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Here's What Every Property Agreement Should Detail

Posted by IKO Community Management on January 12, 2017 at 9:00 AM

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The Balance states that landlords and renters must carefully examine key sections of property agreements prior to signing on the dotted line. The details within this contract are specified for a reason, and it’s important to read over everything carefully before signing.

IKO Community Management takes an in-depth look at what should be included in every property agreement:

Services and Fees

The contract should lay out which services are included in the basic management fee, which services can be performed for an additional fee (whether it’s a flat fee, percentage fee, or case-by-case fee prior to the service), and which services will not be performed by a property manager under any circumstances.

Double-check where the following services fall:

  • Eviction notices
  • Refinancing
  • Maintenance and property inspections
  • Bill payment
  • Vacancy fillings
  • Marketing
  • Emergency service
  • Rent collection

Property Owner Responsibilities

The contract should detail the responsibilities of the property owner, renter, and landlord. This section defines what each party is and isn't obligated to do.

For example, the landlord could be responsible for setting up and maintaining a reserve fund or property insurance. However, they could also be prevented from entering the property without warning or approval from the owner and/or tenant.

Equal Opportunity Housing

This section should detail support for Equal Opportunity Housing. The property management agreement should state that the landlord and owner abide by state and federal fair housing laws.

Liability

This section can be tricky, based on perspective. According to The Balance, this section “is known as the hold harmless clause. In general, this clause will protect the property manager, except in cases where they have been negligent.

The property manager is not, however, responsible for negligence of third parties they hire. For example, a property manager is not responsible if they hire a contractor, and the contractor causes damage to the property.”

Renters can protect themselves by checking for a “reasonable care” clause. For example, the property manager will not be held liable if “reasonable care” has been taken when hiring a third party. They should do their research and avoid hiring a contractor with a history of complaints or malpractice.

Contract Duration

The best advice from property managers is to avoid signing a long-term agreement until the tenant has proven results from, and confidence in, the chosen property management company.

Unfortunately, many management companies will not sign an agreement for less than a year. In this case, carefully review the termination clause to see which party is able to terminate the contract if unhappy with the terms.

Termination Clause

The termination or cancellation clause should state why and when the property management company and the tenant have a right to leave the agreement. Usually, both parties must give between 30 to 90 days notice before termination.

It’s best to find an agreement that doesn't require stated cause or reason to terminate the agreement. This may also include a provision that allows a renter to terminate the contract without penalty if the management company fails to find a tenant within a specified amount of time. For early cancellation, a fee is typically charged.

Upon termination, there's typically an outlined list of duties that must be completed within a specified amount of time. For example, the property management company must provide the property owner with copies of all tenants' leases within two weeks of termination.

From beginning to end, whether you’re a tenant or landlord, read the fine print of each section in the property agreement. Remember that it’s OK to discuss any negotiations with the property owner until a fair compromise is reached.

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Topics: Company, Landlords