What to look for in a property management contract
Updated: Aug 27
When entrusting your valuable rental property to a property management company, it is essential to have a clear and comprehensive property management contract in place. A well-drafted contract sets the foundation for a successful working relationship and protects the interests of both property owners and property management companies. In this article, we will explore key elements that you should look for when reviewing a property management contract, ensuring that you make an informed decision and secure a reliable partnership.
Scope of Services:
The property management contract should clearly outline the scope of services provided by the management company. This includes tasks such as rent collection, tenant screening, property maintenance, marketing, and lease administration. Ensure that the contract explicitly states which services are included and any specific exclusions or limitations.
Fee Structure and Payment Terms:
Review the fee structure outlined in the contract, including management fees, leasing fees, and any additional charges. Pay attention to the payment terms, frequency, and methods of payment. Understanding the financial aspects of the agreement will help you evaluate the cost-effectiveness of the property management services.
Look for a termination clause that specifies the conditions and notice period required to terminate the contract. It is important to have flexibility in case you are not satisfied with the property management services or wish to make changes in the future. Ensure that the termination process is fair and reasonable for both parties.
Maintenance and Repair Procedures:
A well-drafted contract will outline the procedures for handling maintenance and repairs. It should define how repairs are authorized, whether there are spending limits, and how emergency repairs are handled. Clarify who is responsible for the cost of repairs and how they will be documented.
Communication and Reporting:
Effective communication is crucial in property management. The contract should specify how communication will be facilitated between the property owner and the management company. Look for provisions regarding regular reporting, including financial statements, rental income, expenses, and any other relevant updates.
Insurance and Liability:
Ensure that the contract addresses insurance requirements and liability coverage. It should clearly state the insurance obligations of both parties, such as property and liability insurance. Additionally, review any indemnification clauses to understand the extent of liability protection for both parties.
Compliance with Laws and Regulations:
Verify that the property management contract includes provisions for compliance with local laws and regulations. This ensures that the management company will operate in accordance with legal requirements, including fair housing laws, building codes, and rental regulations specific to your area.
Selecting the right property management contract is essential for a successful and mutually beneficial partnership. By thoroughly reviewing the contract and considering factors such as services, fees, termination clauses, maintenance procedures, communication, insurance, and compliance, you can protect your interests and establish clear expectations. Remember, a well-crafted property management contract sets the stage for a smooth and professional working relationship between property owners and management companies.
Before finalizing any agreement, it is recommended to consult with legal professionals or industry experts to ensure that the contract adequately addresses your specific needs and complies with local laws and regulations.