What does a property management agreement cost? If you are a rental property owner looking to hire an individual or a company to manage your rental, you may ask this question. Let’s explore this question and review some general information about property management agreements and what they entail.
How Much Does a Property Management Agreement Cost?
A property management agreement is a legally binding contract between a property owner and a property management company or individual agreeing to manage the rental on the owner’s behalf.
It is common for property owners who rent out their spaces to hire a professional who maintains the rentals. This is especially common if the property owner lives far away from their rental properties.
Some services that a property manager will provide include:
- Tenant screening and background checks
- Preparing units for rent (cleaning, landscaping, maintenance, etc.)
- Drafting a lease agreement
- Collecting rent and keeping accounts
- Handling maintenance requests or tenant complaints
- Marketing and advertising
- Property evaluation
- Property inspections
When a property owner hires a property manager, they essentially hand their rental business over to another entity to run. For this reason, having a well-drafted and detailed property management agreement is essential for a successful business relationship.
Some property management firms have their property management agreements; in other cases, the property owner will provide the contract. Both parties are encouraged to hire an attorney to draft the agreement.
Based on ContractsCounsel's marketplace data, the average cost of a property management agreement is $583.33.
What's Typically Included in a Property Management Agreement
The details of a property management agreement will vary based on the type of property, services provided, and both parties’ preferences. The most fundamental property management agreement should include the following key information:
- Fees and services. A detailed breakdown of all services the property manager provides and associated fees. The management company usually charges a percentage of the rent but could charge more for additional assistance.
- Responsibilities of the property owner. Property owners will still have certain responsibilities if they want to be hands-off. These include setting up a bank account and maintaining a minimum balance for repairs, emergencies, and property maintenance.
- Limitations of the property owner. Property management companies often protect their business by prohibiting property owners from conducting rent deals independently. This is known as a sublease.
- Equal opportunity housing. Every property management agreement should include verbiage about abiding by state and federal Equal Opportunity Housing laws.
- Liability. The liability clause, sometimes called a hold harmless agreement, limits the property management company’s liability. This clause protects the management company by limiting its liability except in cases where the company has been negligent.
- Contract duration. Property management agreements usually have a one-year minimum commitment. Property owners must consult with their lawyers before signing a property management agreement.
- Termination clause. Rules and requirements surrounding terminating the contract before it expires. Some contracts will include fees or penalties for early termination.
Every property management company will have standards and procedures that should be listed in the property management agreement.
Property owners can negotiate these terms or hire an attorney to review the contract and negotiate on their behalf.
Examples of Property Management Agreement Projects
Property Management Agreement Drafting
Property management agreements are an important part of owning a successful property rental business. This contract will lay out the roles and responsibilities of the property owner and the property manager and facilitate a cooperative working relationship.
For this reason, many property owners and managers choose to hire a lawyer to draft their property management agreements. A lawyer will ensure that the contract adheres to state laws surrounding property rentals and contracts and that the agreement securely protects both businesses.
Property Management Agreement Review
A property manager or a property owner can draft their agreement. If either party takes this route, they should always have the contract reviewed by a licensed attorney before putting it to use.
When a lawyer reviews a property management agreement, they check for mistakes, fairness, and whether the contract follows local and state laws. This ensures that both parties are equally protected under the contract.
Drafting a Property Management Agreement Cost
When a property owner hires a lawyer to draft a property management agreement, they must pay the legal fees. A lawyer will charge the client for the following:
- Time spent drafting the contract
According to ContractsCounsel's marketplace data, the average property management agreement drafting costs are $500.00 across all states.
Reviewing a Property Management Agreement Cost
Hiring a lawyer to review a property management agreement will also incur legal fees because it takes time and legal expertise to review and revise a legally binding agreement.
ContractsCounsel's marketplace data shows that the average property management agreement review costs $750.00 across all states.
How Do Lawyers Charge for a Property Management Agreement?
Hourly Rates for a Property Management Agreement
Hourly rates are usually the most common way attorneys charge for their time. In this fee arrangement, the lawyer will charge the client a set hourly rate for the time spent completing the project.
This method of billing has both positives and negatives. Attorneys benefit from ensuring they are compensated for every minute of their time; however, they usually aren’t paid until the project is completed.
The negative for clients is that although they are informed of the hourly rate, they don’t know the total cost of their legal fees until the completion of the project, which can sometimes cause some sticker shock.
The marketplace data for ContractsCounsel shows that the average hourly rate for a real estate lawyer ranges from $200 - $350 per hour.
Flat Fee Rates for a Property Management Agreement
Some lawyers use a flat fee rate billing method for contract drafting. In this fee arrangement, the lawyer will quote a lump sum rate for the project's cost, usually to be paid upfront.
From the client’s perspective, a flat fee billing structure is usually more desirable because they know exactly what they are being charged for legal services and will not be surprised with an expensive bill at the end of legal services.
It is important to make sure the client knows what’s included with the fee before starting the project, as it may not involve rounds of revisions or consultations.
ContractsCounsel's marketplace data shows that a property management agreement's average flat fee rate is $583.33.
Get Help with a Property Management Agreement
Do you need help with a property management agreement project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from real estate lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.