A written management agreement is paramount if you are going to manage someone else’s property. This doesn’t have to be a thirty-page document; in fact, it can be very simple. The main thing is that you spell out what you agree to do for the Owner as his property manager, and what the Owner agrees to pay you for those services. That gives you the “bare bones” agreement and you can add to it from there.
I have included a copy of our management agreement for you to get an idea of what kind of a document you will consider using. Again, please be sure to have a competent attorney review all legal documents you are considering using and have them comment or recreate them into a document that works best for your needs.
Termination of Management Services
All good things must come to an end, as do management contracts. They end, either because they expire and are not renewed, the Owner sells the property, or the relationship between the Owner and ourselves simply was not a good fit.
Our management agreement allows for early termination by either party with 30 days written notice. If we have leased the property for the Owner and paid a commission, the only thing we asked of the Owner was to be paid for the unrealized portion of the leasing commission. In other words, if we paid out $1,200.00 to a real estate agent from an outside company to find a Tenant for this Owner’s property, and 3 months later the Owner decides to terminate the agreement for whatever reason, then the Owner would have to reimburse us for the 9 months of commission, or $900.00, before we would let them out of the agreement. Now, like everything, there are exceptions; we once had an Owner with whom the chemistry between us was so negative that we were glad to “eat” the remaining commission just to get out of the bad relationship!
When you know that you will soon not be managing a property any longer and you know the date, you need to send a letter to the Tenant advising them of the situation. Basically, we prepare a letter that says “as of this date, we will no longer be managing the property you are living in.” Tell them who will be managing it, where to send their rent payments as well as who has their security deposit. Send it to the Tenant via certified mail and send a copy to the Owner. Just prior to the effective date, cut a check for the security deposit and send it to the Owner. Be sure that all of these steps are well documented in writing. They don’t have to be fancy or eloquent, just documented.
The above is an excerpt from our new book: “Manage To make Money . . . with a Career i Property Management”. This book helps you to transition your career to one in the residential property management field. We also offer 3 hour workshops on transitioning your career. If you would like to view the management contract or other documents referenced you will need to see the book.
If this information has been helpful to you and you would like to explore more residential property management tools or resources, please visit our website.
Thank you for reading!