WHAT TO LOOK FOR IN A PROPERTY MANAGER...

 

Every so often I get phone calls and emails from landlords that have had trouble with previous property management companies.  Management companies manage properties for several rental property owners. Usually their complaints have to do with the property management company not doing the job they led the landlord to believe it would do.   I have resolved complaints such as, "He never checked references," or "He just rented to anybody."  After the landlord starts having these problems he or she reads the management agreement and finds out that, contrary to what he or she was led to believe,  the management company  is not responsible for anything. Too many agreements are written so all the managent company is supposed to do is send the right amount of money, and that's only because it will get into trouble with the real estate agency of the state if it doesn't.   After reviewing several property management agreements, I came up with a list of clauses and terms that I feel should be in any property management agreement you sign with an outside management company.         Due Diligence   This is probably the most important clause you can have in a management agreement. In it the management company promises to do its best when managing your property.  It is a legal term, which, among other things is defined as "that amount of effort a reasonable and prudent man would exercise under the circumstances." The professional property manager has an extra duty of diligence, since it has implied, by taking on a management contract, that they are an expert in rental property management.       Communication and Notification   Here they are obligated to tell you what's going on in the management of your property, as necessary.       Accounting   Every state has some kind of law regarding the accounting procedures of licensed property managers. Every agreement will have a provision that provides for the property management company following the law. Since accounting is a statutory requirement, all you can expect is the management company's agreement to obey the law and send the right amount of money periodically.   A few things to watch out for is when they will send the money. By what day of the month will your check be mailed to you? Will the check be for the current month, or will the management company hold back a month? What happens to the security deposit they collect from tenants?       Termination of the Agreement   Every agreement will have a provision for its termination. The question is how long does it take to terminate and is there a cost or penalty to you if you do so before a certain date?       Repairs   Just about every management agreement will provide for the management company to handle repairs. Usually they hire contractors or other companies to handle them. What you will find in the agreement is a "hold-harmless" clause, saying that the management company is not responsible for the "acts, defaults, and negligence" of the people they hire. What you also want to see in the agreement is a statement that they will use "reasonable care" when they hire anyone to work on the property.    Certainly they are not responsible for people over whom they have no control, but they are responsible if they hired a company who has a history of unethical practices       Evictions and Terminations of Tenancy   Believe it or not, some agreements don't provide for the management company to handle evictions. So what bigger problem is there when a tenant needs to be evicted and your management company doesn't handle the issue? That is a bigger problem than you think, however a management company should want to maximize the landlord's profit and handle all evictions making it a quick process. You want their expertise, their willingness, and always make sure that the property management company will use due diligence in terminating the tenancy of any tenant who must be removed.   Will having all these clauses in a management agreement guarantee a smooth relationship with the property management company you hire? Absolutely not, you need to interview and get references from  several different companies before you commit to anyone, but not having these clauses in the agreement will almost guarantee you problems.

 

Blessed to be the Best!