Property Management Agreements
What is important – and what a property management agreement CAN’T tell you.
When you, as a property owner, enter a legal relationship with a property management company, you will need to sign a Property Management Agreement. This agreement outlines the legal terms and obligations of the relationship.
You should review the 7 most important parts of a Property Management Agreement before you enter into this legal relationship. Be sure to read to the end, as we tell you the important things that the agreement CAN'T tell you.
- How Easy Is It To Cancel The Agreement?
This may sound like a strange thing to review in the agreement, but we believe it is one of the most important parts of the agreement. It shows the property management company’s willingness to give you flexibility in allowing you to leave if you are ever unhappy with their service. A property management company should not handcuff you or force you to work with them, nor should they charge you termination fees or penalties if you leave. Ideally, you want a month-to-month agreement, allowing you to potentially leave anytime you want – and without penalty!
-Our management agreement is month-to-month with NO termination fees or penalties
- Was the Agreement Prepared By An Attorney?
The Commonwealth of Pennsylvania requires by law that an attorney prepare a Property Management Agreement specific for the company, and this must be disclosed in the agreement.
If the agreement does not have language stating it was prepared by ‘xxx Law Firm’ then you should assume the company is not operating under the required laws of Pennsylvania.
-Our management agreement is prepared by the Pennsylvania law firm Mette, Evans & Woodside.
- What Are Your Guarantees?
One of the common fears we hear from owners is - what if my tenant does not paid rent and has to be evicted?
While no one can guarantee that a tenant will always pay on time – will your property management company re-rent the property for free? Or better yet will they pay the legal fees on your behalf?
While guarantees like these are not common – ask “What DO you guarantee for me!”
-We will assist with eviction fees and see you through the eviction process.
- How Fast Do I Get My Money?
When a tenant pays rent, how quickly does the property management company process the accounting of those funds and pay you?
You want your money quickly! So be sure you will receive it no later than date on your management agreement.
-We close our accounting cycle on the same day each month, per your management agreement, and disburse funds through a secure ACH transfer directly into your bank account
- How Much Money Do I Have To Place In Reserve?
Your Pennsylvania property management company should open a banking trust account for you and you will need to fund this account with what is commonly referred to as a reserve. This money is used to fund your account and may also be used to pay expenses on the property that are incurred, before or after you receive the rental income each month.
Reserve amounts vary, but you should expect this amount to be anywhere from a few hundred dollars, up to one full month’s rent.
-We require a minimum escrow reserve of $300 per unit.
- Who Handles Evictions?
Although evictions should be rare, if a legal problem must be addressed, will the property management company do it for you or will they hand the problem back to you?
You want to be sure that the company will handle ALL the evictions and tenant issues on your behalf.
-Although rare, if an eviction is necessary, we oversee the entire legal process from start to finish
- What Is A Maintenance Trigger?
One of the reasons you hire a property management company is so YOU don’t have to be bothered with the day-to-day issues and problems that happen – including routine maintenance and repair items.
Eventually the toilet is going to run, the sink is going to drip, and the oven is going to break.
For the protection of your property and to comply with health and safety laws, your property management company MUST have strong maintenance protocols in place. These protocols should clearly define when repairs are tenant vs owner responsibility, what constitutes a maintenance emergency, when to repair vs replace, and when you (as the owner) should be involved.
Be sure you understand when you will have to become involved in repair requests.
-We handle all repair issues and won’t bother you for items under $900
What the Property Management Agreement Can’t Tell You
Because Property Management Agreements are written by attorneys to outline the legal relationship between you and the company, they can’t tell you what you need to know most.
They can’t describe the most important parts of your new relationship– things like integrity, honesty, professionalism, communication, compassion, wisdom, and the list goes on.
These are the most important things to consider before entering into a relationship with a property management company.
-You are NOT entering into a transaction, as much as you are entering into a relationship.
I hope this information will help you make an informed decision for your property management needs. Please consider me a resource if I can help you in any way!