When you decide to entrust your property to a management company, it is only wise to enter into a legal and binding contract. This agreement will provide legal direction in case of disputes and allows you to receive professional services. Keep in mind that property management contracts are different. Therefore, it is important to do due diligence by reading the fine print before signing on the dotted line.
Confirming things verbally is simply not enough if you intend to work with a property management firm. You should raise matters of concern and verify that they are included or well clarified in the contract so that you can make an informed decision. With that in mind, here are four important things to pay attention to when scrutinizing a property management agreement.
What do the Service Fees Entail?
Apart from rent collection, property management companies offer a wide range of services. They can handle repair and maintenance issues, fill vacancies, and carry out eviction procedures. Some basic agreements do not include all of these services. In fact, you might come across some companies that charge additional fees for what the term as ‘extra management duties’.
In addition, different property management companies will often charge varying management fees. While others usually take a percentage of the total rent collected each month, some may include other charges depending on the level of services offered to a property owner. It is therefore important to pay attention to how the fees are structured. Make sure to understand what services will be rendered by the property management company and the amount you have to part with.
Obligations for the Property Owner
Contracts for managing property also do come with obligation for real estate owners. For instance, some companies might require the property owner to set up a reserve fund to solve emergencies and maintenance or repair issues. You may also be responsible for ensuring that this fund never falls below the threshold that the property management company requires to operate. In addition, some property managers might decide to make insurance a requirement for all their clients. Hence, be on the lookout for any special obligations on your part as the property owner before signing the management agreement.
In most cases, property management agreements have a contract duration attached to them. It is wise to sign a relatively short agreement to avoid being stuck with a company that offers poor services. However, most management companies will not sign a contract for less than a year. Some will even stipulate longer contracts, therefore you will want to be careful and review the contract duration before going into any property management agreement.
Any professional property management contract will have a termination clause. Read this section to find out if you are allowed to terminate the contract before the tenure ends, the cancellation procedure, possible penalties, and charges that might be incurred.
Those are just a few of the important factors to look at when entering into a property management agreement. As a property owner, make sure to scout for a reliable and trustworthy property management company that offers clear yet friendly service terms and conditions.
Tom Wallace is a property owner with more than 10 years in the real estate business. If you are looking for the best property management agreements in Edinburgh, Tom recommends you visit http://www.jamesgibb.co.uk/.