Everything You Need to Know About Using Property Management Contract Templates
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Many landlords rely on property managers to handle maintenance concerns on their behalf. When making arrangements with these providers, landlords need to feel confident in both the cost and quality of the services. A property management contract provides much-needed peace of mind, ensuring that both the landlord and tenants receive the care and consideration they deserve.
With so many contracts to handle, even the most detail-oriented landlords sometimes neglect property management agreements. If these aren't thorough, all parties involved can be at risk. Therein lies the value of the property management contract template, which provides a useful (and customizable) blueprint for landlords to follow. In this guide, we'll highlight what this template might include and how it can be customized.
What Should a Property Management Contract Include?
The content of a property management contract is largely determined based on the nature of the relationship between the landlord and the property manager. This can encompass the scope of services provided — and whether the manager enters into utility contracts or hires employees on the landlord's behalf. In general, however, a property management contract template should include the following key elements:
- The term of the agreement. This section should mention not only when the agreement goes into effect, but also, when the initial end of the term will arrive. In most cases, this clause will also highlight the possibility of renewal, which, if approved, should occur automatically unless terminated as agreed by both parties.
- Information about contingency reserves. To ensure that maintenance tasks are carried out promptly, property managers may require funding known as contingency reserves. This money is set aside so that property managers can easily handle unexpected costs. Because requirements for these reserves can vary over time, contracts may include information about how such funds can be adjusted following periodic reviews.
- Instructions for financial reports. Property management contracts typically include reporting requirements designed to keep managers accountable. As such, this clause may explain how often agents are to submit reports — and how long the landlord can take before approving them. Some contracts may also mention the owner's right to audit these financial reports. Details such as limits on maintenance expenses may also be mentioned.
- Authority to hire employees. Depending on the scope of maintenance tasks, property managers may need to hire several employees or contractors. The property management agreement authorizes them to do just that, although workers may officially be designated as employees of the landlord.
- Details about compensation. Don't forget to explain how property managers will be paid for their services — and how these payments will be arranged. While many property managers receive monthly compensation, some instead opt for a specific percentage of the monthly receipts.
Best Practices for Using a Property Management Contract Template
Both landlords and property managers can be vulnerable when creating and signing property management agreements. As such, attention to detail is crucial. Be sure to keep these best practices in mind when signing a property management contract template:
- Clarify the relationship between the landlord and the property manager. It should always be evident that the property manager serves as an agent for the landlord, rather than as a partner or as an employee. This explanation should also mention that the agent is not to be held liable for the behavior of the landlord.
- Be transparent about the possibility of termination. Property management contracts can be ended for a variety of reasons. Each contract should explain the circumstances under which termination might occur, as well as instructions for liquidated damages or other forms of compensation payable after the agreement ends.
Next Steps: Signing a Property Management Contract
Signing is the final step in a long process, but this essential task should not be neglected. Use a streamlined and highly trusted solution such as Nitro Sign to keep property management contracts and other documents safe. To discover how this might look in action, get started with a free trial.