March 3, 2017

Dissecting Your Property Management Services Agreement: What to Look and Watch Out For

When I first received a property management service agreement, I felt completely overwhelmed by the sheer volume of content in the document. It seemed really complicated and overwritten. Fortunately, I was able to consult my parents, who have owned dozens of vacation rentals over the years and are very well-acquainted with the wording, terminology, and scope of these documents.

If you’re hiring a property manager for the first time, you may be feeling equally overwhelmed. So what should you be looking for in the wording of your property management service contract? Let’s take a closer look.


What to Look for in Your Property Management Service Agreements

Your property management contract will address many different things related to the upkeep and oversight of your vacation home. So what do you need to look for and what clauses are most essential? Consider the following points:

What is the length of the contract or agreement?

The document will indicate a particular timeframe during which the service agreement is valid. So you must ensure that this jives with your own understanding and objectives. A one-year contract is fairly standard, although it’s certainly possible to opt for longer or shorter terms.

What happens if you wish to prematurely end the agreement?

There may be cases in which you wish to discontinue services before the contractual period draws to a close. This could occur because you opt to sell the property or discover that the property manager you’ve selected just isn’t right for your needs. Whatever the case, your contract should address what happens if you (or the property manager) chooses to end the relationship prematurely. Specifically, look out for any wording referring to penalties or fees that may be linked to ending the contract prematurely.

What is the payment rate or commission percentage?

Take a careful look at the figures. How much are you receiving and how much is your property manager receiving? Typical property management fees can range from 15-40% of the rental income, with the average in the United States being 28%. Also, make note of specific terms such as “gross income” and “profits.” These can be very different figures, as gross income would be all money earned by the vacation rental, irrespective of operating costs, whereas profits are the funds in excess of operating costs.

Is it clear what is included?

What fees are included as part of the property management service agreement? Is your property manager in charge of finding and vetting potential guests or is that within your realm of responsibilities? Will your property management team be tending to all advertising and marketing expenses or are you going to be billed for these expenses (which can include advertising fees, website development and maintenance costs, and social media marketing expenses).

Will your property manager be including services such as housekeeping and handyman services? Or are you responsible for these expenses? If the contract references a broad term such as “routine maintenance,” ask questions and get it in writing so you know exactly what tasks or projects are considered part of “routine maintenance.”

This is one of the most significant and costly errors a vacation homeowner can make when hiring a property manager. You do not want to lock yourself into a contract or service agreement only to find that you cannot afford the financials because you’re responsible for paying things that you thought were included as part of the service. So if the contract is not specific on what tasks and services are covered, ask questions and get a supplemental document in writing. This document can be signed by all parties and referenced in the formal agreement.

Notably, if you are part of a condominium complex or a homeowner’s association (HOA), you will also need to know what is included as part of your condominium association or HOA fees. This can impact your service agreement and, ultimately, the percentage that you are charged for property management services.


Consider Asking a Lawyer to Review Your Property Management Contract Prior to Signing

Whenever possible, it is wise to have your property management contract reviewed by an attorney who will have your best interests in mind. While most property management relationships are positive and beneficial, there are cases in which a good business arrangement goes bad, so it’s important that you know what you’re signing.

Most property management service agreements are drafted by attorneys who have the interests of their client — your property manager — in mind. So for this reason, it’s important that you have someone who can review to ensure you’re not entering into a bad agreement or one that could result in significant hassle or financial loss.

You should also be sure to ask for references from the prospective property manager and take the time to make calls to those individuals and find out what it’s really like working with this property.

You should also ask to view websites, social media accounts, and advertisements for the property manager’s other clients, especially if these are included in your property manager’s services. You’ll want to ensure that these marketing and advertising materials represent the properties in a compelling, professional manner.

Are you ready to find the right property manager for your vacation rental property? If so, can assist. We connect homeowners with experienced property managers who are ready to make a management offer. Sign up for free today at

Lead image: Pixabay user Unsplash

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