Part 3 Chapter 22 Property Management Agreement
Define property management agreement.
It is a binding employment contract that establishes the manager's legal authority over the operation of the property by establishing an agency agreement between the manager and the property owner.
In Indiana, why are property managers required to hold a real estate license?
Leasing, renting, managing, listing, or offering to perform any of those acts are considered real estate activities under Indiana real estate laws. Therefore, any property manager who is going to perform those activities needs to have a license.
Briefly explain the process an owner should undertake when terminating a management contract.
Owner must give proper notice according to the terms of the agreement, and notice must be in writing. The owner must have cause for termination unless the contract terms say otherwise. The owner needs to collect any funds owed to him/her by manager, but this usually takes a couple of months. The owners should get copies of all documents, including leases, security deposits, and statement of all income and expenses immediately upon termination.
Breaching of property management contract should be done according to the agreement
Proper notice of termination, Notice must be in writing,The notice must include the effective date of termination, Cause for termination, Cost to terminate,Informing tenants of termination, Funds owed to owner, Documents,Either party breaching the property management agreement could result in cause for legal action by the other party.
In general, a property manager is responsible for:
Renting the units promptly at the highest market rent possible,Keeping operational and other costs within budget, Preserving and enhancing the physical value and prestige of the property
How do the owner and the property manager arrive at a management fee?
The fee is a negotiated item. It often is a base fee and/or a percentage of the collected rents.
If the property manager breaches the contract, what should the owner do?
The owner should terminate the contract.
List five qualities or attributes of a good property manager.
Trustworthiness, Diplomacy, communication, Flexibility,Problem-solving
Reasons for refusal by manager to take on a property
Unrealistic fees offered by the owner: Slum lording,Negative cash flow situations, in which the owner doesn't want to subsidize management activities. Unresolved code violations on the property.Short-term opportunities in which he/she will have to manage some unpleasant task in which the owner does not want to be involved.Situations in which the owner doesn't trust the manager enough to give him/her a reasonably free hand in managing.
Who should notify the tenants when the manager is terminated?
Who notifies the tenants should be included in the management agreement, so whoever is designated in the agreement is the one who should notify the tenants. Notification to tenants should be in writing.
A real estate asset manager
acts as the property owners' agent and adviser for the property. He or she plans and directs the purchase, development, and disposition of real estate on behalf of the business and investors. A real estate asset manager focuses on long-term strategic financial planning rather than on day-to-day operations of the property.
If the agreement requires cause for termination and the owner attempts to terminate without cause, the result will be
breach of contract
Amounts or percentages of revenues allotted for operations, taxes, insurance, capital expenditures, etc. all fall under which contract provision?
budget
Property management
can be defined as the administration of rental or other property by a person or a team of people who are acting for the owner. The management of the property is done for a fee.
Property management agreement cont.
establishes agency between owner and manager, is the managers employment contract
Duties/liabilities of manager
hire, fire, enter into contracts, perform routine tasks without interference from the owner, maintain financial records, make reports, budget, find, retain and collect from tenants, maintain and secure the property, liable for mishandling funds, violating fair housing, credit, and employment laws
Upon termination of the contract, when should the owner be given copies of all leases, records of security deposits, and a statement of all income and expenses?
immediately
Any owner entering into a property management agreement with a property manager should always check that the manager
is properly licensed.
An individual property manager
is usually a real estate broker who manages properties for one owner or a number of owners. Such a manager may be a member of a small property management firm devoted to full time property management, he or she may be a self-employed manager, or he or she may be one of several managers in a large real estate firm.
Upon contract termination, funds owed to the owner may include rent money, reserve funds, tenant security deposits, etc. When will the manager pay these funds?
it could take months to figure out what is owed
Who has the right to terminate the management agreement?
it depends on the agreement
A resident manager
lives on the property and may be employed by a real estate broker, a managing agent or an owner to manage a property on a part-time or full-time basis.
Property management agreement should include basic components of a real estate contract such as
names, property description, term, owners purpose, owners responsibility, managers authority, managers responsibilities, insurance and risk management, budget, accounting, allocation of cost, reporting, compensation, equal opportunity statement, termination, signatures
The property management agreement does not need to include
owners authority
When a property management firm or a property manager takes over the management of a property, all existing policies should be reviewed.
pet policy, security deposits, period of lease, qualification requirements, occupancy
Duties and liabilities of the landlord
receive rent, enter and inspect premises, enter into contracts, select tenants, set rents, terminate management contracts, liable for failure to comply with EPA, fair housing, or other state laws
Who or what determines to what extent an owner is liable for the acts of the manager?
state law
When seeking new contracts, property managers should never underestimate
the importance of networking.
There are times when _______________________ will dictate the property manager pass up the opportunity to manage a property.
the practice of good business
The following is not included in a community association management agreement:
the role of the owners in the agreement
Property managers dual responsibility
to the owner and to the tenants
3 trends helping real estate management to grow
1. An increase in the total number of all types of buildings 2. A larger percentage of real estate is considered investment property 3. The fact that real estate management requires special training and education.
contents of the management proposal
A description of the property, including the land and all improvements, A list of what maintenance will be required, Information about how maintenance records will be kept,Information regarding the accounting procedures the manager will use,A schedule of property inspections,Several proposed budgets - operating budget, capital improvement budget, stabilized budget, Information about the proposed management fee
Property management agreement
A management agreement is a binding contract that establishes the manager's legal authority over the operation of a given property. The manager usually is an agent for the owner, serving as the owner's fiduciary or trustee of the owner's funds and assets associated with the property. The agreement establishes the relationship between the owner and the manager for a fixed period, defines the manager's authority and compensation for services provided, outlines procedures, specifies limits of the manager's authority and actions, and states financial and other obligations of the property owner."
What is the difference between a management proposal and a management agreement?
A management proposal is submitted to the owner for review before any formal agreement is made. The management agreement is the employment contract for a property manager.
What is the definition of a resident manager?
A resident manager lives on the property and may be employed by a real estate broker, a managing agent or an owner to manage a property on a part-time or full-time basis.
Which terms should be defined on a community association management agreement?
Association documents, fiscal year, and common areas
a management proposal
Before entering into a formal agreement, a property manager will submit one to the property owner.
A management agreement for a community association is made between the broker and the board of directors of the community association. These agreements vary depending on the association, but there are several basic items that should be found on each agreement:
Definitions of the following terms: association documents, fiscal year, and common areas, The date of the agreement, The identification of the involved parties, The role of the manager in the agreement, The manager's financial and physical responsibilities, The insurancebonding agreements, The books and record-keeping requirements, The policies for on-site employees and the contracting procedures for contract services, Any auditing procedures, Details for the compensation of the management, The term of the agreement and provisions for its termination, The required reports and government filings
What is necessary for the contract to be enforceable?
It must be in writing.
Before entering into a management agreement, what should the property manager do?
The manager should submit a management proposal to the property owner.
An individual building manager
usually manages a single large property. This manager may be employed by a property manager or directly by an owner and may or may not have a real estate license.
