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Regardless of whether a person is a property owner or a property manager, a property management contract is really essential for proper management of rental properties. An owner or manager has to be aware of all the rules involved in managing properties and the contract does just that it outlines all the necessary rules.
When a property owner employs the professional services of an agency for management of properties, the property manager will have to assume significant responsibilities of the properties. A contract details the rights and responsibilities of the manager and clarifies what he is responsible for and what he is not supposed to do.
Usually, property owners are reluctant to sign a property management contract or pay any fees unless the property managers first rent out the properties. While owners emphasize this to save on management fees, such situations can create confusion for both parties. The owners and managers will have to constantly compare notes and keep track of prospective clients who respond to advertisements. To avoid all that confusion and streamline all activities of managing properties, it is best to finalize the contract and offer exclusive rights of the property to the manager.
What Does The Contract Contain
The contract basically contains the following details
• Names of all parties involved in the contract
The contract must contain the names of all parties involved – including the name of the owner and the company name of the property manager.
• Property address
Property address refers to the legal address of the property that is included in the contract.
• Responsibilities of the owner and manager
The contract must also clearly define the responsibilities of the owner and the manager. Typically, the responsibilities of the property manager include a range of tasks like advertising the properties, screening prospective applicants, collecting deposits, collecting rent, maintaining records of all payments received, supervising maintenance or repairs, preparing lease agreements. Sometimes, the contract may also state duties like responding to issues of tenants or anything else that the property owner requires.
• Fees and commissions
The contract will enumerate all kinds of fees and commissions including in leasing a property. The compensation for property manager is usually stated in two parts the first fee for finding the right tenants and the second fee that would be paid monthly.
The fee for finding tenants generally depends on the monthly rent and can vary from one months rent to one and half months rent for a one year lease. Other costs of the manager are also covered by fees in property management contract . So, the manager gets compensated for costs of advertising properties, screening tenants, collecting security deposits and preparing lease. The monthly fee for the manager is generally a percentage of the monthly rent.
• Term of contract
The contract must also define the term of contract including the effective period, the starting date of contract and the end of contract. The term of contact can be for one year or automatic renewal after one year until either of the parties decides to cancel the contract.
• Signing the contract
Once the owner and the property manager has verified all the details in the property management contract and is very clear about what is expected from them to enable the smooth management of a property, it is time to sign the contract.
The contract thus greatly aids in eliminating any confusion in management of property and creates a mutual understanding regarding the specific responsibilities of both the owner and the manager.
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