{"id":78748,"date":"2016-06-30T12:00:39","date_gmt":"2016-06-30T18:00:39","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=78748"},"modified":"2021-03-16T12:00:16","modified_gmt":"2021-03-16T18:00:16","slug":"2016-06-30-fine-print-property-management-contract","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2016-06-30-fine-print-property-management-contract","title":{"rendered":"The Fine Print: 5 Items to Look for BEFORE You Sign a Property Management Contract"},"content":{"rendered":"

Songwriter Pete Seeger once said, \u201cEducation is when you read the fine print; experience is what you get when you don\u2019t.\u201d With all the fine print that contracts bring, at times we\u2019re tempted to take our chances and just learn from the \u201cexperience.\u201d But it\u2019s obviously better to walk into a deal understanding the details above the dotted line. <\/span><\/p>\n

Once you\u2019ve researched property managers and compared prices and locations, reviewing the contract is the final step. Before you sign on the dotted line, take a look at the following five property management contact specifics to be sure you\u2019re truly getting a good deal.<\/span><\/p>\n

1. What ISN\u2019T Included<\/h2>\n

Ironically, you should first look for what\u2019s <\/span>not<\/span><\/i> included in the fee a management company quotes. For example, they may charge a 7% monthly management fee, but then charge extra per inspection. <\/span><\/p>\n

As you read your contract, look to make sure the services you\u2019ve been sold are included in the price of the management fee. You don\u2019t want to deal with a laundry list of extra charges at the end of each month. It\u2019s better to wrap them all in one price.<\/span><\/p>\n

\"limit-liability-landlords\"<\/p>\n

2. Fees in the Event of a Sale, Insurance, or Legal Matters<\/h2>\n

If you sell your property, what happens to the management company? Most (but not all) will charge a fee in the event of a sale. <\/span><\/p>\n

Related:<\/strong> Which is Better: A Large Property Management Company or an Individual Property Manager?<\/a><\/em><\/p>\n

Also, insurance claims can be a nightmare to handle. If a storm causes damage to the house, will the property management group handle it? And will they deal with home warranty issues like a leaky sink or malfunctioning AC unit? Some of those who do charge an hourly rate for dealing with insurance companies. Sure, it\u2019s a headache, but the best property management companies don\u2019t charge extra. As a benefit of your contract, they should handle these issues without a fee. <\/span><\/p>\n

As for legal matters, look specifically for the eviction policy. If you have a tenant that needs to go, will your company only give you the attorney\u2019s contact information, or will they take care of the process? If they do, will they charge you for it? <\/span><\/p>\n

Look for a property management company that\u2019s confident in their screening. If they place the tenant, they shouldn\u2019t charge you for an eviction. Companies that charge you for evicting their chosen tenant are double-dipping. <\/span><\/p>\n

Each of these scenarios brings extra fees with some management groups. Where they may seem to have a lower price, these extra charges add up quickly if circumstances demand it.<\/span><\/p>\n

3. Indemnity Clause<\/h2>\n

The indemnity clause goes hand in hand with evictions. All contracts have it, but some are a little stronger than others. There\u2019s a standard agreement in Texas that we use, but not everyone does. <\/span><\/p>\n

Some indemnity clauses exempt the management group from liability, even with manager negligence. Make sure you\u2019re aware of the responsibility your management company will assume. <\/span><\/p>\n

4. Authority of the Broker<\/h2>\n

How will the manager handle repairs? Are they authorized to spend an amount without your approval? Some automatically repair any expense under $250, which adds up over time. Others don\u2019t spend a dime without your approval. If you\u2019re paying the bill, you most likely want to approve charges. \u00a0<\/span><\/p>\n

Related:<\/strong> The 5 Levels of Property Management Expertise<\/a><\/em><\/p>\n

When your management company lets you make the call on each expense, <\/span>you<\/span><\/i> choose what repairs are worth making. If it\u2019s an issue caused by tenant negligence, you can have the tenant held responsible. You can also decide <\/span>who<\/span><\/i> you want to make the repairs. Some companies have an in-house maintenance department that could cost you even more, while raising the question, \u201cAre they fixing something that doesn\u2019t need to be fixed?\u201d <\/span><\/p>\n

When you\u2019re kept in the loop, you keep them financially accountable. The more you know, the more wisely you can spend your money.<\/span><\/p>\n

\"human-side-real-estate\"<\/p>\n

5. Termination Clause<\/h2>\n

How do you get out of the contract if you need to? If the property manager is negligent and you decide to switch, know their stance on terminations. Will there be fees for early termination? What notice will you have to give? Will you need to provide reasons? What are your obligations upon termination? <\/span><\/p>\n

Being able to get out of a contract also lays another level of accountability for the management company. If they set too many stipulations on terminations, it raises the question of how many people are trying to switch to another company.<\/span><\/p>\n

Know the fine print of your contract before committing to it. When you look at these 5 areas, you\u2019ll most likely catch the glitches that make a \u201cgood deal\u201d not so good anymore. Enter into the agreement with your property manager with your eyes wide open. The risk involved in skimming your contract isn\u2019t worth taking.<\/span><\/p>\n

Investors: Anything else you look at when reading through a property management contract?<\/em><\/p>\n

Be sure to leave a comment and let me know.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

You should NEVER sign on the dotted line before you know EXACTLY what you’re getting into. Avoid disaster by checking out these vital items.<\/p>\n","protected":false},"author":166440,"featured_media":78749,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4241],"tags":[],"class_list":["post-78748","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-business-management"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/78748","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/166440"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=78748"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/78748\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/78749"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=78748"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=78748"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=78748"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}