Property Management agreement review

6 Replies

There are a lot of stipulations in the agreement that overly protect the PM company and not so many to protect myself. Hoping to confer with an expert to manage my expectations and/or confirm my current thoughts. It's a 12 page agreement and I've read through it 3 times, the PDF has my comments listed on it already. If anyone from Texas or if possible more specifically McAllen, TX would be willing to walk me through this instance. I would be very grateful. I won't bore you with the full details here, but for those interested in helping I will divulge as much of the story as you would like to hear.

cheers,

Tom

With broad concerns, bp may be able to help you. “Walking you through” I assume all the contract details, may be best done with a good contract lawyer. Then, you can see if it is worth it to try to get changes to the contract or find another PM company. 

@Thomas LeBarre a lot of a PMA does seem to protect the PMC versus the owner. The PMC isn't the owner of the property, thus is handcuffed by what the owner allows them to do. So, the PMC has to protect themselves accordingly. 

The only way to address this is to give the PMC total control of your property. Unfortunately, that's not usually a wise move as there should be some oversight and authorization control. 

So, a happy median must be found that is fair to both sides.

@Thomas LeBarre , yes, a management agreement will favor the PM company because they paid for their lawyer to create it.  Plus they want to be protected.

Are all the terms fair?  Definitely not.  Should you be worried about all the terms?  Probably not.

Here are some that, in my opinion, are what you need to look out for:

  • Termination Notice:  Every agreement should have a termination notice.  You'll typically see a 60 day to PM and 30 day to LL.  I understand why PM's want this protection.  The realty though, if your PM terminates the agreement they won't be actually managing your rental anymore anyways.  At least, I wouldn't trust them to responsibly manage it.
  • Termination Fees!:  Ah, this is where they get you.  When a landlord terminates the contract, they are often responsible for 100% of the fees owed regardless of duration remaining or cause.  Yep.  So even if they're god awful, you'll still pay them their full amount.  Even worse because you'll need to fork up the cash upfront instead of amortizing it with each monthly rent payment.
  • Contractor Selection:  There should be a protocol for seeking a PM and getting proposals.  PM's want to use their own trusted contractors.  Sometimes because of the relationship; sometimes because of kick-backs.  If you want the ability to request your own contractor and still have the PM manage it, discuss that clause.
  • Maintenance Coordination:  Make sure you understand their process for coordinating maintenance.  Proposal requests and any fees.  For your protection, you should demand any work above a certain amount requires multiple proposals.  They'll refuse because of time, but that's also what you're paying them for.
  • Reserve Funds:  PMs always require a reserve fund.  Makes sense so they can pay contractors.  Except their excuse for paying landlords on the 15th-20th each month is to use the rent check to pay contractors.  So which one is it?  I would push for a lower reserve fund just in case something goes bad.
  • Tenant Selection:  By hiring a PM, you forgo the ability to review screening reports.  That's not a PM demand, that's a FRCA law that prevents credit reports from being shared.
  • Breach of Contract:  Understand how to report and document when they are in breach of contract.  This helps you with termination and avoiding any more fees.  It should state how many days for correction.  If it doesn't, include 14 days.
  • Best of luck!