Property Management Contracts: Everything You Need to Know
Property management contracts enforce an agreement between two parties in the management of property.3 min read
Property management contracts enforce an agreement between two parties in the management of property. Such an agreement is a pact between a property owner and a company to perform certain property management duties. The agreement would cover all duties and responsibilities that a management company would perform for the owner.
The agreement not only explains the responsibilities of all parties involved but also covers liabilities that may arise if either party breaches the agreement. Further, a sound agreement should include an insurance clause that an owner should carry on a building, and a property management company should buy its own insurance to safeguard the business from liability.
- Note: Both parties should understand everything that’s in a contract before signing.
It’s also worth noting that property management companies and owners may have verbal conversations about other duties, but the contract itself overrides anything not stated in the agreement.
Property management agreements are necessary if you intend to hire an individual or company to management a property. If you own a management company, you also need an agreement to safeguard your company.
A contract details all responsibilities, and not all property management companies do the same work. For example, certain management companies take responsibility in marketing rental properties, while others may not. The agreements also reflect the type of duties the management companies will provide during the term of the contract.
From an owner’s standpoint, such an agreement would also safeguard your interests. For property management owners, the agreement would protect your interests as well and would provide proof of terms with an owner. Regardless of your position, property management contracts are a necessary part of doing business in this area.
In addition, you should add all relevant fees and services that will last throughout the agreement as an individual or company manages the property. Further, both parties will have peace of mind in knowing that all interests are protected, with all duties included in a written agreement.
The key in drafting a property management contract is stellar communication, decreasing the chances of a legal dispute. An agreement provides a positive experience to residents by eliminating miscommunications.
A solid property management contract lays out certain tasks in the form of:
- Renting out properties
- Property management
- Adhering to local regulations pertaining to tenants and property
Verbal agreements are also enforceable by law, but you may have a hard time making your case in a courtroom without a written agreement to fall back on. Agreements via handshake are also valid as well, so long as the business runs smoothly. Overall, written contracts give both parties better protections in case a lawsuit occurs.
Written Agreement Termination Components
A written agreement yields the following benefits in the event of a severed business relationship:
- Determines a reason why parties would want to end a business relationship
- Outlines a time frame in which either party can serve the other with a termination notice
- Details clauses that determine remaining fees if the contract ends prematurely
- Answers any questions that may stem from liability matters in the form of personal injury or other instances
Overall, these agreements give you a structure that ensures a beneficial relationship and a smooth transition out of an agreement if one or both parties no longer wish to remain in the contract.
It’s worth noting that an agreement should benefit all parties, including the property. For example, an agreement on a commercial property that houses various businesses needs certain considerations for those businesses located on the premises. Commercial property management agreements stipulate that an owner should purchase Commercial General Liability Insurance.
Residential properties may come with special considerations as well. It’s standard practice for owners to include property managers in their insurance plans to protect the interests of a commercial property.
One of the more vital services that property managers perform are tenant screenings. For instance, a property management company can agree to run credit checks on all renters. Other duties may include:
- Filling vacancies
- Landscaping and maintaining hallways
- Providing repairs for tenants
- Collecting rental payments
- General upkeep of the property
To learn more about property management contracts, submit your legal inquiry to our UpCounsel marketplace. UpCounsel’s lawyers have graduated from some of the most prestigious law schools in the nation and will use their expertise and law savvy in helping you draft a solid property agreement that will protect your interests, whether you are a property owner, or if you own or manage a property management company. In addition, our lawyers will remain at your side if contract disputes arise and will help you legally enforce all terms of the contract.