Are all Property Management terms so unfavorable to owhers?

[Niranjan P Ghate]

I am new to REI and using property management companies, but having looked at terms offered by 3 property managers, I see some of the following unfavorable terms:

1. Manager can renew leases without Owner approval

2. Manager has broad discretion over rental amounts, discounts, and payment arrangements 

3. Continued management fees for remaining lease terms even after termination

4. 3% to 6% sales commission if the property is sold to a tenant within 3-12 months after termination of property management agreement

5. Manager keeps 100% of late fees and pet rent, etc 

6. One-sided Liability Provisions, Legal Protections

7. Cross-collateralization - proceeds from one property can be used against charges from another property being managed for you.

8. Manager has lien rights against the property. ?!!!

Is this common across various states or something seen more in Arkansas? 

What are people's thoughts about not using a property manager but working with the tenant to have them schedule repairs as needed, but paid for by the owner?

Any advice is much appreciated!

- Niranjan

[Drew Sygit]

@Niranjan P Ghate a desperate owner, is really not much different than a desperate tenant.

What makes an owner, "desperate"? 

Running low on funds to make their mortgage payment(s), divorce, lawsuits, etc.

So, PMCs have to take steps to protect themselves. How else can they collect what they are legally owed?

1) This is negotiable, as an owner may want to be notified in case they want the property vacant to sell. Also, owner should have some say in renewal amount.

2) How do YOU have more experience & knowledge than the PMC?

3) So, you want to hire a PMC to manage a property for you, they place a tenant and then you fire them with no repercussions? Easy solution, just have your PMC ONLY do month-to-month leases. Your tenant turnover costs will probably go up though.

4) 3 months is fairly standard. Otherwise, what's to stop a "sneaky" owner from firing their PMC when they tell them the tenant wants to buy the property, then the owner turns around and deals directly with the tenant? All to save paying that 3-6% sales commission.

5) Negotiable

6) They're not one-sided. You hire an attorney to represent you in court - what happens if they lose? They have no liability other than malpractice. Why would you expect this to be different with your PMC?

7) See desperate owner issues.

8) See desperate owner issues.

Suggest you try looking at these issues from a PMC's point of view, to better understand them:)