What Is a Property Management Agreement and Why Is It Important?

Whether you have a job, are looking to supplement your primary income, or wish to make money without engaging in the usual grind, renting out a property can do the trick. And for a frictionless way to go about it, hiring a property manager makes complete sense. However, signing a property management agreement beforehand is crucial so you (the landlord or property owner) and the management company know your duties and responsibilities. 

This legal contract outlines how your property will be operated regularly and what you are supposed to pay the property manager. Now, let’s delve into why and what you need this agreement entails. 

Importance of a Property Management Contract 

Signing a property management agreement is essential whether you are leasing out one or several properties. It improves your relationship with the management company and instills a sense of legally binding accountability in both parties. As a landlord, you can also rest assured that you will be entitled to all kinds of support and services related to property management, from advertising and tenant screening to maintenance, rent collection, periodic inspection, and more. 

Depending on the contract’s terms, you can eliminate the stress of running your property daily and concentrate on growing your real estate business. 

The following section will explore what a management agreement contract includes. 

1. Parties Involved 

The agreement includes the property owner’s name, the property management firm’s name and contact details, and the date the contract is deemed valid. 

2. Services 

The property management agreement lists down the services you will receive as a landlord against the fees decided upon. These might include: 

• Leasing: The firm will help you prepare listings, photograph the property for advertisement, screen applicants, zero in on suitable tenants, prepare necessary lease documents, handle move-ins, and collect the rent. 
• Compliance and Licensing: If you live in a state that requires a housing inspection or rental license, the property management company can help. They will ensure you follow the law before renting out a property. 
• Invoicing and Collection of Rent: As part of the property management contract, the firm will collect the rent promptly on your behalf. They will prepare and share invoices with tenants, help them choose suitable payment options, handle vendor communication, and ensure your account is credited without hassle. 
• Noncompliance and Late Payment Penalty: The management firm will take necessary action if a tenant doesn’t comply with lease terms or pays late. They might levy late fees and send written warnings. 
• Relations with Tenants: The property management company also ensures that tenants are satisfied and heard. They readily tackle complaints, treat everyone fairly, and encourage open communication. 
• Preventive and Reactive Maintenance: Unless your property is in good shape, tenants might register complaints, delay rent payments, or even move out. Hence, a property management agreement usually mentions that the firm will take essential measures to keep the property safe, clean, and functional. They will also hire contractors for repair work and regular maintenance.   
• Financial Reports: The management company will provide detailed financial reports every month or year. These will include the total rent earned, the cost incurred for operating the property, and your net profit. 

3. Responsibilities of the Owner

A management agreement contract also outlines your responsibilities as the property owner. These generally include: 

• Ample Funds: You must have a reserve fund to meet daily tasks and emergency expenses. The property management company should be able to access it, and you must always maintain a certain amount of money in the fund. 
• Entry Right: While the property belongs to you, the tenant can live there without your intrusion after signing the rental agreement. Hence, you cannot enter tenant-occupied premises without a valid reason, the property manager’s prior approval, and giving the tenant at least 24 hours’ notice. 
• Landlord Insurance: The management firm will specify the type of insurance and coverage you must take out for your rental property. This can financially cover you against unforeseen physical injury, asset damage, theft, etc. 

4. Management Liability 

This part of a property management agreement protects the firm against harm caused by third-party vendors. However, it would be best to be assured that the firm will hire any vendor only after due diligence.

5. Term of Contract 

Usually, a property management contract is signed by both parties for a year. Especially if you are new to the real estate landscape, only go for lengthier contracts if you are sure the management firm is worthy. 

6. Fees 

Before signing a management agreement contract, check what the firm will charge you and review the breakdown of fees. Make sure the inclusions and exclusions are mentioned clearly. Avoid settling for a firm just because its fees are low, as you might end up with more responsibilities than expected. 

7. Equal Opportunity Housing 

Every property management agreement has a section that states that the firm follows the Fair Housing Laws specified at the federal and state levels. This means no discrimination against tenants based on race, religion, color, gender, etc. 

8. Termination 

Both landlords and property management companies can terminate an agreement if they feel the other party is not fulfilling their responsibilities. Hence, a property management contract includes the following termination clauses in general:

• Either party must share a notice in writing 30, 60, or 90 days in advance. 
• As an owner, you should be able to terminate the contract without penalty if the firm cannot offer specified services or find tenants. 
• It should be mentioned clearly if you must pay a fee for early termination. 
• If you terminate the contract as the landlord, the property management firm must return all important documents within a certain period and settle any funds due to you within 30 days. 

Consult the Right Property Management Company 

Now that you understand the importance of a property management agreement and what it includes, it’s time to contact an experienced, reliable, and professional company. Guardian Property Management can help you kick-start your rental business in the Greater Twin Cities area. 

You can discuss your requirements with the home property management experts here and sign a contract that best serves your interests. 

So, take the next step by emailing info@guardianprop.com or calling us at 651-287-2011.