In order to start service with an Oklahoma City property management company, you must first enter into an OKC property management agreement. But be careful, entering into such an agreement can be the start of an absolutely terrible experience if you don’t know what to look for.
You only get one shot initially at a contract. Be careful that there aren’t terms in the agreement that stacked heavily in favor of the management company, that can later cause you grief.
The article is about what to look for in an OKC property management agreement to ensure that you aren’t taken advantage of.
#1. What are the fees?
Any and all fees must be disclosed on the OKC property management agreement. The most common fees include leasing fees and management fees. Leasing fees are charges for advertising, showing, taking applications, screening the applications, and establishing a lease agreement between the owner and the tenant.
However, some Oklahoma City property management companies also charge a whole host of other fees. Here are some examples of those fees: releasing fees if the tenant’s renew their lease, a lease preparation fee, service fees, maintenance administration fees, etc.
The OKC property management agreement should also specify how the late fees are distributed. Do they go to the owner? Are they split between the owner and property management company? Do they all go to the property management company?
#2. How are rents, security deposits, and reserve funds handled by the OKC property management company?
Rents, security deposits, and reserve funds, by Oklahoma state law, must be deposited by the OKC property management company into FDIC insured trust accounts that are registered with the state. The treatment of these funds must be designated in the OKC property management agreement. Also, the distribution of interest in these accounts must be disclosed in the agreement, even though those amounts are typically very small (interest rates on these types of accounts is less than 1%).
#3. Does the OKC property management company guarantee the tenant?
Most OKC property management companies don’t guarantee their tenants. In those cases, if the tenant moves out before the end of the lease, the owner is forced to pay another leasing fee. The property management company puts in another tenant, pocketing another leasing fee at the expense of the owner.
Property management companies should have enough confidence in their ability to screen tenants to offer a solid guarantee. Otherwise, their is no accountability. OKC Home Realty guarantees their tenants. If they move out during the 12-month lease term, we replace that tenant at no additional cost to the owner. Our guaranty is clearly laid out in our property management agreement.
#4. How will maintenance be handled?
The OKC property management agreement needs to clearly define how the maintenance will be handled. The property management company should not be able to spend the owner’s money without any oversight. There should be a threshold in place. For example, the OKC Home Realty property management agreement requires that if we expect repairs will exceed $200, we must contact the owner before proceeding.
#5. How is the accounting provided, and when is it provided?
It is essential that the property management company provide itemized monthly statements. Otherwise, how will you possibly know what the actual income and expenses are? I have several clients who have mentioned that their prior management company never provided them a statement. No! That’s not how it should work.
In addition, they should provide you a copy of all itemized invoices for maintenance and repairs with the statements.
Statements should be provided on a monthly basis. Here is an article that has more about what information should be provided in the itemized monthly statements.
#6. What should be term (length) of the agreement be?
According to Oklahoma state law, the property management agreement must have a beginning and ending date.
However, I believe that either party (owner or management company) should be able to terminate the agreement with notice. Suppose the management company is not doing what they promised, and the property is not leasing. You should not be tied up for a year waiting for the contract to expire! Sadly, many property management companies will hold your feet to the fire on the term of the agreement no matter how poorly they are performing.
#7. How can the OKC property management agreement be terminated?
The OKC property management agreement should stipulate how the management agreement can be terminated.
The OKC Home realty property management agreement stipulates that the owner can terminate the agreement with a 30-day written notice for any reason. Without financial penalty. At any time!
Some people wonder why we make it so easy for our clients to leave. Simple. If they aren’t happy, why should I force them stay?
#8. What if you decide to sell the property?
Property management companies must have a licensed broker, and therefore it’s likely they will have realtors who would list the property for sale. However, that doesn’t mean the property management company can demand that if the owner wants to sell the property that the property management company must be allowed to list the property for sale. OKC Home Realty absolutely does not require that owners use our company to sell the property.
In fact, a contractual requirement like this is not allowed by the Oklahoma Real Estate Commission. The property management company would likely find themselves in trouble if this came before the commission.
#9. What exactly are the duties of the property management company? What are the duties of the owner?
The OKC property management agreement should explain what the management company will be responsible in regards to marketing the properties, negotiating leases, who (in a general sense) the management company can employ to manage the property, what expenses the property management company can pay, and other items discussed in this article.
The agreement should also explain what is expected of the owner. For example, that the owner should reply quickly to requests make by the property management company, that they insure their property, etc.
#10. What documents can the property management company sign on behalf of the owner?
The property management agreement should allow signing of routine documents, such as work orders and service agreements as long as they aren’t prohibited by the owner. You should allow your property management company enough latitude to get things accomplished. However, the owner should be signing lease agreements for the owner, not the property management company.
You absolutely must read any OKC proposed property management agreement line-by-line.
You don’t necessarily need to have your attorney review the contract, but you might do that if it makes you more comfortable. The prospective clients wouldn’t have needed an attorney to discover these onerous terms. They just needed to read the contract.
OKC Home Realty Services Property Management Agreement
Here are the terms within our property management agreements:
[table id=3 /]
If you’d like us to send you a copy of our property management agreement, enter a note in the form below.