of the company.
On the other hand, responsibilities stipulate the obligations of the
owner during the lifetime of the contract. This may include, but not limited
to, not engaging in another property management contract, or informing the
property manager of any event that may affect the relationship. Most
companies would also require that the necessary documents and records be
given for them to effectively provide their services. They would also require
that all negotiations and dealings with prospective and current tenants
relating to property management be referred to them.
Usually, most property management companies would require that a
certain kind of insurance over the property must be maintained. They want
insurance premiums to be fully paid or up-to-date.

Duration of the Agreement

This is the section which provides on how long the contract will be
effective. This is the lifetime of the agreement. Very few property
management companies offer monthly basis. Most of them require more
than two years contract period. Also, some contracts also provide for
automatic renewal after every year, unless notice of termination was given to
the property management company. The property owner would to think
twice before committing to this kind of contract, because they would be in
effect for a long time.

Termination
This could be the most important part of the contract. This section
provides for the proper procedure for terminating the agreement. Most
contracts would require notice period, spanning from 30 days to 90 days.
The termination part also enumerates the valid causes for terminating the
agreement. The owner must clarify what those causes are, because these
stipulations are usually written in a vague language. It also states the
penalties and damages that the owner may incur should he terminate the
agreement prematurely or without valid cause.

On the other hand, the contract must also provide causes for
termination if the user finds the services unsatisfactory. For example, in a
management contract for leasing an apartment. If the property management
company is unable to find prospective tenants within a certain period of
time, then the property owner should be given a valid cause for terminating
the agreement. Another example of valid cause would be if the property
management company causes damage to the property.
Sometimes, property management companies would require
termination fees, ranging from a few hundred to thousand dollars. As most
experienced property owners would say, if a property management firm
relies on termination fees to retain clients, instead of on their capability to
satisfy them, then it means that the company might not be a good one.