A property management agreement review entails the legally binding process of revising and enhancing a contract with legal guidance to oversee it effectively. The agreement is signed between the property management company and the property owner. It is signed with the free consent of both parties. A property management contract review has various elements that will be discussed in this blog. However, doing a review will require professional services from a legal consultant. A property management agreement review lawyer can update the contract for both parties.
Essential Elements of a Property Management Agreement Review
A property management contract is signed between two parties who agree to manage a property. They agree on specific terms and conditions. Such a contract can have various steps like the appointment of a property manager, the relationship of the parties, insurance and indemnity, accounts, pay scale, termination, rights and duties of both parties, etc. A lawyer should review these terms and conditions. The review is done once the contract has been drafted or it comes into force. Let us learn some of the essential elements to look for in a property management agreement review and how a lawyer can help with the same:
- Pay Scale of the Property Manager: Money matters are one of the most essential matters to look for in a property management agreement review. The property owner should ensure that the other party is given fair payments. The other party could be an individual property manager or a property management company. At this step, the lawyer for the property owner will review the frequency of payments, schedule of fees, and amount of payments. He will also check the additional property management costs with other payments. Additional charges may or may not be specified in a property management contract. These costs usually include set-up fees, tenant placement fees, eviction fees, etc. These reviews will save the property owner from any unforeseen costs in the future.
- Duties of a Property Manager and a Property Owner: The lawyer for property management agreement review must go through the responsibilities of a property manager and that of the property owner. In case of any discrepancies, he should update them if required. Defining the responsibilities of both parties can save them from a lot of unnecessary bickering at a later stage. Generally, the duties of a property manager are listing the property, finding a responsible tenant, marketing the property, etc. These duties are imposed based on the requirements of the property owner. On the other hand, the responsibilities of a property owner are management and repair of the property, dealing with emergencies, keeping insurance, keeping themselves updated with the work of the property manager, etc.
- Termination of the Contract: A legal agreement can be terminated at any time by either of the parties. A termination clause specifies why and how a property manager and a property owner can terminate the contract. Generally, the conditions for termination of the agreement are set at the time of drafting. It provides the grounds on which parties can terminate the agreement. It also provides the procedure for termination. The property owner’s lawyer for property management agreement review can also add a clause for a penalty on termination if required. The clause for termination of the contract shall also mention the notice period. The notice period can vary from 30 days to 90 days. This means a party will have to issue a notice to the other party 30 to 90 days before they intend to terminate the contract.
- Dispute Resolution Clause : If the property contract has been well drafted, it must have a dispute resolution clause. There are various methods of dispute resolution that a lawyer for property management agreement review can add to the contract. This includes mediation, litigation, arbitration, counseling, pre-litigation, etc. This clause can save both parties from any unnecessary legal disputes in the future.
- Fair Housing Clause: The Fair Housing Act of the USA comprises various federal laws. This Act intends to prevent discrimination and ensure equality in the housing sector. The property management agreement review lawyer can add this clause to the contract.
- Duration of the Contract: The duration of the contract should be reviewed based on the progress of both parties. A contract ends when both parties have fulfilled their duties or after a specific time period. The duration of the contract is generally one year or any tenure as agreed upon by both parties. The lawyer for the property management agreement shall review and update the duration.
- Sale of the Property: It is the property owner's discretion if he wants to rent or sell the property. The contract should mention the same if he intends to sell the property. This includes defining the powers of the property manager with respect to sales. The contract should explain which agreements require the sign of only the property manager and which require the sign of the property owner. In general, except for the actual lease or sale contract, other agreements can be signed by a property manager only.
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Key Terms for Property Management Agreement Reviews
- Equal Opportunity Housing: Equal opportunity housing ensures no discrimination occurs while renting the property to a tenant.
- Governing Law : Governing law refers to the law which will rule the legal contract. It is the law of the state where the contract is based.
- Insurance: Insurance of the property by the property owner can prevent him from unwarranted expenses in the future. Various clauses can be inserted in a tenant-occupied property.
- Liabilities: Liabilities are those contract provisions for which the parties can be held responsible. Liabilities enforce duties on the parties to fulfill specific tasks.
- Limitations: Limitations are imposed on liabilities. These limitations save the party from being held liable for the other party's negligence. Limitations are an exception to the liabilities.
- Property Manager: A property manager is an individual or company that manages other parties' property. They usually list, market, and rent the property to a third party.
- Recitals: Recitals provide the background information about the parties and the property. It is an essential part of a property management agreement. The lawyer can include basic contact information and both parties' legal intentions. Along with that, the address or location of the property should also be mentioned.
- Reimbursement Clause: The reimbursement clause saves the parties from any hidden expenses. A reimbursement clause clearly specifies which party will bear a particular cost type. For example, if the property manager handles the maintenance payment, the property owner must compensate him.
- Termination Clause: Termination of a contract refers to ending an agreement before the time period is over. A termination clause states the reason for ending a contract and its consequences.
Final Thoughts on Property Management Agreement Reviews
A property management agreement review updates a legally binding contract between the property owner and the property manager. The property owner must avail the services of a property management company if he has many properties that are put on lease. It is also recommended that the owner consult a lawyer to ensure the relationship between the parties runs smoothly. It is wise to choose a lawyer experienced in business, real estate, and contract law to review property management agreements.
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