Need Urgent Guidance Pls:-1st 4PLEX: PM Contract looks one sided?

Question

Please advise if these clauses in the contract are okay from the owner's (my) perspective? Anything, I should ask the Property Manager to add/update /delete to safeguard my self as an owner? Thank you!

-----  Owner hereby employs the services of Manager to manage, operate, control, rent, and lease.

Responsibilities of Manager.Owner hereby appoints Manager as his lawful agent and attorney-in-fact with full authority to do any and all lawful things necessary for the fulfillment of this Agreement, including the following:1. To collect all rents as they become due, giving receipts therefore and to render to Owner a monthly accounting of rents received and expenses paid out; and to remit to Owner all income, less any sums paid out.2. To make or cause to be made all decorating, maintenance, alterations and repairs to the property and to hire and supervise all employees and other labor for the accomplishment of same.3. To advertise the property and display signs thereon; to rent and lease the property; to sign, renew and cancel rental agreements and leases for the property or any part thereof; to sue and recover for rent and for loss or damage to any part of the property and/or furnishings thereof; and, when expedient, to compromise, settle and release any such legal proceedings or lawsuits.Liability of Manager.Owner hereby agrees to hold Manager harmless from any and all claims, charges, debts, demands, and lawsuits, including attorney's fees related to his management of the hereindescribed property, and from any liability for injury on or about the property which may be suffered by any employee, tenant or guest upon the property.

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Patricia Steiner · Answer

It's typical language- but for me and my clients, it's unacceptable.  It's "ALL CONTROL, NO ACCOUNTABILITY.  So, step back for a moment and decide what you really want from a PM. Are you going to be entirely passive as the investor or do you expect a minimum and continuous return on this investment?  Do you have a budget?  Is it okay for your PM to redecorate the place, hire a bunch of contractors, and spend your money creating a signature rental?  Who decides the rent price and the tenant quality?  Who gets the late fees?  Is it okay to advertise for tenants via Craigs List or television?  The biggest issue that is shared with me time and time again about PM is that the investor gives away all control, assumes all accountability, with no guaranteed return.  Get it negotiated right upfront and require that the PM provide  Errors/Omission/Liability Insurance coverage.  Control with Accountability is a contract and relationship worth pursuing.

Patricia Steiner · Answer

@Vibhu Arya

Congratulations on your newest acquisition - and for getting the PM right from the start.  Big victories!

Vibhu Arya · Answer

Thank you @Patricia Steiner Your insights were very helpful I executed the contract per your invaluable insights as I was closing today & wanted it to be ready for tomorrow for the PM to take ownership for this out of state property (my 1st).

Patricia Steiner · Answer

You can change whatever you want on the contract and initial the change.  The PM may or may not accept it but it's not their investment/money.  And, you don't have to do anything overnight.  Take your time to get it right.  I recommend using your language - words like "the property owner," "the property manager."  And, do a search for "sample property management contract,"  and "property management proposals." And, take a look at this and others like it:

https://www.thebalancesmb.com/property-management-agreement-2124845It doesn't need to be long or in legalese but it does need to clearly state your expectations of a PM.  The overall message to the PM is:  I am giving you an opportunity to demonstrate your expertise and to provide me with an acceptable ROI, tenant experience, and frequent feedback.  In exchange for this opportunity, my expectations are..."

And, congrats on your acquisition.

Vibhu Arya · Answer

Thank you  @Patricia Steiner & @Bjorn Ahlblad.  You are right, I'm not looking to be a passive investor & will be actively involved. So I'm thinking of including clauses like anything over $100 needs to be approved by me etc.

Can you please share some of standard clauses to bring ACCOUNTABILITY & PERFORMANCE in this PM contract?Also, I'm not sure of the wordings  - his lawful agent and attorney-in-fact - is it okay or shall I ask to replace with?  - grants authority to.

Also, I'm not sure of the 'Liability of Manager' or Harmless clause. Can we remove it?

Its the last day of closing and the contract was sprung on me. Its an out of state investment. Do I need to have the PM contract signed today or can it wait till little later?

Thank you again!

Bjorn Ahlblad · Answer

@Vibhu Arya what @Patricia Steiner said is right on. Also look at what else happens: 'term' and 'termination', 'in event of sale'. Unfortunately the devil is in the details and some PM's do a great job others not so much. Check their feed-back on social media. We let a PM go about a year ago; like Patricia described they were creating a 'signature rental', upcharging the contractors, and charging us for showing the unit to everyone on the planet before they were even qualified to any degree. Having a PM does not mean you as the investor can sit back and watch your bank accounts grow; the PM is a filter and some will filter better than others.

Need Urgent Guidance Pls:-1st 4PLEX: PM Contract looks one sided?

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