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Attention property owners! Thinking of hiring a property manager? Don’t sign a contract without reading this first! This article guides you through essential elements to know about property management agreements, so you can make an informed decision.
What is a Property Management Agreement?
A Property Management Agreement is a legal contract between a property manager and a property owner who hires them. It includes all the essential clauses that a property management company should follow once they are hired.
In order to start service with a property management OKC company, you must first enter into a 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 property management contract. Be careful that there aren’t terms in the agreement that are stacked heavily in favor of the management company, which can later cause you grief.
What should be included in Property Management Contract?
The article is about what to look for in an OKC property management agreement to ensure that you aren’t taken advantage of. Get to know the essential parts included in the agreement.
What are the fees?
Any and all fees must be disclosed in the OKC management agreement. The most common fees include leasing fees and management fees. Leasing fees are charges for advertising, showing, taking applications, screening applications, and establishing a lease agreement between the owner and the tenant.
However, some Oklahoma City property managers also charge a whole host of other fees. Here are some examples of those fees: releasing fees if the tenants renew their lease, a lease preparation fee, property management services fees, maintenance administration fees, etc.
The OKC property management services should also specify how the late fees are distributed. Do they go to the owner? What are the responsibilities of a property manager? Are they split between the owner and the property management company? Do they all go to the property management company?
The property management fees charged by OKC Home Realty are covered in this other article.
How are rents, security deposits, and reserve funds handled?
Rents, security deposits, and reserve funds, by Oklahoma state law, must be deposited by the OKC property manager into FDIC insured trust accounts that are registered with the state.
The treatment of these funds must be designated in the property management agreement, and the distribution of interest in these accounts must also be disclosed, even though those amounts are typically very small (interest rates on these types of accounts are less than 1%).
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 managers should have enough confidence in their ability to screen tenants to offer a solid guarantee. Otherwise, there is no accountability. OKC Home Realty guarantees its tenants. If they move out during the 12-month lease term, we replace that tenant at no additional cost to the owner. Our guarantee is clearly laid out in our agreement.
How will maintenance be handled?
The OKC agreement for property management needs to clearly define how the maintenance will be handled. The property manager 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 agreement requires that if we expect repairs will exceed $200, we must contact the owner before proceeding.
Recommended: Rental Property Improvements You Can Make For Your Rental Property
How is the accounting provided, and when is it provided?
It is essential that the property manager 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 property managers never provided them with a statement. No! That’s not how it should work.
In addition, they should provide you with 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.
What should be term (length) of the property management 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 send a notice for contract termination. 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 property manager agreement to expire! Sadly, many property management companies will hold your feet to the fire on the agreement term no matter how poorly they perform.
Recommended: What is an annual rental property management statement?
How to terminate the property management agreement by notice?
The property management agreement should stipulate how the contract can be terminated.
The OKC Home realty real estate management agreement stipulates that the owner can put up a 30-day written notice to terminate the property management agreement for any reason. Without the 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 to stay?
Recommended Article: How to deal with a bad property management company?
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, they 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 itself in trouble if this came before the commission.
Note: Top Questions to Ask Property Manager Before Hiring
What documents property management company can sign on behalf of the owner?
The property management agreement should allow the 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 property owner should be signing lease agreements for the owner, not the property manager.
Responsibilities and Limitations: Property Managers Oklahoma City
The property management contract should explain the manager’s responsibilities regarding marketing the rental 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” is correct.
The agreement should also explain what is expected of the owner. For example, the owner should reply quickly to requests made by the property management company, that they insure their property, etc.
Some agreements include a clause that governs what a property owner cannot do. Most management contracts will include a clause saying that the owner cannot place tenants in the building because those residents might not adhere to the management company’s guidelines. There may be set limitations so that the management company can handle all aspects of the day-to-day running of the building.
Also Read: Pros and Cons of Property Management Company
Read the Contract Line-by-line
You don’t necessarily need to have your attorney review the property management 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.
Recommended: How to switch property management companies
Benefits of Property Management Agreement
There are various benefits of a Property Management Agreement. Here are some;
- Explains every question that might arise disputes later from liability issues.
