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Brooklyn Property Management Blog of ProRealty

What Items to Look Out for in a Property Management Contract?

Brooklyn Property Management Blog of ProRealty

Any contract is considered to be a serious matter. For example, the ‘Property Management Agreement’ is also a matter of grave concern. Since it binds two parties into a relationship, it’s wise that you first have a thorough knowledge of what should be included in this agreement. Property management contracts are designed according to the interests of property owners and property management companies in a mutually beneficial relationship.

When you hire a property manager for you, you need to carefully review their management contract. You should make sure that you understand the responsibilities of the property manager, the responsibilities of the landlord and make sure you will be protected if the manager does not fulfill his obligations.

Need of a Property Management Contract:

When investing in properties it could be easy to handle the purchase and management of the properties that you have bought and want to rent out. As you become more diversified in buying or investing into properties for rentals, the specific needs and responsibilities of managing of each property can take all your time and hinder you from investing and other business that you are doing. By signing a property management contract with a qualified property management business means you can step away from your invested property without neglecting it and focus on other investments and buying more properties.

Moreover, a property management firm in return of fee, will take on the responsibilities of renting, repairing, and other day to day running of your property allowing you to take on other important responsibilities and business.

Here is a list of things you should look out for in a property management contract.

Services and the fee:

The first basic part of the management contract you must know about is what services the property manager has agreed to perform and how much they will charge for these services. You need to understand which services will be provided in the management fee, which services can be performed for an additional fee and which services will not be performed under any circumstances.

Remember, do not immediately rule out a property manager because it seems they are charging a higher fee. Property managers who charge a lower initial fee may charge more for “extra duties” such as filling vacancies, paying bills, maintenance issues, and eviction procedures. You need to read the management agreement very carefully to determine which services are actually included in the management fee and which services are considered extra and require additional payment.

Also, be aware of the services the property manager is not going to perform under any circumstances. Be sure the manager is not excluding anything you consider an absolute necessity, such as finding tenants, collecting rent or handling emergencies.

Responsibilities of the property owner:

It is important to include a clause in the contract that lays out the expectations of the property owner and what they can and cannot do in their dealings with the management company. For instance, an owner ‘s responsibility can be to set up a bank account and maintain a minimum balance for repairs, emergencies and general maintenance as well as obtaining and maintaining appropriate types and amounts of insurance.

An essential part ; Equal Opportunity Housing :

‘Equal Opportunity Housing’ is an essential part of a property management contract. Make sure there is a section clearly stating that they support ‘Equal Opportunity Housing’.

Keeping this section means that the property management abides by both the state and the federal fair housing laws in your area.


This part of the contract limits the property manager’s liability. It is also known as the hold harmless clause. In general, this clause will protect the property manager, except in cases where they are negligent.

The property manager is not responsible for the negligence of third parties they hire. For example, a property manager will not be responsible if he hires a contractor, and the contractor causes damage to the property.

Duration of Contract:

You try to avoid signing a long agreement until you have proven results from, and confidence in, the management company. Unfortunately, most management companies do not sign a contract for less than a year. In that case, you will carefully review the termination clause and make sure you are able to terminate the contract if you are unsatisfied with the service.

Clear Termination Clause

Make sure that the management contract has a clear termination or cancellation clause. It should state why and when the property manager/management company has the right to terminate the contract and when and why the landlord, has the right to terminate the contract. Ending the relationship prematurely comes with penalties so make sure to read this part of the agreement thoroughly.

Early Termination Fee

The early termination fee varies a few hundred dollars as compared to full fee the management company would have accumulated during the agreement. All the managers do not charge a fee for terminating the contract early. However, if they charge a fee, it’s either a flat fee around $300 to $500 dollars or something conditional.

Termination Causes:

You might want a contract that does not require reasons to terminate the agreement. Your agreement should at least have this flexibility to allow you to terminate the contract without any penalty.

A contract that can be terminated without a cause should have a 30 days’ notice. And if you don’t want any penalty for this termination of the contract, it’s suggested that the termination date might reflect the exact contract term expiration date.

Obligations upon Termination:

There should be a list of duties that must take place upon termination and the time window they must be completed within. For example, the property management company needs to provide the property owner with copies of all tenants’ leases within 14 days of contract termination; or that money owed to either party must be paid within 30 days of contract termination.


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