Your property management agreement is probably the most important document you’ll draft as a landlord (or property manager.) It’s essentially the contract that breaks down what each party is responsible for! In the event that either party breaches the contract, the legal ramifications probably won’t be pleasant.
Every good contract is thorough and well-thought out. The property manager is responsible for making sure it all makes sense and is legal for the local city/county/state, while the tenant is responsible for looking it over and knowing exactly what they’re signing.
Here are a few key topics that your contract must cover.
Your Property Management Agreement Must Indicate Costs
Besides the property address, this is probably the most obvious one, right? It needs to be clear how much the tenant is paying to rent the space each month, quarter, year, etc.
But you need to cover more than just rent. Is there a pet deposit or regular “pet rent?” What about the security deposit required before the tenant can move in? Are the utilities placed in the name of the tenant, or do they need to add a fee onto their monthly rent, as the property manager takes care of it?
How about landscaping costs? If that’s something else not handled by the tenant, is it just tacked onto the monthly rent, or is it already included in the total cost?
These things sound trivial, but they’re very important. You want everything to be in writing to make sure your argument holds up in court (if it ever came to that.)
Your Property Management Agreement Should Discuss Pets
If you want to make things easy on yourself, you can always just say that pets aren’t allowed. That said, there is a strong argument that you should allow tenants to have pets, as many landlords have found it to be more profitable over the long-term.
If pets are allowed, what kinds of pets will you allow? Many property managers ban any “dangerous dog breed.” These are dogs that tend to be more aggressive than other breeds, like German Shepards of Pit bulls.
Besides banning the dangerous breeds, a weight limit is often used- especially in apartments or condos. For example, you might say that the animal can’t weigh more than 20 pounds, preventing someone from bringing that Great Dane to live with them in an apartment.
…and yes, it happens. I’ve seen people live in apartments with those majestic animals. Why- or even how- baffles me.
Besides what’s allowed, you should identify the fact that the costs to repair damage to the carpet, walls, door frames, etc. from the pet will be taken out of their security deposit. Because of this, some property managers will charge a separate pet security deposit.
Your Property Management Agreement Must Identify the Contract Length
The length of your contract can be however long you and the tenant have determined is fair. Some contracts are month-to-month, whereas others can last for years. A simple one year contract is by far the most common, but is usually negotiable. If your tenant is interested in signing a longer contract, you can sweeten the deal by reducing the monthly rent.
Breaking the Contract
If the tenant must move out before the contract ends, the ramifications must be spelled out. For example, some contracts require that the tenant continue to pay until a new tenant is found to fill the home. Others have a penalty of a full month’s rent, even if a new tenant is found to occupy the space.
You should also keep in mind that local laws may require you to let the tenant out free-and-clear. For example, I joined the military after college. When I received orders to move across the country, the state’s laws required my apartment complex to release me from my contract. Obviously they weren’t happy about it, but that’s just a risk that comes from investing in military housing.
Renewing or Termination of a Contract
Finally, your property management agreement must highlight how to end the contract. Common terms are at least 30 days written notice, whether that’s through an email or hand-written note.
It should also explain the various ways you as the property manager can terminate the contract. For example, if they fall more than 14 days late on their rent payment.