- Mentioned clauses that itemize the fees related to the property management termination.
- It allows the property manager to lead the property completely which leads to profit.
Also Read: 8 Reasons To Hire a Property Manager
Consequences of Not Having a Property Management Agreement
Not having a property management agreement can lead to several consequences for the property owner and manager. Here are some potential consequences:
Legal issues:
Without an agreement, legal issues may arise due to unclear roles and responsibilities of each party. It can lead to disputes and even lawsuits.
Miscommunication:
Without a clear agreement, miscommunication arises between the property owner and the property manager, leading to misunderstandings and mistakes.
Lack of protection:
A management contract protects both parties by defining roles and responsibilities. Both parties may be vulnerable to risks and liabilities without a property management agreement.
Unclear expectations:
It may be unclear what is expected from each party, leading to confusion and frustration if not having a management agreement.
Mistakes To Avoid in Property Management Agreement
There are several mistakes that property owners can make when signing a property management agreement. The most commonly observed errors to avoid are:
- Not reading the agreement carefully: Before signing any property management agreement, read the terms and conditions carefully.
- Not understanding the terms of the agreement: Even if you read the agreement carefully, ensure you understand all of the terms of the contract.
- Not getting everything in writing: Get everything in writing to avoid any misunderstandings or disputes down the road.
- Not negotiating the terms of the agreement: Do not ignore to negotiate the terms of the agreement to your satisfaction.
- Not specifying the responsibilities of the property manager: An agreement should not underestimate the property manager’s responsibilities to avoid confusion and disputes in the future.
- Not including a termination clause: A termination clause should not be avoided in an agreement. It will allow either party to terminate the deal with a certain amount of notice.
- Not hiring a qualified property manager: A property manager with a good reputation and experience managing rental properties in your area should be hired for your property management.
If you’d like us to send you a copy of our management agreement form, enter a note in the form below. You can also download the Property Management Agreement PDF here. Contact us if you have any Oklahoma rental property management queries. You can fill up the form below or call us.
FAQs
What is the purpose of the property management contract?
The main purpose of the property management contract is that define how the particular company will operate the rental property’s management. Therefore, the agreement focuses on the responsibility of the property manager and what tasks remain with the owner.
What is a residential management agreement?
A residential management agreement is a contract between a property owner and the company or property manager. It includes all of the responsibilities that a management company is taking on for the property owner. It is essential to know what the agreement covers.
What are the major components of a good real estate management agreement?
The Key parts of a real estate management agreement are;
1. What are the Services and Fees?
2. What are the duties of the property manager & owner?
3. How are rents, security deposits, and reserve funds handled?
4. What should be term (length) of the agreement be?
5. What if you decide to sell the property?
What is not included in a management agreement?
Extra services like paying bills, filling vacant property, and maintenance issues are not included in the agreement.
What is a property maintenance agreement?
Property maintenance contracts are contracts between two parties that create an agreement in which one party will see to the upkeep of possession of another party in exchange for agreed-upon compensation. Once this is agreed to a final agreement is settled with an official contract.
What do property management companies look for in a contract?
Oklahoma Property management company includes the services like rent collection, payment of bills, home inspections, evictions, tenant screening, advertising vacant units, maintenance of building exterior and landscaping, and more.
What is a property manager’s first responsibility to the owner?
The initial responsibility of the property managers in Oklahoma to the owner is to realize the maximum profit on the property that is compatible with the owner’s directives.
What are the obligations of the owner under a management agreement?
Here are some of the obligations of the owner under a management agreement:
1. Provide the property manager with all necessary documents and information.
2. Pay the property manager's fees and expenses.
3. Approve the property manager's budget and operating plan.
4. Cooperate with the property manager in carrying out their duties.
5. Remedy any breaches of the agreement.
Author
Scott Nachatilo is an investor, property manager and owner of OKC Home Realty Services – one of the best property management companies in Oklahoma City. His mission is to help landlords and real estate investors to manage their property in Oklahoma.
