How to Screen a PMC BETTER than a Tenant – Part 3: The Management Contract
When you hire a Property Management Company (PMC), you are handing over control of one of your biggest investments.
But without a detailed and binding management contract, how confident can you be that your expectations will be met?
Unfortunately, a common mistake landlords make is thinking that a shorter contract is better. This could not be further from the truth.
Why the Management Contract Holds the Key to Your Investment’s Success
A vague or poorly written agreement leaves too much to chance, which can cost you significantly in terms of unexpected fees, mismanagement, and a lack of accountability.
A well-crafted management contract is more than just terms and conditions.
It’s a document that outlines responsibilities, safeguards your rights, and establishes the framework for a productive relationship with your PMC.
Here’s what every landlord needs to know when evaluating a property management contract.
The Fine Print on Fees
One of the first parts of a PMC agreement landlords tend to analyze is the fee structure.
While monthly management fees usually take center stage, they’re rarely the whole story. A comprehensive contract clearly outlines all possible fees and charges, so you’re not blindsided down the road.
Here are the typical fees a comprehensive contract should address:
- Monthly Management Fees
- Late Payment Fees: What portion of these, if any, do you receive?
- Tenant Placement Fees
- Lease Renewal Fees
- Vacancy Fees
- Maintenance Costs and Markups
- Eviction Charges
- Inspection or Compliance Fees
- Invoice Processing Fees
It’s common practice for PMCs with low advertised management fees to add significant charges for services other companies might include in their standard package.
Always compare the real costs of working with different companies by thoroughly reading these fee sections.
Responsibilities: Who Does What?
Your management contract isn’t just about numbers. It also defines responsibilities between you (the landlord) and the PMC.
The clearer these roles are spelled out, the fewer disputes you’ll have when issues arise.
Some key points to look for:
- Maintenance Management: Will the PMC handle everything autonomously, or are you required to approve certain repairs? If so, what is your approval threshold (cost values above which they must seek your input)?
- Vendor and Bid Selection: Are you allowed to choose your contractors, or do you need to rely on vendors the PMC selects?
- Monitoring Compliance: Who ensures that your property meets municipal and state codes?
- Utility and Tax Payments: Will the PMC be responsible for paying these, or will you handle them directly?
Any responsibilities not covered in the contract can open loopholes PMCs can exploit. Review carefully to ensure there’s no ambiguity about what the company is accountable for.
Reporting Deadlines and Communication
A significant aspect of your property management experience hinges on how promptly and accurately you’re informed about your property’s performance. Your contract should specify:
- How and when critical updates will be communicated (online portal, email, phone).
- What types of updates you receive regularly (rental income, maintenance progress, tenant complaints, rent arrears).
- Response times for addressing urgent issues.
For example, if the PMC finds unauthorized property use (like a tenant running an unapproved business out of your unit), the contract should clearly state a timeframe for reporting such serious matters.
Additionally, you’ll want to note any deadlines for your approval. For instance, the contract might stipulate that if you don’t respond to a maintenance approval request within a specific timeframe, the PMC has the authority to proceed without your input.
Maintenance and Repairs
Property maintenance is often an area riddled with disputes, so make sure the contract spells out the following in detail:
- Approval Limits: At what dollar threshold is the PMC required to obtain your approval for maintenance work?
- Bid Transparency: Will the PMC provide multiple bids for larger repairs, or just proceed with their chosen contractor?
- Invoice Details: Are invoices itemized, showing parts, labor, and markups?
- Proof of Completion: Does the PMC document repairs with photos/videos and provide verification?
Without clear documentation and procedures, you risk being charged for unnecessary or incomplete work, so these contract clauses are vital.
Termination Clauses
At some point, you might decide to part ways with your PMC. Knowing the terms under which you can terminate the contract is essential. Look for these specifics:
- Can you terminate without cause, or must they fail to perform for cause?
- Is notice required to terminate? (Typically 30 days.)
- Does the contract auto-renew, and how can that be stopped?
- Are there termination fees?
Just as critical is a clause that requires the PMC to cooperate during the transition to a new management company. This should include transferring documents such as leases, ledgers, open maintenance requests, and tenant security deposits in a timely manner.
Without these, you could run into significant logistical headaches.
What Makes a Strong PMC Contract
A solid property management contract balances clarity, accountability, and flexibility. It should protect your rights as an owner while establishing your obligations clearly enough to avoid disputes. Some red flags to watch out for include:
- Vague fee descriptions or hidden costs.
- No requirement for documentation on repairs and approvals.
- Poorly defined termination procedures.
When in doubt, consult with a real estate attorney or advisor to ensure your interests are fully safeguarded.
Final Takeaway
A detailed contract is your first line of defense against future problems with your PMC.
It ensures transparency, accountability, and peace of mind as you entrust someone else with managing your investments.
While it may take extra time to review every clause, it’s time well spent to avoid costly surprises down the road.
Looking for Expert Property Management?
Partnering with a reliable, efficient, and proactive PMC shouldn’t be a gamble. We’re here to simplify the screening process and guide you toward management excellence.
Contact us today to learn how we ensure seamless property management, compliant contracts, and results-driven service.