5 Things Every Property Owner Needs to Check before Signing a Contract with a PM Company
When a property owner decides to hire a company to manage their rental properties, an agreement or contract between the two parties needs to be signed. The agreement should outline beginning and end dates of the contract, terms for getting out of it early, what’s expected of the management company, fees the owner will have to pay, onboarding and offboarding procedures, information about insurance and taxes, local laws, and more. Before putting a wet signature on the line, there are a few things you should keep an eye on.
1. Any clauses that require you to use the Property Management (PM) company as representation for selling your property when and if you decide to sell. The reason this clause is troublesome is because the PM company might not be best suited to represent you on the public market as a sales company. They may only hold a presence as a PM Company on the market and they may not have enough experience with sales to get you the best deal for your property. When the time comes, you don’t want to be forced to have them as your representation. Some companies may even dictate what their commission would be in hidden clauses, which is something you should have the freedom to determine yourself when the time is right.
2. Any clauses that require you to use the PM Company’s preferred vendors. While a company’s preferred vendors may be great, you don’t want to be limited in your choices. If your brother-in-law becomes an HVAC expert and you decide you want to give him your business, you don’t want to be locked in to using another company because of your PM contract.
3. The terms for breaking the agreement. With appropriate notice, you should never have to pay a fee for breaking a contract. You also shouldn’t have to pay any fees if you have a reasonable cause for wanting to end the agreement. Make sure you check what the renewal term is, how you can get out of it, and what the fee is for breaking it.
4. Don’t assume any services are included free of charge. For example, some companies may charge a fee for paying vendor invoices on your behalf. Be sure you’re aware what that upcharge is ahead of time so you’re not surprised by any extra fees. Other services that might not be included in the base price are leasing fees, onboarding fees, and hourly fees.
5. Contract options. Some PM Companies offer different plans that range from minimal management to full-service management. Depending on what you’re looking for, checking out all the different options available could be beneficial. Make sure to ask the company if there are multiple options before making your decision.
Legal documents can be intimidating if you’re not sure what to look for. If you keep an eye out for these five things, you should be well on your way to signing a PM Agreement that’s going to serve you well. If you need further guidance or PM services in the Lehigh Valley, PA, don’t hesitate to reach out to us here at Lighthouse Realty LV. For more information on our property management services, click the link below.
This post should not be taken as legal advice or used as a substitute for such.
