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As a wise investor, you must be very careful while signing up the management agreement . Make sure that all the terms are clearly stated and understood. The document must cover provisions for all the possible areas that may result in disputes. If you find an area that you think will create problems in the future, you should talk about it with the company who is going to take care of your property or properties. It is also important for you to understand that residential apartments are different from commercial complexes. Therefore, you must have a different approach towards them. Following is a brief rundown about some of the key points that must be negotiated with the company and included in the agreement for managing buildings.
The manager who is going to take care of your buildings must work with the status of an independent contractor because this way, you will not be responsible for the tax and withholding obligations on the compensation you pay to them. The responsibilities and duties of these professionals should also be clearly explained in the document. A good idea is to interview each of them before you approve their appointment by the company.
The Fee Structure
The fee structure is the next important point of consideration while you are signing the property management agreement . In most cases, the fee is charged as a certain percentage of the gross rent collected. But, some companies also charge a flat fee after reviewing the size and type of the buildings they have to manage. Sometimes, they also charge extra fee for additional services. For example, you may have to pay extra for showings. Likewise, in case of eviction, many companies will charge you a certain amount of money other than the legal fee. You may like to negotiate these prices before including the same in the document. The provisions regarding the payment must be clearly stated in order to eliminate the risk of disputes in future.
Types Of Advertisement
The management agreement should also clearly explain the details regarding the type of advertisements used by the company for your buildings and apartments. As the owner of your properties, you must keep the right to give the final approval on what kind of advertising strategies should be implemented. Everything must comply with ADA and handicap access laws, fair housing, and truth in lending policies.
Since your third party professionals are handling the issues associated with your buildings and apartments, it is important for you to make sure that you get detailed reports on a regular basis. The agreement must also include a provision for the same, such as what types of reports the manager will be liable to send and whether the reports will be submitted on a weekly or monthly basis.
The document must also clearly state the grounds for termination by either side. Likewise, the provisions about the renewal of the service should also be explained thoroughly.
There are several other key points as well. For example, the document must identify the possible areas of conflict and how such situations will be handled. Likewise, the method of rent collection should also be described thoroughly and that how the various bills associated with the buildings will be paid. The agreement should also explain how the emergency repair works will be handled and how the cost will be managed.
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